Circular Flow Model Definition Economics. The circular flow model in economics describes how resources money goods and services flow through an economy. The concept the circular flow of income is a simplification which attempts to illustrate the flow of money and goods from households to business enterprise and back to households.
In order for economies to thrive there must be movement energy and life. The model represents all of the actors in an economy as either households or firms companies and it divides markets into two categories. The circular flow diagram is a basic model used in economics to show how an economy functions.
In short an economy is an.
The circular flow of income or circular flow is a model of the economy in which the major exchanges are represented as flows of money goods and services etc. The circular flow model in economics describes how resources money goods and services flow through an economy. Money flows from producers to workers as wages and flows back to producers as payment for products. In short an economy is an.
