from the household, the income flow which is the purchase of goods and services will become firms. then the income flow from the firms which is the wages, interest and rents will go back to the households.
The circular flow model is a summary of the operation of a market economy, that is the flow between production factors (firms) and households. Firms provide an income to households though employment (labour) and in the same manor households spend their income on firms for services and products.
households
Circular flow
households and firms
labor, capital, and resources
The circular flow model is a summary of the operation of a market economy, that is the flow between production factors (firms) and households. Firms provide an income to households though employment (labour) and in the same manor households spend their income on firms for services and products.
households
Circular flow
households and firms
labor, capital, and resources
Labor, capitital, and raw materials.
With wages, rent and dividends.
The market is the mechanism that brings together households and firms.
The connection between households and firms in the economy stems from the fact that consumers in this case households work for firms to earn wages as the company makes profits due to increased production.
flow of money payments(Kaylop)Factor services ( From household to firms) &Goods & Services (From firms to households).[in a 2 sector economy)
flow of money payments(Kaylop)Factor services ( From household to firms) &Goods & Services (From firms to households).[in a 2 sector economy)
flow of money payments(Kaylop)Factor services ( From household to firms) &Goods & Services (From firms to households).[in a 2 sector economy)