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5 November, 18:36

N a circular flow diagram, labor and other factors of production are sold on resource markets. These resources are then used to produce goods and services sold on product markets. How are businesses involved in this flow

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  1. 5 November, 18:39
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    A Circular flow diagram represents how households and businesses interact. In a Circular flow diagram, a household is a social unit that consists of those living together. In this case, a household supplies economic resources like labor and other factors.

    A business is a company involved in the production of goods in an effort to make profits. Households in a Circular flow diagram supplies labor economic resources like labor and other factors to businesses.

    The top half of a complete Circular flow diagram represents product markets and shows how households issues money to businesses in exchange for goods.

    Businesses are usually the suppliers and households are the demanders. On the hand, the bottom half of the flow diagram represents resource markets. It shows how businesses give money to households in exchange for labor and other economic resources.
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