Market Interaction / Circular Flow

Circular Flow Diagram 

• model which describes the reciprocal circulation of income between producers and consumers.
• (the flow of resources, products, and income)
• (theory that all parts of the economy are connected)
• macro / micro theory 

Parts of the model (simple)

• Firms (businesses)  
• Households (individual consumers) 
• Resource Markets 
• Product Markets 
• Government

more complex models include: financial markets, import and export markets, etc.

Market: means by which buyers and 
sellers carry out exchange

From our reading....
How do you think this model would 
look if it showed government?