Question

Suppose Megan earns $600 per week working as jewelry appraiser for Classy's Jewelry Store. She uses $9 to order a mojito cocktail at Little Havana. Little Havana pays Larry $200 per week to wait tables. Larry uses $175 to purchase necklace from Classy's Jewelry Store.

Q: Identify whether each of the following events in this scenario occurs in the factor market or the product market. Event Factor Market or Product Market

1.Megan spends $9 to order a mojito cocktail.

2.Larry spends $175 to purchase necklace from Classy's Jewelry Store.

3. Larry earns $200 per week working for Little Havana.

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.

A. The $175 Larry spends to purchase necklace from Classy's Jewelry Store

B.The mojito Megan receives

C.Megan's labor

D. The $200 per week Larry earns working for Little Havana

Answer 1

1. 1. Megan spends $9 to order a mojito cocktail = product market

2. Larry spend $175 to purchase necklace = product market

The Megan and Larry buy goods and services in exchange of money as consumption expenditure.

3.Larry earns $200 per week working for little Havana. = Factor market

Because Larry give its labour in the factor market and earn $200 as wage(money income).

2. The correct answer is C. Megan's labour

Because household sold labour to firm as a factor of production.