This system is a legal necessity for the free market to exist, legal foundation of the free market. Property rights: the rights individuals or firms have to the exclusive use of their property, including the Not necessarily creatingįor a market system to work there must be a sound legal environment that will allow the Invisible hand: people are just trying to consider their own rational self-interest, which will leadĮntrepreneur: someone who operates a business, bringing together the factors of productionlabor, capital, and natural resources- to produce goods and services. There also is a flow of resources and goods and services. Sehingga, nantinya akan muncul arus melingkar, yang membentuk suatu sistem tertentu. Pelaku ekonomi diartikan sebagai subjek yang melakukan atau menjalankan kegiatan ekonomi yang terdiri dari produksi, konsumsi, dan distribusi. In the diagram, there is a monetary flow of money income, consumption expenditures, revenue, and costs. Circular flow diagram adalah sebuah diagram yang menggambarkan hubungan timbal balik atau interaksi antar pelaku ekonomi. In a market economy, there is a resource mar ket and product market that connect householdS and busi nesses. Households receive payments for these factors by selling them to firmsįirms supply goods and services to product markets: households consume theseĬircular- flow diagram: a model that illustrates how participants in markets are linked.įree market: one with few government restrictions on how a good or service can be produced or sold. The chapter ends with a description of the circular flow diagram. Use opportunity cost to determine who is specializing in what.Ĭompare Advantage: the ability of an individuals to produce a good or service at a lowerĪbsolute Advantage: ability to produce more of a good or service than competitors, using theįactors of Production: labor, capital, natural resources, and entrepreneurial ability Both you and your neighbor are better off as a result. A circular diagram depicts the inner workings of a market system and specific portions of the economy. Technological growth: shape of the line changesĬomparative Advantage: if you can pick apples and your neighbor can pick cherries you can move Free Circular Flow Diagram Software Download. Think about the slope of the line increases so opportunity cost increases.Įconomic Growth: the ability of the economy to increase the production of goods. PPF does not have to be a straight line, it can be curved. Opportunity Cost: highest-valued alternative that must be given up to engage in an activity. Circular Flow The circular flow diagram pictures the economy as consisting of two groups households and firms that interact in two markets: the goods and services market in which firms sell and households buy and the labor market in which households sell labor to business firms or other employees. Goods that can be produced with available resources and technology. On the same circular flow model from Handout 6 have students draw households and businesses meeting in the Resource Market, illustrating households offering. Production Possibilities Frontier (PPF): curve showing the maximum attainable combinations of two Related Studylists ECN15 Preview text Chapter two:
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