1.1.3 Economic Agents

• What is an economic agent in an economy?

  A key decision-maker
• Economic agents interact through markets to determine what, how, and for whom goods and services are produced.
• Order the objectives of the four economic agents from individual to global:

  1️⃣ Maximize utility and improve living standards (Households)

  2️⃣ Maximize profits and expand market share (Firms)

  3️⃣ Promote economic stability and social welfare (Government)

  4️⃣ Achieve trade surplus and gain comparative advantage (Foreign Sector)
• The foreign sector engages in international trade to achieve a trade surplus and gain comparative advantage.
• Match each economic agent with their objective:

  Households ↔️ Maximize utility

  Firms ↔️ Maximize profits

  Government ↔️ Promote stability

  Foreign Sector ↔️ Achieve trade surplus
• Households provide labor to firms in exchange for wages, which they use to consume goods and services.


  True
• What determines the overall economic activity in an economy?

  Interplay between economic agents
• Match each economic agent with their objectives:

  Firms ↔️ Maximize profits, grow market share

  Government ↔️ Promote economic stability, social welfare

  Foreign Sector ↔️ Maximize trade surplus, gain advantage
• Households aim to maximize profits by consuming goods and services.

  False
• Households are motivated to maximize their utility and achieve a higher standard of living
• Households aim to maximize profits and grow market share.

  False
• Match each economic agent with their primary role:

  Households ↔️ Provide labor and consume goods

  Firms ↔️ Produce goods and services

  Government ↔️ Regulate the economy

  Foreign Sector ↔️ Engage in international trade
• Firms maximize profits by producing and selling goods and services to households.


  True
• What is the primary objective of households as economic agents?

  Maximize utility
• What are the four main economic agents in an economy?

  Households, firms, government, foreign sector
• The government regulates the economy, sets policies, and provides public goods and services
• Match each economic agent with their objectives:

  Households ↔️ Maximize utility, improve standard of living

  Firms ↔️ Maximize profits, grow market share

  Government ↔️ Promote economic stability, social welfare

  Foreign Sector ↔️ Achieve trade surplus, gain advantage
• Households provide labor and consume goods/services to maximize their utility
• What questions do economic agents help answer in an economy?

  What, how, and for whom
• Order the interactions between economic agents from labor provision to final consumption:

  1️⃣ Households provide labor to firms

  2️⃣ Firms produce goods/services

  3️⃣ Households consume goods/services
• Match each economic agent with their primary motivation:

  Firms ↔️ Maximize profits

  Government ↔️ Promote stability

  Foreign Sector ↔️ Gain trade surplus