Name: Crisencio A.

Barillo 2nd year- AS3 9-7-20

ECON 101
Circular Flow Model

The Circular Flow Model

is what defines the
interactions and similarity
between the households
and the firms in the free
market. Market:  A
location in which
customers can buy goods
or economic products.
But, who makes those
decisions?

They are:
Consumers
Businesses
Government
Foreign Sectors
Looking to the left of this wonderful model, this is known as the circular flow
model. Starting from the households, imagine yourself are the basic
customer! And yes, everyone in this world are customers, no matter how
you view it. Anyways, a person like you needs money, right? So, having the
skill as a human resource, you sell (for me my product is magnetic
bookmarks) yourself to the business to do some labor work. You then
create the productions that are needed for the product market, which then
the production input (the goods produced by labor) is given to the firms that
you work for. The firms then sell your perfect product to the resource
market. From there, the resource market is then bought by typical
customers, like you! The whole cycle is then repeated.
As for the money that is pinpointed by the dark blue arrow above, imagine
yourself as the household once again. You have money that’s on your
hand, wohooo hahaha. Now, there’s this huge big seller product that you’ve
always want your whole life, and you use that money to spend on it. That’s
great. Now, that money is then given to the business that created that
product as revenue. That revenue can be used by the firms to be used on
resources, or wages to the workers. Those workers then can use that
money they got from the wage, and spend it on other products. The whole
cycle then starts again.