What are the circular flow of goods among production units in economics?

Answer 1

This consists of the flow of raw materials, the flow of intermediate goods, and the flow of final goods. Raw materials are unprocessed goods like logs, wheat, and iron ore. Intermediate goods are also called goods in process because they are not yet ready for final use in consumption. Final goods consist of the bread we buy in the bakeries, the car, the table and chairs we use at home. Some firms are raw material producing firms. They cut down lumber from the forest or explore mines for ores. Some firms transform these raw materials into intermediate goods. An automatic mobile body shop does this to iron sheets. And of course, we have firms that convert these intermediate goods into final goods, such as when a firm finishes up the car so it is ready for us to ride in.