ECO 007: Economic Development

Student Activity Sheet #2

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule:_____________________________________ Date:_______________

Lesson title: Overview of Economics and the Circular Flow Materials:

Model of Economic Activity Student Activity Sheets
Lesson Objectives: References:
1. Differentiate macroeconomics and microeconomics. Economics by Bello, Camacho,
2. Illustrate and explain the circular flow model of economic activity. Catelo, Cuevas and Rodriguez.
2009 edition

Productivity Tip:
“There is no elevator to success, you have to take the stairs.”- Zig Ziglar

A. LESSON PREVIEW/REVIEW
1) Introduction (2 min)
Good day buddy! Welcome to the world of Economics. I know you already have lot of ideas about this
topic. I hope you will appreciate the relevance of this subject to your life as a student and as a future
professional someday. Let’s check your stock knowledge about economics. Are you ready? Let’s do
this!

Pre-Test (3 min)
Multiple Choice: Write your answer on the space provided before the given number.

____1. Which is the most accurate definition of the study of economics? Economics is the study of
a. the distribution of surplus goods to those in need.
b. affluence in a morally bankrupt world.
c. ways to reduce wants to eliminate the problems of scarcity.
d. the choice we make because of scarcity.

_____2. The analysis of the behaviour of individual decision-making units is the definition of
a. microeconomics c. positive economics
b. macroeconomics d. normative economics

_____3. Macroeconomics is the branch of economics that studies

a. prices of individual goods c. the way individual market works.
b. important as oppose to trivial issues. d. the economy as a whole.

2) Activity 1: What I Know Chart (3 min)

Direction: For this activity, you need to write your answers on the column “What I Know” based on the
questions on the second column. Do not write anything on the third column until you are told to do so.

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 ECO 007: Economic Development
Student Activity Sheet #2

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule:_____________________________________ Date:_______________

What I Know Questions: What I Learned (Activity 4)

1. What is Economics?

2. What is the difference between

macroeconomics and
microeconomics?

3. Who are the principal economic

agents involved in the circular flow
of economic activity?

B.MAIN LESSON
1) Activity 2: Content Notes (10 min)
You can highlight important words or phrases related to the topic.

Macroeconomics Economics Microeconomics

Macroeconomics studies an
overall economy on both a
national and international level.
Its focus can include a distinct
geographical region, a country, a
continent, or even the whole
world. Topics studied include
foreign trade, government fiscal
and monetary policy,
unemployment rates, the level of
inflation and interest rates, the
growth of total production output
as reflected by changes in the
Gross Domestic Product (GDP),
and business cycles that result
in expansions, booms,
recessions, and depressions.
Economics is a social science
concerned with the production,
distribution, and consumption of
goods and services. It studies
how individuals, businesses,
governments, and nations make
choices on allocating resources
to satisfy their wants and needs,
trying to determine how these
groups should organize and
coordinate efforts to achieve
maximum output.
Microeconomics focuses on how
individual consumers and firm
make decisions; these
individuals can be a single
person, a household, a
business/organization or a
government agency. Analyzing
certain aspects of human
behavior, microeconomics tries
to explain they respond to
changes in price and why they
demand what they do at
particular price levels.
Microeconomics tries to explain
how and why different goods are
valued differently, how
individuals make financial

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 ECO 007: Economic Development
Student Activity Sheet #2

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule:_____________________________________ Date:_______________

decisions, and how individuals

best trade, coordinate and
cooperate with one another.

THE CIRCULAR FLOW MODEL OF ECONOMIC ACTIVITY

The circular flow diagram summarizes the transactions between households and business firms including
the government. It captures the roles of these agents in an economy as well as the flow of payments and
receipts between them. Households are usually portrayed as owners of different factors of production like
labor, land, capital and entrepreneurship. Firms purchase and use these factors in the production of goods
and services. Household then acts as the consumers of these goods and services.
The upper panel of the circular flow diagram
shows the transactions that take place in the
markets for goods and services. The blue arrow
originating from the business firms represents the
sale of goods and services. On the other hand,
the green arrow that originates from the
household represents the payments for the
goods and services. This is consumer spending
on the part of the households and business
revenue on business firms.
The lower panel of the circular flow diagram
shows the transactions that take place in the
markets for production. The blue arrow
originating from the households represents firms
hiring factors of production
from households. The green arrow originating
from the business firms represents payments for those factors of production and income on the part of
households. Like individuals, government also engages in various transactions with other economic
agents. It deals with firms through purchase of goods and services. Government also deals directly with
firms and households via taxes on income, property, profits, goods and services and other transactions.

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 ECO 007: Economic Development
Student Activity Sheet #2

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule:_____________________________________ Date:_______________

2) Activity 3: Skill-Building Activities

Part 1 Identification (8 min)

Direction: Identify the following transactions/topics whether they are macroeconomic or microeconomic
topics. Write “MACRO” for macroeconomic transactions and “MICRO” for microeconomic
transactions.
__________1.the effect of increasing money supply on inflation
__________2.the effect of an increase in the tax on cigarettes on cigarettes’ sales
__________3.how a rise in the price of sugar affects the market for sodas
__________4.how a trade agreements between the US and Mexico affects both nations’
unemployment rates
__________5.how federal government budget deficits affect interest rates
__________6.the reason why Kathy buys less orange juice
__________7.studying what factors influence the price and quantity of automobiles
__________8.how rent ceilings impact the supply of apartments
__________9.comparing inflation rates across countries
__________10.total, nationwide employment

Part 2 Do you know the Flow? (12 min)

Find a circular flow model below with some of the labels missing. Answer the questions using the
numbers from the image. To answer correctly, pay close attention to the subject and verb in each item.
Indicate the assigned number of arrow on the scenarios listed below.

