The circular flow diagram is an example of an economic model; it’s a model of the economy as a whole. For each of the following transactions, identify (i) which market is most directly involved and (ii) where the flow is going to/from (households to firms, or firms to households).
For example, consider this statement:
Mary works over the summer harvesting tomatoes in the Central Valley.
Answer: (i) Market for Factors of Production (ii) Mary (a household) supplies labor to a farm (a firm).
Carly buys a car from a Honda dealership in Sacramento.
Prof. Xu teaches summer school at Sac. State to earn extra income.
Todd pays Jiffy Lube to change the oil in his car.
Stephanie takes care of children as part of her nanny job.