Question

Based on this model, households earn income when _______purchase______ in factors markets.
Suppose Eileen earns $600 per week working as a corporate attorney for Rowan and Martin Associates. She uses $8 to buy a box of aspirin at Pillmart Pharmacy. Pillmart Pharmacy pays Clancy $350 per week to work the cash register. Clancy uses $175 to purchase legal service from Rowan and Martin Associates Identify whether each of the following events in this scenario occurs in factor market or the product market.
Event Factor Market Product Market
Clancy earns $350 per week working for Pillmart Pharmacy.
Eileen earns $600 per week working for Rowan and Martin Associates
Clancy spends $175 to purchase legal service from Rowan and Martin Associates.
Which of the elements of this scenario represent a flow from a household to a firm? This could be a flow of dollars, inputs, or outputs.
a. The $350 per week Clancy earns working for Pillmart Pharmacy
b. The $175 Clancy spends to purchase legal service from Rowan and Martin Associates
c. The aspirin Eileen receives
d. Eileen's labor

Answer 1

Answer:

Based on this model, households earn income when FIRMS purchase SERVICES in factors markets.

Identify whether each of the following events in this scenario occurs in factor market or the product market.

Event Factor Market Product Market

Clancy earns $350 per week working for Pillmart Pharmacy. FACTOR MARKET

Eileen earns $600 per week working for Rowan and Martin Associates FACTOR MARKET

Clancy spends $175 to purchase legal service from Rowan and Martin Associates. PRODUCT MARKET

Which of the elements of this scenario represent a flow from a household to a firm? This could be a flow of dollars, inputs, or outputs.

b. The $175 Clancy spends to purchase legal service from Rowan and Martin Associates PRODUCT MARKET, HOUSEHOLD PURCHASES PRODCUTS

d. Eileen's labor FACTOR MARKET, HOUSEHOLDS SELL SERVICES TO FIRMS