1. Circular Flow Model
of Goods and Services
PRODUCT MARKET
SSEMI1a-b

2. What is the Circular Flow?
The circular-flow diagram or model is a graphical representation of the flows of goods and money between two distinct parts of the economy: -market for goods and services, where households purchase goods and services from firms (businesses) in exchange for money;
Firms use these factors in their production of products

3. Producers vs. Consumers
Producers OWN businesses that make the goods and services.
Consumers- people, households, families that participate in voluntary exchange (trade in which both parties are satisfied)

4. Government
Households
Businesses/
Firms
SELL

5. Government
PRODUCTS
Households
Businesses/
Firms
PRODUCTS
SELL

6. Government
PRODUCTS
Households
Businesses/
Firms
PRODUCTS
SELL

7. Government
PRODUCTS
TAXES
Households
Businesses/
Firms
PRODUCTS
SELL

8. SELL SERVICES PRODUCTS TAXES PRODUCTS Government Businesses/ Firms
Households
Businesses/
Firms
PRODUCTS
SELL

9. FACTOR/RESOURCE
MARKET

10. Government
Households
Businesses/
Firms
WORK/LABOR

11. Government
WORK/LABOR
Households
Businesses/
Firms
WORK/LABOR

12. Government
WORK/LABOR
Households
Businesses/
Firms
WORK/LABOR

13. Government
WORK/LABOR
TAXES
Households
Businesses/
Firms
WORK/LABOR

14. TAXES WORK/LABOR WORK/LABOR SERVICES Government Businesses/ Firms
Households
Businesses/
Firms
WORK/LABOR

15. RESOURCE PRODUCT

17. Circular Flow Pt. 1

18. Circular Flow Pt. 2