A circular flow model represents the flow of money, goods, and services
Factor Markets
-where factors of production are bought and sold
-a.k.a resources
-Firms buy factors of production from households
-ex: A clothing store buys clothes from another store (physical capital) or volunteering (exerting labor)
Product Markets
-where goods and services are bought and sold
-a.k.a goods
-goods and services produced by firms are purchased by households
-ex: getting a haircut
Economic Actors
- Firms: a business or organization that produces goods or services for sale
- Household: a person or group of people that share an income
Market Economy: makes all the decisions for themselves (ex: Hong Kong)
Communist Economy: run by others
Traditional Economy: all family member have same jobs
Free-Market: some decisions are made, some decisions made by government (ex: Health Care)
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