Question

Suppose Becky earns $650 per week working as an analyst for A-plus Accountants. She uses $10 to order a mojito cocktail at Little Havana. Little Havana pays Alex $250 per week to wait tables. Alex uses $250 to purchase tax services from A-Plus Accountants.
Identify whether each of the following events in this scenario occurs in the resource market or the product market.

a. Alex earns $250 per week working for Little Havana. (Resource Market / Product Market)
b. Becky spends $10 to order a mojito cocktail. (Resource Market / Product Market)
c. Becky earns $650 per week working for A-Plus Accountants. (Resource Market / 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. Check all that apply.

( ) The mojito Becky receives
( ) The $250 Alex spends to purchase tax services from A-Plus Accountants
( ) The $250 per week Alex earns working for Little Havana
( ) Becky's labor

Answer 1

Answer:

Resource Market or Product Market

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

a. Alex earns $250 per week working for Little Havana. (Resource Market / Product Market)

b. Becky spends $10 to order a mojito cocktail. (Resource Market / Product Market)

c. Becky earns $650 per week working for A-Plus Accountants. (Resource Market / Product Market)

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

a. The $250 Alex spends to purchase tax services from A-Plus Accountants.

b. Becky's labor

Explanation:

The resource market is the market where firms buy resources for the production of goods and services.  This means that the resource market deals in the transfer of inputs: labor, capital, land, and entrepreneurship from households to firms.  In the product market, households buy output, i.e. goods and services from firms.