Transcript Consumer Spending

Excellence
• Demonstrate a thorough
understanding of the
relationships between
sectors of the economy.
and
Merit
• Explain how changes in
one sector of the
economy impact on other
sectors.
and
Achieved
• Describe the
relationships between
the major sectors of the
economy.
Interdependence
The Circular Flow Model
Different Markets
Income
Resources
Firms
Households
Households are consumers of
goods and services and providers
of resources (such as labour)
Firms employ resources (such as
labour) and uses them to create goods
and services
Goods and Services
Consumer Spending
Goods and services flow from Firms to Households in return for Consumer
Spending (a money flow).
Resources flow from Households to Firms in return for Income (a money flow).
Income
Resources
Firms
Households
In which flow or sector would
you classify the following?
Goods and Services
A snowboard
Goods/Services
The buyer of a snowboard
Households
Consumer Spending
Money spent on a snowboard Consumer Spending
Timber for the core
Resources
A snowboard manufacturer
Firms
A factory worker
Resources
Wages paid to a factory worker Income
Payment for timber
Income
Profits from the sale of snowboards Income
Income
Savings can be defined as
income not spent
Investment can be defined as
Resources
Firms
Households
the creation of capital goods
The model can be simplified
by leaving out the Real Flows.
Goods and Services
Consumer Spending
Finance
Income
Savings can be defined as
income not spent
Investment can be defined as
Firms
Households
the creation of capital goods
In which flow or sector would
you classify the following?
Consumer Spending
Chris deposits money in the bank
Savings
Chris buys a snowboard
Consumer Spending
LBJ Ltd buys a cutting machine
Investment
Chris buys shares in LBJ
Savings
LBJ uses a share float to expand their factory Investment
Chris receives his salary
Income
Chris gets a dividend on his shares Income
LBJ researches a new snowboard design
Investment
Finance