Firms and Businesses Households/ Consumers Product Market Economic Resource Market $ (Revenues) $ (Wages, Salary, Interest, and Profits) $ $ Goods and Services Goods and Services Land, labor, Capital, and Entrepreneurial ability Land, labor, Capital, and Entrepreneurial ability Biosphere Outputs: Wastes and pollution(to sinks) Input: Natural Resources and environmental services (Sources) Solar Energy Waste Heat BroaDer Circular Flow MoDel Harris Why Include the Ecosystem? Sources and Sinks Explained Failures with the Traditional Model Price ($) Quanity (tons of coal) Coal Supply (private) Demand Equilibrium (private) Price (private) Quanity (private) Supply (social) Equilibrium (social) Price (social) Quanity (social) market Incorporating Externalities in the Supply and Demand Analysis Economics 12 Pennington Fall 2011 Define *Externalities, limits, etc.