In the Circular Flow Diagram, Households ________ Goods and Services

question 32

Multiple Choice

In the circular flow diagram, households ________ goods and services and ________ labor.

• A) demand; demand
• B) supply; demand
• C) demand; supply
• D) supply; supply

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Definitions:

Good Y

Typically, a variable used in economic models to represent a generic good or service in the market.

Income Elasticity

A measure of how much the demand for a good or service changes in response to changes in consumer income.

Inferior Good

is a type of good whose demand decreases when the income of consumers increases, contrary to what is observed with normal goods.

Cross-price Elasticity

A measure of how the demand for one good responds to a change in the price of another good, indicating their substitutability or complementarity.