Question

Suppose Sharon earns $575 per week working as a programmer for PC Pros. She uses $9 to get her car washed at Spotless Car Wash. Spotless Car Wash pays Paolo $300 per week to wash cars. Paolo uses $200 to purchase software from PC Pros.
and
1. Paolo spends $200 to purchase software from PC Pros.
- A. Resource Market? B. Product Market market?
2. Paolo earns $300 per week working for Spotless Car Wash
- A. Resource Market? B. Product Market market?
3. Sharon spends $9 to get her car washed.
- A. Resource Market? B. Product Market 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.
1. The $300 per week Paolo earns working for Spotless Car Wash
2. The $200 Paolo spends to purchase software from PC Pros
3. Sharon's labor

Answer 1

Answer:

First Question

1. B

2. A

3. B

Second Question

The $200 Paolo spends to purchase software from PC Pros.

Explanation:

1. Paolo's transaction falls under the product market cash flow because he wittingly spends on a product–the software.

2. Paolo's earnings comes to the resource market, since he is been paid for his human resourcefulness in the organization.

3. Sharon's payment for washing her car is best placed on the Product market flow since she is spending on a personal product–the car.

The $200 Paolo spends to purchase software from PC Pros in this scenario represent a flow from a household to a firm because he (an individual belonging to a household) transfers his money to the firm.