1. Households What are “Households” in terms of the Circular Flow of the Economy? PEOPLE Workers Land Owners Investors Renters Home Owners Families You & Me Entrepreneurs

2. Firms What are “Firms” in terms of the Circular Flow of the Economy? LARGE FACTORIES THAT PRODUCE GOODS BUSINESSES THAT PROVIDE SERVICES An Artisan who makes small number of finely crafted products An individual who works out of their home Businesses that sell things that they import or buy Employer

3. Market – A place that brings buyers and sellers together The Goods & Services Market Goods & Services are sold By the firm to the Household Money goes from the Household to the Firm to buy the goods & Services

4. Households Firms GOODS & SERVICES BUYS SELLS $ FOR GOODS & SERVICES The Goods & Services Market

5. NATURAL RESOURCES Factors of Production (RESOURCES USED TO PRODUCE GOODS AND SERVICES) LAND LABOR The Factors of Production Market CAPITAL MENTAL, PHYSICAL OR SKILLED WORK FOR WAGES BUILDINGS, MACHINERY, TOOLS USED TO PRODUCE GOODS & SERVICES

6. Households Firms FACTORS OF PRODUCTION BUYS SELLS $ PAID FOR FACTORS OF PRODUCTION The Factors of Production Market LAND LABOR CAPITAL Wages Wages, Rents, Interest, ProfitsInterestProfitsRents Profits

7. Both the Goods and Services Market and the F.O.P. Market occur simultaneously

8. Households Firms The Goods & Services Market

9. Market – A place that brings buyers and sellers together The Goods & Services Market Goods & Services are sold By the firm to the Household Money goes from the Household to the Firm to buy the goods & Services

10. Households Firms The Goods & Services Market Goods & Services are sold By the firm to the Household Money goes from the Household to the Firm to buy the goods & Services