1. The Circular Flow Model describes and shows how the economy interacts.
FACTOR
MARKET
Where you get your
4 factors of production to make your goods and services
PRODUCT
MARKET
Where you buy your finished goods and services for use

2. Business and Companies
Get the 4 factors of production from the Factor Market and sale products in the Product Market.
Households
Provide 4 factors of production to the Factor Market and buy products from the Product Market.

3. HOUSEHOLDS provide the factor market with the four factors of production.
Land
Labor
Capital
Entrepreneurship
In return, they receive income in the from:
Rent
Wages
Interest
Profit

4. Businesses spend $$$ (costs) in the factor market to get the 4 factors of production to make goods and services.
In return, businesses receive the land, labor, capital and entrepreneurship to make goods and services.

5. Businesses make goods and services with their resources and supply it to the product market.
In return, businesses get revenue for supplying their goods and services.

6. Households Households spend money in the product market.
In return, households get the goods and services they want and need.

7. Factor Market Product Market
Businesses
Households
Product Market

8. Rent, Wages, Interest , & Profit
4 factors of production
Factor Market
Rent, Wages, Interest , & Profit
Businesses
Households
Product Market

9. Rent, Wages, Interest , & Profit
Resources
4 factors of production
Factor Market
Rent, Wages, Interest , & Profit
Costs
Businesses
Households
Product Market

10. Rent, Wages, Interest , & Profit
Resources
4 factors of production
Factor Market
Rent, Wages, Interest , & Profit
Costs
Businesses
Households
Revenue
Product Market
Goods and Services

11. Rent, Wages, Interest , & Profit
Resources
4 factors of production
Factor Market
Rent, Wages, Interest , & Profit
Costs
Businesses
Households
Consumer
Spending
Revenue
Product Market
Goods and Services
Goods and Services

12. Ticket Out The Door Questions!!! You may use your notes
The factors of production are bought and sold in the ___________ market.
Goods and services are bought and sold in the ___________ market.
In the circular flow model, ____________ buy the factors of production from _____________.
Households and businesses pay ___________ to the government in exchange for goods and services.