Circular Flow of the Economy
Balancing Our Economy
Learning the basics:
- markets for goods and services
- markets for factors of production (factor markets)
Households:
The primary economic function of households is to supply domestic firms with needed factors of production - land, human capital, real capital and enterprise. The factors are supplied by factor owners in return for a reward. Land is supplied by landowners, human capitalby labour, real capital by capital owners (capitalists) and enterprise is provided by entrepreneurs. Entrepreneurs combine the other three factors, and bear the risks associated with production.
Product Market:
The marketplace in which a final good or service is bought and sold. A product market does not include trading in raw or other intermediate materials, and instead focuses on finished goods purchased by consumers, business, the public sectors and foreign buyers.
They are the markets where households acquire finished (consumer) goods and services. The markets are most familiar with retail markets.
A few examples would be:
- Wal-Mart
- Gas Stations
- Burger King
- Best Buy
Businesses:
Factor Market:
A few examples would be:
- The Cowan Equipment
- IBM Business Solutions
- Snelling Personnel