Circular Flow Basics

 Resource/ Factor markets: productive resources ( 4 factors of production) are being bought and sold

 Producers invest in capital to increase production and find the labor needed to run their businesses.

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

 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

3 Economic Actors BusinessesHouseholdsGovernment

 1. Supply productive resources to businesses  2. They buy final goods and services

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

 The government taxes consumers and businesses and then injects spending into the economy