Unit 2: Circular Flow

Circular Flow - Shows the flow of money goods and services and factor of production throughout the economy .

3 entries 
  1. Household- person or group of people who share income. Household owns the Factor of Production 
  2. Firms- is an organization that produces goods and services . Firms produce goods by taking imports, which is your FOP product and turning them into output , which is your finished product.
  3. Government- Their provider of public goods and services and demanders of both private good and services and the factor of production.
2 market 

  • Product market- this is where goods and services are bought and sold ; exchange finish good for money 
  • Factor market(Resource market)- where resources especially capital and labor are bought and sold . Exchange factor of production for money. 
Image result for circular flow diagram

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