Sunday, March 24, 2013

The Circular Flow of Economic Activity


Labor market
 The input/factor market in which households supply work for wages to firms that demand labor.

Capital market
The input/factor market in which households supply their savings, for interest or for claims to future profits,
to firms that demand funds to buy capital goods.



Land market 
 The input/factor market in which households supply land or other real property in exchange for rent.

Factors of production
The inputs into the production process. Land, labor, and capital are the three key factors of production.

Product or output
markets The markets in which goods and services are exchanged.

Input or factor markets
The markets in which the resources used to produce goods and services are exchanged.



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