Answer to Question #267428 in Economics for Tenn

Question

Describe the Circular Flow. Describe how the good moves in relation to:

• Households
• Suppliers of goods and services
• Money

Answer 1

Economic goods do not move by themselves. They act as a means of communication between economic agents.

Economic agents (economic agents) are subjects of economic relations involved in the production, distribution, exchange, and consumption of economic goods. The main economic agents are individuals (households), the state, the state, and its divisions. In turn, among the firms are primarily individual business enterprises, partnerships, and corporations. Modern economic theory is based on the premise of the rational behavior of agents. This means that the goal is to maximize results at cost or minimize costs at a given result. Individuals strive for the maximum satisfaction of needs with expenditures, the state - for the highest growth of social welfare under a certain budget. As economic agents, for example, an increase in wages and improvement of social conditions of life also act as their means - the struggle for favorable conditions for concluding collective agreements.

An economic circulation is a circular movement of a real economy, accompanied by a counter flow of cash income and expenses.

The main subjects of a market economy are households and firms. Households have a demand for consumer goods and services, being at the same time suppliers of economic resources. Firms demand resources, offering in turn consumer goods and services. The behavior of the main economic agents can be expressed by the supply and demand cycle.

With all the conventionality of the circuit, it shows the main thing - in a developed market economy, the constant interaction of supply and demand: demand gives rise to supply.