Question

Based on this model, how do households earn income?

1) When firms purchase in markets for factors of production
2) When households purchase goods and services from firms
3) When households invest in the stock market
4) When households receive government subsidies

Answer 1

In a market economy, households earn income by providing the labor and resources that firms need to produce goods and services.

Step-by-step explanation:

In a market economy, households earn income by providing the labor and resources that firms need to produce goods and services. This is done through the market for factors of production, where households sell their resources and receive factor payments from firms. For example, if a household owns land, they can rent it out to a firm and receive rent payment. If a household provides labor, they can work for a firm and receive wages.