Question

Based on this model, households earn income when purchase in resource markets.
Suppose Cho earns $600 per week working as a doctor for the Medical Clinic. She uses $10 to buy a box of aspirin at Pillmart Pharmacy. Pillmart Pharmacy pays Bob $225 per week to work the cash register. Bob uses $225 to purchase medical services from the Medical Clinic.
Identify whether each of the following events in this scenario occurs in the resource market or the product market.
Event Resource Market / Product Market
Cho spends $10 to buy a box of aspirin.
Bob spends $225 to purchase medical services from the Medical Clinic.
Cho earns $600 per week working for the Medical Clinic.
Which of the elements of this scenario represent a flow from a firm to a household? This could be a flow of dollars, inputs, or outputs. Check all that apply.
A. The $225 per week Bob earns working for Pillmart Pharmacy
B. The $225 Bob spends to purchase medical services from the Medical Clinic
C. The aspirin Cho receives
D. Cho's labor

Answer 1

Answer:

1. Identifying whether each of the following events in this scenario occurs in the resource market or the product market:

Event                                                        Resource Market / Product Market

1. Cho spends $10 to buy a box of aspirin.        Product market

2. Bob spends $225 to purchase medical

 services from the Medical Clinic.                     Product market

3. Cho earns $600 per week working for

the Medical Clinic.                                              Resource market

2. The elements of this scenario that represent a flow from a firm to a household:

A. The $225 per week Bob earns working for Pillmart Pharmacy

C. The aspirin Cho receives

Explanation:

The resource market refers to the factor market or a situation where households provide firms with the factors of production (land, labor, and capital) in exchange for money incomes (rent, wages, and interest).  In such situations, the firms are the buyers while households are the sellers.  In the product market, the reverse is the case.  Firms provide the goods and services that households buy and consume.