Circular Flow Diagram
It represents the transaction in an economy.
Terms
Product Market versus Factor/Resource Market
http://youtu.be/GNX3KO7xevk Watch this random but entertaining video about Product & Factor Market!
Product Market: it is the place where goods and services are produced by businesses and their bought by their households.
Factor/Resource Market: the place where households sell resources and businesses buy resources.
Continuation of Terms
Firms: an organization that produces goods and services for sale.
Households: a person or group of people that share their income. (Sells factors of production to businesses)
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