Hint: Orange-Goods and Services; Factors of Production

Green-Consumer Expenditures; Payments and Income

Arrow (Indicate
Item
Scenarios the number of
No.
arrow)
1 Famous Person Clothing Inc. sold designer shirts at a department

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 ECO 007: Economic Development
Student Activity Sheet #2

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule:_____________________________________ Date:_______________

store.
2 Developers “R” Us hired five new computer programmers.
3 Josef spent $25 for a meal at a local restaurant.
4 Crabapple Farms Inc. rents its orchard for $50,000 per year.
5 Lydia received her senior portrait photographs from Snapshot
Photography.
6 Crazy Coaster Theme Park received $100,000 in ticket sales last
Friday.
7 Jasmine, a recent graduate with a PhD in economics, applies for
jobs with the government, universities, and international nonprofits.
8 Cory earns $15 per hour from his summer internship program.

3) Activity 4: What I Know Chart (2min)

For this part, you need to revisit the Activity 1. I want you to write all the things you’ve learned on the
third column “What I Learned”. Take time to compare your initial and final understanding after studying
this topic. I hope you gain additional knowledge.

4) Activity 5: Check for Understanding (5min)

I.) Who’s in the flow?
Use the information from your infographic poster to answer the following questions. For each of the
scenarios, you should identify:
a. the role of the person: buyer OR seller; the market: resource OR product
b. the sector: household OR firm
c. the sector receiving the money payment: household OR firm

1. Swooshy Sports sells a soccer ball to James. What can you tell about the transaction?
a. James was the __________ of the soccer ball in the ___________ market.
b. James is part of the ______________sector.
c. The money used in this transaction was paid to the ______________ sector.

2. Margie has a large rural property where she grows pine trees and sells them to Big Paper Company.
What can you tell about the transaction?
a. Margie was the ______________ of the land and trees in the ___________ market.
b. Margie is part of the ____________ sector.
c. The money payment in this transaction went to the _______________ sector.

II.) What’s in the flow?

Use the information from your infographic poster to answer the following questions. For each of the
scenarios, you should identify:
a. the market: resource OR product

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 ECO 007: Economic Development
Student Activity Sheet #2

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule:_____________________________________ Date:_______________

b. the factor of production: land, labor, capital, OR entrepreneurship

c. the product: good OR service

1. Shayla has her own business selling tacos at a stand in a local park. For her taco stand, she grows
tomatoes in a small garden plot she rents from a man named Jack.
a. Shayla rents her garden plot in the ____________ market.
b. The garden plot is a _______________ resource.
c. A taco Shayla sells at her stand is a _________________.

2. Show Me Productions Inc. just announced a big hit show will play at the Grand Theater in July. Alec
works at the snack bar inside the theater and says he can help you buy tickets to the show.
a. Show Me Productions Inc. will sell tickets to you in the ___________________market.
b. Alec is an example of a _____________ resource.
c. Show Me Productions Inc. is selling you a ______________________.

C. LESSON WRAP-UP
1) Activity 6: Thinking about Learning (5 mins)
A. Work Tracker
You are done with this session! Let’s track your progress. Shade the session number you just
completed.

B. Think about your Learning

1. Congratulations! You’re almost done on this activity. Were you able to achieve our learning targets
for today’s activity? Is it difficult or a little bit easy? Kindly share your strategies in order to easily
understand the topic.
__________________________________________________________________________________
_________________________________________________________________________________

2. What will you do next session in order for you to maintain or improve you performance?
__________________________________________________________________________________
__________________________________________________________________________________
FAQ
1. Who was the father of Economics?
Adam Smith was an 18th-century Scottish economist, philosopher, and author who is considered the
father of modern economics. His most notable contribution to the field of economics was his 1776 book,
“An Inquiry into the Nature and Causes of the Wealth of the Nations.”

KEY TO CORRECTIONS

Pre-Test (1.d, 2.a, 3.d)

This document is the property of PHINMA EDUCATION

 ECO 007: Economic Development
Student Activity Sheet #2

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule:_____________________________________ Date:_______________

Activity 3
Part 1. Identification
1.MACRO 3.MICRO 5.MACRO 7.MICRO 9.MACRO
2.MICRO 4.MACRO 6.MICRO 8.MICRO 10.MACRO

Part 2.
1. Arrow #3 3. Arrow #2 5. Arrow #1 7. Arrow #6
2. Arrow #8 4. Arrow #7 6. Arrow #4 8. Arrow #5

Activity 5 Check for Understanding

I. Who’s in the flow? II. What’s in the flow?
1 1
a. buyer; product a. resource
b. household b. land
c. firm c. good
2 2
a. seller; resource a. product
b. household b. labor
c. household c. service

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