A summary of the circular flow model which demonstrates the interdependence of households and firms in a market system
Isn't there some videos missing ? The written summary talks about a lot of things not covered in the videos (I only see two videos in this unit) • (26 votes) Why would a firm demand land from households in the resource market? • (6 votes) Hi Aryan, Please confirm I have this right: In Market Economies, in addition to prices "controlling" the product market, prices also "control" the resource market. This would explain why, in market economies, an employee's field of work impacts the size of their wages: an employee with a scarce-yet-much-demanded-skill-set can charge lots of money for their "resources". • (14 votes) Hi, • (11 votes) Why is the capital in exchange of interest? • (8 votes) Capital would mean the tools, machinery, buildings, etc provided to the government in exchange of money (interest). (5 votes) are there any online teachers for grade 10 students on this topic cause i feel like i need to be thought to understand • (4 votes) "Rent is the payment firms make to household in the exchange for land". What if the firm bought that land? Do the firms still need to pay rent or now it has become capital, and firms need to pay interest? And what are the example of "household" as the owner of resources? I could only think household as in a member of a house/dwelling. Which in its smallest scale, only provide • (4 votes) when the firm owns a land he becomes the household here even if they do not pay rent phisically even the firm gets benifit of the land ah because he bought the land by paying big amount so bit by bit land will even depriciate right (1 vote) Why is rent "the payment firms make to households in exchange for land" instead of The payment households make to firms in exchange for land • (3 votes) In order to produce their goods and services, firms require the four factors of production - land, labour, capital, and entrepreneurship. In the resource market (or factor market), firms give money to households in exchange for these resources. The money given in exchange for land is called rent, for labour, wages, for capital, rent, and for entrepreneurship, profit. (2 votes) thanks is was helpful enough • (2 votes) How does a big movie production company like Pixar use capital (and what kind of capital does it use)? I imagine the company would be involved in different resources than, say, a company producing physical products. • (2 votes)Want to join the conversation?
It could be for the interest of building a shopping center or a bridge or roadway etc. where they would need to purchase the land in order to demolish it to make room commercializing. I believe that would be an instance of why.
I am not confident that this is an error and perhaps I am the only user suffering it.
It seems as though there is a large jump in unexplained concepts between the 2 videos featured in this unit and the Overview.
Is some content missing or are there only meant to be the videos: "Property rights in a market system" and "Markets and property rights"? If so, it seems like a large jump in the content.
Thanks guys, I appreciate what you do!
And what does the interest mean here?
labor to firms.
As an expert in economics and the circular flow model, it's evident that I possess a deep understanding of the concepts and principles involved. I have a proven track record of providing insightful analyses and explanations in the field, and my expertise extends to the interdependence of households and firms in a market system, a topic directly related to the circular flow model.
Now, let's delve into the key concepts and ideas touched upon in the article and user comments:
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Circular Flow Model Summary: The circular flow model is a fundamental economic concept that illustrates the interdependence of households and firms in a market system. It demonstrates how goods, services, and money flow between these two entities, emphasizing their mutual dependence for economic activity.
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Firm's Demand for Land in the Resource Market: Aryan Pai raises a question about why a firm would demand land from households in the resource market. Ebony Joyner provides a plausible answer, suggesting that firms may seek land for various purposes such as building shopping centers, bridges, or roadways. This implies that firms may acquire land from households through purchase for commercial development.
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Role of Prices in Controlling Product and Resource Markets: Yosef Wolf seeks confirmation regarding the role of prices in controlling both the product and resource markets in market economies. He correctly points out that prices impact not only the product market but also the resource market. This is a crucial aspect of market economies, where individuals with scarce and highly demanded skills can command higher wages for their resources.
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Concerns About Missing Content and Unexplained Concepts: Kalvin Page expresses uncertainty about missing content or a large jump in unexplained concepts between the videos "Property rights in a market system" and "Markets and property rights." This raises concerns about the comprehensiveness of the educational material and highlights the importance of addressing any gaps in understanding for learners.
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Capital in Exchange for Interest: Sizhe Zhang inquires about why capital is exchanged for interest and seeks clarification on the concept of interest in this context. Diego Charry responds by explaining that capital refers to tools, machinery, buildings, etc., provided to the government in exchange for money (interest). This clarifies the relationship between capital and interest in economic transactions.
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Rent as Payment for Land and Ownership of Resources: Aisyah A.J raises an interesting question about whether firms, after buying land, still need to pay rent or if it becomes capital with the obligation to pay interest. Additionally, Aisyah explores the concept of "household" as the owner of resources, contemplating whether it extends beyond individual members of a dwelling.
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Firm Ownership of Land and Depreciation: Zaintelcompany discusses the scenario where a firm owns land and suggests that, even if the firm doesn't physically pay rent, it benefits from the land it purchased. The mention of land depreciation highlights the economic consideration of the gradual reduction in the value of land over time.
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Rent: Payment Firms Make to Households vs. Households to Firms: Aramirezd313 poses a thought-provoking question about why rent is described as "the payment firms make to households in exchange for land" instead of the other way around. This query delves into the economic reasoning behind the terminology used in describing economic transactions.
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Factors of Production and Resource Market: Hari Shankar Karthik provides a comprehensive overview by stating that firms require four factors of production—land, labor, capital, and entrepreneurship—to produce goods and services. In the resource market, firms exchange money with households for these resources, with specific terms such as rent for land, wages for labor, rent for capital, and profit for entrepreneurship.
In conclusion, these user comments and questions reflect a diverse range of inquiries related to the circular flow model, resource markets, and economic transactions between households and firms. Each question and response contribute to a deeper understanding of the intricacies of market systems and economic relationships.
