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Module 3 Microeconomic

The document discusses several economic concepts: 1) It evaluates the differences between capitalist ideology and market characteristics, explaining how capitalist private actors can benefit society if property rights are respected. 2) It describes money's role in simplifying exchange by serving as a common medium of trade, circulating goods and services between individuals and countries. 3) It illustrates how adding government and foreign sectors to the traditional circular flow diagram complicates the model by showing how these sectors manage and interact with household/business production and trade.

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Christian Villanueva
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122 views2 pages

Module 3 Microeconomic

The document discusses several economic concepts: 1) It evaluates the differences between capitalist ideology and market characteristics, explaining how capitalist private actors can benefit society if property rights are respected. 2) It describes money's role in simplifying exchange by serving as a common medium of trade, circulating goods and services between individuals and countries. 3) It illustrates how adding government and foreign sectors to the traditional circular flow diagram complicates the model by showing how these sectors manage and interact with household/business production and trade.

Uploaded by

Christian Villanueva
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Palawan State University

El Nido, Palawan
Microeconomics-module-3

Villanueva, Christian
BS Entrepreneurship 1

Critically evaluate capitalist ideology? How does this differ from market characteristic? Explain.
Capitalist ideology in the market are the private actors which own and control property in
accord with their interest. They are also main actor of the demand and supply in the market that
can serve the best interest of society. Capitalist have freedom to act to its coverage which give
positive impact to the market that all sector is equally distributed and receive according to their
ability and needs. There efficient allocation and wide range in economic activity will give positive
impact to the government for economic freedom and political freedom of the country which drive
to the smooth market operation and flexible economy of the country.

Explain the role of money in a modern economic system. Does this simplify or complicate matter?
Explain.
Money place a huge role in everyone’s life. In business, people’s job, and even education. It
is because money helps student a better-quality education for a larger chance of success in life and
for the higher work output of an individual. Therefore, money is economically for the exchange of
service or product which circulate from person to person and country to country that give us easier
trading of good, labor services which simplify each value, quality, and quantity.
Develop the traditional circular flow diagram and illustrate the interdependence between the
sectors. Add the government and the foreign sectors, how does this complicate matter? Explain.
Household- are the consumer
Business sector- Businesses
Resources Market- (land capital, labor)
Product Market- the output of the business

Government- manage and control the household sector, business sector, the resources, and the
product of market.
Foreign Sector- They import and export product which consume and produce from household
sector from the control and management of the government to business sector interaction of
import and export product or services and it may affect to the resources market and product
market of the economy and everything flow circularly.
The following two commodities are produced by Tennessee and Kentucky:

Sour Mash Whiskey Bourbon


Tennessee 5,000 500
Kentucky 500 10,000

Assuming free trade and that each state wishes to consume as much of each commodity as possible,
what will each state produce? What will the terms of trade be?
-The Tennessee produced 5,000 sour mask whiskey and 500 bourbon and Kentucky
produced 500 sour mash whiskey and 10,000 bourbon, and the term of trade is dependent to some
extent on exchange and inflation rates and prices that may base to the number of goods available in
trade which the more goods a vendor has available for sale(Kentucky) the more goods that it will
likely sell, and the more goods that vendor can buy using capital obtained from sales. It means, the
larger and higher-quality goods will likely cost more. If goods sell for a higher price, a seller will
have additional capital to purchase more goods because if one country purchase more imported
goods for every unit of export that it sells when its term of trade improves. An increase of term of
trade can be beneficial because the country needs fewer exports to buy given number of imports.
Explain the role of currency exchange rates in international trade. What cause these exchange rates
change?
The exchange rate is the price of unit of foreign currency in terms of the domestic currency.
It serves as a basic link between the local and the overseas market for various goods, services and
financial assets. Using exchanges rate, we are able to compare prices of goods, services and assets
quoted in different currencies and the movement of exchange rate can affect actual inflation as well
as expectations about future price movement.
Foreign exchange or the international trading markets facilitate the trade of one foreign
currency for another. Business financial, institutions government, investors, and individuals use the
foreign exchange market to adjust their currency holding and the cause of exchange rate changes
are Balance-of-payments position which a country experiencing a trade-deficit usually faces
downward pressure on its foreign exchange rate. Most factor is domestic economic and political
condition which deteriorating economic conditions and inflation typically have an adverse effect on
foreign exchange rates
Sample Question:
Multiple Choice:

Which of the following is not a function of money?


Answer: D

Barter is a system that historically existed since the beginnings of time. Why has barter been
displaced by more modern system?
Answer: A

If the dollar gains value with respect to the Euro what would we expect to observe?
Answer: A

TRUE-FALSE
 The circular flow model demonstrates that there is interdependence between the section
but does not identify how the section are interdependent. {FALSE}

 Comparative advantage derives from having an ability to produce some commodity at a


lower cost than a potential trading partner? {TRUE}

 The majority of the countries in the world are high income, developed countries. {FALSE}

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