ECON101: Principles of Microeconomics

We wrap up this unit by introducing another essential model in Economics: the circular flow model, which pictures the economy as consisting of two groups – households and firms – that interact in two markets: the goods and services market, where firms sell, and households buy, and the labor market, where households sell labor to business firms or other employees.

Watch this video on the circular flow model of income and expenditures. Make sure you understand the concepts related to the payments of the factors of production. Is income the same thing as revenue?