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SSEMI1a. Illustrate the flow of goods and services by means of the circular flow

Circular Flow Basics. SSEMI1a. Illustrate the flow of goods and services by means of the circular flow. Factor/Resource Market. Resource/ Factor markets : productive resources ( 4 factors of production) are being bought and sold. Factor/Resource Market.

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SSEMI1a. Illustrate the flow of goods and services by means of the circular flow

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  1. Circular Flow Basics SSEMI1a. Illustrate the flow of goods and services by means of the circular flow

  2. Factor/Resource Market • Resource/ Factor markets: productive resources ( 4 factors of production) are being bought and sold

  3. Factor/Resource Market • Producers invest in capital to increase production and find the labor needed to run their businesses.

  4. Product markets • After individuals receive income, they spend it in product markets. • Product markets: where producers sell their goods and services to consumers

  5. Product Market • Only final goods and services are sold here. • Final/Finished goods: This is the last time a good or service will be consumed or used

  6. Three Actors

  7. Role of households • 1. Supply productive resources to businesses • 2. They buy final goods and services

  8. Role of Business Firms 1. Supply goods and services in the product market 2. Function as consumer and producer 3. Try to sell products for more than cost of production

  9. Role of the government • The government taxes consumers and businesses and then injects spending into the economy

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