The circular flow model illustrates the flow of goods and services through the economy.
Money is the medium of exchange in a market economy.
A market is a place where buyers and sellers meet to engage in exchanges with one another.
There is a product market and a resource market in a market economy.
The goal of firms is to maximize profits, and the goal of households is to maximize utility.
As long as leakages are equal to injections, the circular flow of income continues indefinitely.
The concept of supply and demand controls a market economy.
There are two possible effects if the price of a good increases.
Marginal utility deals with consumption of a good or service.
Demand is elastic if it changes a lot when the price changes. Soda is an example.
Demand is inelastic if it does not respond much to price changes. Gas is an example.
Price controls change the market equilibrium in a free market.
The most common price floor is the minimum wage, the minimum amount that can be paid for labor.
Financial institutions include three types of banks as well as credit unions.

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