Economic Decision Makers - Outline Example

 Households earn money by providing labor to the firms and through government handouts. They then spend this money on buying goods and services from firms and paying taxes to the government (Piros & Pinto, 2013). Firms are economic units that are formed by people seeking profit from selling goods and services. Firms use available resources to produce goods and services that are later sold to households. The government is important in an open market as it helps ensure that there is a level playing ground for all firms.

They also ensure that the conditions are favorable for the firms to maximize their profit (Silvia, 2011). In turn, the firms pay taxes to the government. This revenue is used by the government to provide public goods for the firms and household to enjoy. The households provide labor to the firms. In return, they earn income from the firms that they use to purchase goods and services from the firms and also pay taxes. The firms, on the other hand, provide goods and services to the households and also pay taxes to the government to ensure that there is a level playing ground and the environment is good to ensure firms maximize their profits.