CIRCULAR FLOW MODELS

Circular Flow Models

Circular flow model                                                                                                                         -Shows the flow of money, goods and services, and factors of production through the economy. There are three parts:

Household                                                                                                                                          -is a person or group of people who share an income.                                                                       -they own the factors of production.

Firms                                                                                                                                                   -organizations that produce goods and services for sale.                                                                    -they produce goods by taking inputs (factors of production) and turning them into outputs (finished products).

Government                                                                                                                                        -are the providers of public goods and services                                                                                  -they are also the demanders of both private and public goods as well as factors of production

Inside a circular flow model, there are two types of markets:

Product market

-are where goods and services are bought and sold

Factor market/resource market

- are where factors of production and resources are bought and sold

If you still don't understand, here are some vids :) :

Circular flow of income and expenditures: https://www.youtube.com/watch?v=_PKH2wtDT3E