CIRCULAR FLOW DIAGRAM

- It represents the transactions in an economy.

Resource (Product) Market

- This is the place where households sell resources and businesses buy resources(goods and services).

Factor Market

- This holds the factors of production(land, labor, capital and entrepreneurship).

Firms

- It is an organization that produces goods and services for sale.

- Firms sell finished products to households.

Household

- It is a person or a group of people that share their income. Households sell their factors of production to businesses.