Question

MINDIAP Q Search this c Homework (Ch 02) Based on this model, households earn income when households purchase factors in factor markets Suppose Hilary earns $600 per week working as work as a flight attendant for Flyaway Airlines. She uses $9 to order a mojito cocktail at Little Havana. Little Havana pays Edison $200 per week to wait tables. Edison uses $150 to purchase air travel to Hawail from Flyaway Airlines. Identify whether each of the following events in this scenario occurs in the factor market or the product market. Event Edison earns $200 per week working for Little Havana. Hilary spends $9 to order a mojito cocktail. Edison spends $150 to purchase air travel to Hawaii from Flyaway Airlines. Factor 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 O Hilary's labor O The mojito Hilary receives The $150 Edison spends to purchase air travel to Hawal from Flyaway Airlines

Answer 1

Solution:

1)

	Factor Market	Product Market
Edison earns $200 per week working for Little Havana	Factor Market
Hilar spends $9 to order a mojito cocktail		Product Market
Edison spends $150 to purchase air travel to Hawai		Product Market

Working: In this case households sell resources in factor markets when Edison supplies her labor to Little Havana and when Hilary supplies his labor to Flyway airlines. Furthermore a firm sells goods and services to a household in product markets when Hilary and Edison spends their earnings to purchase cocktail and air travel bag.

2) Solution: Hilary's labor; The $1.50 Edison spends to purchase air travel to Hawai from Flyaway Airlines

Working: When Hilary (a household) supplies the labor to any firm, labor is an input that flows from a household to a firm. When Edison spends to purchase air travel to Hawai from Flyaway Airlines it is a payment that flows from a household to a firm