Circular Flow Diagram Of A Market Economy. Market for factors of production such as labour or capital where firms purchase factors of production from households in exchange for money. The economy s income and expenditure the following diagram presents a circular flow model of a simple economy.
In this video i explain the circular flow matrix and how products resources and money flow in a market economy. Market for factors of production such as labour or capital where firms purchase factors of production from households in exchange for money. According to this diagram where do individuals sell their labor.
The model represents all of the actors in an economy as either households or firms companies and it divides markets into two categories.
According to this diagram where do individuals sell their labor. Between the two are the product market and the resource market. The circular flow diagram or circular flow model is a graphical representation of the flows of goods and money between two distinct parts of the economy. It illustrates the interdependence of the flows or activities that occur in the economy such as the production of goods and services or the output of the economy and the income generated from that production.
