Production is a continuous process in an economy.Various factors of production like land,labour,capital and entrepreneurship are combined together for the production of goods and services.The supply of these factors of production comes from household sector.The factors offer their services to the producers(also known as firm)who in return produce goods and services They make payments as reward in the form of rent,wages,interest and profit. The household sector spends this money on goods and services produced by the films.
Thus,income or money first flows from the firms to the households in the form of factors payments and then from households to the firm to the form of consumption expenditure.The income continuous to flow.In short,this type of economic activity remain in action with the help of circular flow of money and goods in four sectors:
1. Household sector
2. Producing sector
3. Government sector
4. Foreign sector
Thus,circular flow of income and product is defined as the flow of payments and receipts for goods and services and factors services between sectors of the economy.
Thus,income or money first flows from the firms to the households in the form of factors payments and then from households to the firm to the form of consumption expenditure.The income continuous to flow.In short,this type of economic activity remain in action with the help of circular flow of money and goods in four sectors:
1. Household sector
2. Producing sector
3. Government sector
4. Foreign sector
Thus,circular flow of income and product is defined as the flow of payments and receipts for goods and services and factors services between sectors of the economy.
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