28 Apr 2022


Economy Circular Flow Model of Resources

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Academic level: College

Paper type: Essay (Any Type)

Words: 256

Pages: 1

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Economics is a discipline that studies how household satisfies their unlimited wants with scarce resources. These resources flow in a vicious cycle from the household who are consumers to the market who are producers. However, other key players in the economy affect the circular flow of resources from household to production market. These players constitute the primary economic decision makers.

Primary economic decision makers are made up of households, firms, and governments. The household comprises of people residing under the same roof. The household is essential in an economy because they demand commodities and services from the firm and supply resources that are used in production. The firms are responsible for producing goods and services for sale which are consumed by the household. The government plays the role of regulating and formulation policies in the market.

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Money and resources are exchanged in the resource market. The household sells their labor, capital, land and their entrepreneurial skills to the businesses of rather firms to undertake production process of goods and services. In this case, the household gets income from the businesses who in turn receive the resources of production from the household. Consequently, in the product market scenario, household purchases goods and services that have been produced by the businesses. Therefore, businesses get their income from the sale of the goods and services to the household.

The economic model in question does not represent other participants nevertheless; governments and the rest of the world indeed are participants. Governments play a significant role in formulating and enforcing policies in the market. They promote competition and more importantly produce public goods and services. The rest of the world comprises the household, government, and firms internationally.

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StudyBounty. (2023, September 14). Economy Circular Flow Model of Resources.


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