Question

Define the forces driving change in the household and personal products market and the impact each is likely to have

Answer 1

Answer :- The product market represents the purchases of finished goods and services in an economy. Households are the main buyers of goods and services in the product market, and businesses are the sellers of goods and services, as shown in the top half of Figure 2.3. From the circular flow model, it appears that the product market is a single physical location where products are bought and sold. But this is clearly not the case. Instead, the product market represents the millions of buy-sell transactions that are made every day in supermarkets, gas stations, convenience stores, department stores, bakeries, laundries, dentist and doctor offices, delis, and coffee shops.
The transactions that take place in the product market are based on the principle of voluntary exchange. That is, both the buyer (household) and the seller (business firm) believethey will benefit from an exchange; otherwise, it will not take place. The spending by a household becomes revenue earned by a business. In an expanded version of the circular flow model, the government also appears as an important buyer of goods and services in the product market. For example, the government purchases military goods such as submarines and aircraft from private firms. Household and government spending become important sources of revenue for businesses.
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