Microeconomics: Two-Sector Model
40 Questions
0 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What do firms use as an input to produce goods and services?

  • Households
  • Revenue
  • Factors of production (correct)
  • Goods and services

    • In a two-sector model, what do households sell to firms?

  • Revenue
  • Factors of production (correct)
  • Labour only
  • Goods and services

    • What do firms sell to households in a two-sector model?

  • Goods and services (correct)
  • Revenue
  • Factors of production
  • Labour

    • What flows from households to firms in a two-sector model?

    <p>Factors of production</p> Signup and view all the answers

    What represents expenditure by firms to purchase factors of production?

    <p>Spending</p> Signup and view all the answers

    In a three-sector model, which additional sector is involved in economic activities?

    <p>Government</p> Signup and view all the answers

    What flows from firms to households in a two-sector model?

    <p>Income</p> Signup and view all the answers

    What is represented by the flow of Birr in Figure 1.4?

    <p>Flow of income</p> Signup and view all the answers

    What is the market demand function given by?

    <p>Q = 20 - 2P</p> Signup and view all the answers

    What happens to the demand curve when there is a change in the price of a product?

    <p>It moves along the same curve</p> Signup and view all the answers

    Which of the following is NOT a determinant of demand?

    <p>Quantity supplied</p> Signup and view all the answers

    What is the result of an increase in demand?

    <p>The demand curve shifts upwards</p> Signup and view all the answers

    Which of the following is an example of a demand shifter?

    <p>Change in the taste or preference of consumers</p> Signup and view all the answers

    What happens to the demand curve when there is a decrease in demand?

    <p>It shifts to the left</p> Signup and view all the answers

    What is the result of a change in any determinant of demand except the good's price?

    <p>A shift of the demand curve</p> Signup and view all the answers

    What is the relationship between the price of a product and the quantity demanded?

    <p>Inversely proportional</p> Signup and view all the answers

    What is derived by horizontally adding the quantity supplied of the product by all sellers at each price?

    <p>Market supply</p> Signup and view all the answers

    Which of the following is NOT a determinant of supply?

    <p>Number of buyers in the market</p> Signup and view all the answers

    What happens to the supply curve when there is an increase in the price of inputs?

    <p>It shifts inward</p> Signup and view all the answers

    What is the effect of technological advancement on the supply curve?

    <p>It shifts outward</p> Signup and view all the answers

    What is the effect of a decrease in input price on the supply of a product?

    <p>It increases</p> Signup and view all the answers

    Which of the following is an example of a determinant of supply that is related to natural factors?

    <p>Weather</p> Signup and view all the answers

    What happens to the quantity supplied by seller 1 when the price per unit is $5?

    <p>It is 11</p> Signup and view all the answers

    What is the market supply when the price per unit is $4?

    <p>30.5</p> Signup and view all the answers

    What type of goods are those that satisfy the same type of demand and can be used in place of one another?

    <p>Substitute goods</p> Signup and view all the answers

    Which of the following factors determines price elasticity of demand?

    <p>All of the above</p> Signup and view all the answers

    What is the term for the degree of responsiveness of quantity demanded of a commodity to change in any of its determinants?

    <p>Elasticity of demand</p> Signup and view all the answers

    Which type of goods is characterized by a decrease in demand with an increase in income?

    <p>Inferior goods</p> Signup and view all the answers

    What is the term for goods that are used jointly or together?

    <p>Complementary goods</p> Signup and view all the answers

    What is the purpose of adding individual demand curves horizontally to get the market demand curve?

    <p>To find the total quantity demanded at a given price</p> Signup and view all the answers

    What type of elasticity of demand measures the responsiveness of quantity demanded to a change in the price of a related good?

    <p>Cross price elasticity of demand</p> Signup and view all the answers

    Which of the following is NOT a type of elasticity of demand?

    <p>Supply elasticity</p> Signup and view all the answers

    What is the main role of a government in the economy?

    <p>To provide public goods and services to the society</p> Signup and view all the answers

    What is the product market?

    <p>A market where goods and services are transacted/exchanged</p> Signup and view all the answers

    What is the flow of economic resources and final goods and services represented by in the circular-flow diagram?

