(2) The Simple Circular Flow Model
Circular Flow, Households, Firms, Output Market, Goods Market, Input Market, Factor Market
This takes a closer look at the simple circular flow model. It serves as a general overview of how the economy might operate. The dual nature of both the flows and the types of interactions is emphasized. This leads to a discussion of the role of output and input markets in an economy. How the circular flow model fits into micro and macro economic analysis is also explained.
Crane, Steven E., "(2) The Simple Circular Flow Model" (2011). Principles of Microeconomics. Paper 21.
Ability to explain the roles of households and firms in a market economy. Ability to distinguish real vs. financial flows and input vs. output markets. Ability to explain the role of markets in coordinating the interactions between households and firms.
Core Economic Actors Video