CIRCULAR FLOW DIAGRAM
It represents
the transactions in an economy.
Product market
It is the place where goods and services are
produced by businesses and they are bought by households.
Factor market
(factors of
production) this is the place where households sell resources and businesses
buy resources.
Firms
An organization that produces goods and services for
sale.
Households
It is a person or group of people that share their
income. They sell factors of production to business.
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