Explain the role played by households in the economy.

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Solution

Households - All those people living under one roof are considered a household.

Households do two fundamental things vital to the economy.

1. Demand goods and services from product markets

2. Supply labour, capital, land, and entrepreneurial ability to resource markets.

Economists think of each household acts as a single decision-maker.

Householder: The key decision-maker in the household.

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