Chocolate Case
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The main economic activity of the businesses is the production of services as well as consumer and capital goods. Consumer goods include TV sets, clothing, and health care (immediate use). Capital goods include trucks and equipment which are used to produce additional consumer goods.
As producers, firms compete with each other in the resource markets when acquiring the limited amount of economic resources.
Business firms can be in the form of: corporations, partnerships, or sole proprietorships.
A firms net income (profit) is the difference between its revenue from selling output and the costs or expenses associated with producing it.
Business firms:
Make resource payments to the households.
Use these resources to produce the goods- the goods are exchanged with money payments from the households, government, and foreign countries.
Pay taxes to the government sector in exchange for public goods and services.
Make payments to the foreign sector for imports of goods, services, and resources
The Government
Government provides the people with goods and services that the market generally does not or cannot provide. These are called public, or collective goods and services because individuals “collectively” benefit from their availability whether or not they pay (i.e. national defense).
The main source of revenue for the federal government comes from taxes put on the income of households and businesses. Deficits occur when the government spends more than it collects in taxes.
Government:
Purchases resources from the households in exchange for money payments.
Purchases goods and services produced by the private businesses.
Provides goods and services to the people in exchange for the payment of taxes.
According to the circular flow, in what economic activities is government engaged?
In what economic activities are households engaged?
In what activities are businesses engaged?
Give an example of a productive resource that households sell to governments
Give an example of a good or service that businesses sell to governments
Give an example of a good or service that governments provide to households in exchange for taxes?
Give an example of a good or