    <p>Clockwise direction</p> Signup and view all the answers

    What do households receive when they supply their resources to firms in the factor market?

    <p>Income</p> Signup and view all the answers

    What is the purpose of the circular-flow diagram?

    <p>To show the interaction between households, firms, and government</p> Signup and view all the answers

    What is the factor market?

    <p>A market where economic units transact/exchange factors of production</p> Signup and view all the answers

    What do business firms receive when they sell goods and services to households in the product market?

    <p>Revenue</p> Signup and view all the answers

    What is represented by the anti-clockwise direction in the circular-flow diagram?

    <p>The flow of birr in the form of revenue, income and spending on consumption</p> Signup and view all the answers

    Study Notes

    Circular Flow of Income with Two-Sector Model

    • The circular flow of income represents expenditure by firms to purchase factors of production, used as inputs to produce goods and services.
    • The two-sector model consists of households and firms interacting in two markets: product market and factor market.
    • In the product market, firms sell goods and services to households, and in the factor market, households sell factors of production to firms.

    Circular Flow of Income with Three-Sector Model

    • The three-sector model involves the government, which has legal and political power to control or influence households, firms, and markets.
    • The government provides public goods and services to society.
    • The three economic agents (households, firms, and government) interact in two markets: product market and factor market.

    Demand

    • The demand for a product is influenced by many factors, including:
    • Price of the product
    • Taste or preference of consumers
    • Income of consumers
    • Price of related goods
    • Consumers' expectations of income and price
    • Number of buyers in the market
    • A change in any of these factors, except the price of the good, will change the demand, causing a shift in the demand curve.
    • A change in the price of the good, while keeping other factors constant, will result in a movement along the same demand curve.

    Determinants of Demand

    • Price of the product
    • Taste or preference of consumers
    • Income of consumers
    • Price of related goods
    • Consumers' expectations of income and price
    • Number of buyers in the market

    Changes in Demand

    • A change in demand will shift the demand curve from its original location.
    • If buyers choose to purchase more at any price, the demand curve shifts rightward (an increase in demand).
    • If buyers choose to purchase less at any price, the demand curve shifts leftward (a decrease in demand).

    Market Supply

    • Market supply is derived by horizontally adding the quantity supplied of the product by all sellers at each price.
    • The supply of a particular product is determined by:
    • Price of inputs (cost of inputs)
    • Technology
    • Prices of related goods
    • Sellers' expectations of price of the product
    • Taxes and subsidies
    • Number of sellers in the market
    • Weather, etc.

    Determinants of Supply

    • Price of inputs (cost of inputs)
    • Technology
    • Prices of related goods
    • Sellers' expectations of price of the product
    • Taxes and subsidies
    • Number of sellers in the market
    • Weather, etc.

    Types of Goods

    • Normal good: a good for which the demand increases with increases in income
    • Inferior good: a good for which the demand tends to fall with an increase in the income of the consumer
    • Substitute goods: goods that satisfy the same type of demand and can be used in place of one another
    • Complementary goods: goods that are used jointly or together
    • Giffen goods: goods whose demand falls with a fall in their prices

    Studying That Suits You

    Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

    Quiz Team

    Description

    Understand the concept of expenditure by firms to purchase factors of production in a two-sector model, including revenue, markets, and goods and services.

    More Like This

    Macro 2: Measuring the Collective Sector
    36 questions

    Macro 2: Measuring the Collective Sector

    FavoriteSwamp avatar
    FavoriteSwamp
    Rest of the World Sector in Macroeconomics
    18 questions

    Rest of the World Sector in Macroeconomics

    CozyNaïveArt avatar
    CozyNaïveArt
    Economics: Producers and Productive Sectors
    8 questions

    Economics: Producers and Productive Sectors

    FineLookingPhosphorus avatar
    FineLookingPhosphorus
    Junie V1 Mix
    272 questions

    Junie V1 Mix

    TalentedParody avatar
    TalentedParody
    Use Quizgecko on...
    Browser
    Open
    Browser
    Browser