BUSINESS ADMINISTRATION
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Businesses buy goods and services from individuals
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Businesses purchase productive resources in product markets
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Individuals provide labor for factor markets and buy goods in product markets
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Individuals buy productive resources from factor markets and provide labor for product markets
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Detailed explanation-1: -How do individuals contribute to the circular flow of economic activity? They sell scarce resources (labor) for income and spend income to buy goods and services.
Detailed explanation-2: -Key Takeaways. The circular flow model demonstrates how money moves from producers to households and back again in an endless loop. In an economy, money moves from producers to workers as wages and then back from workers to producers as workers spend money on products and services.
Detailed explanation-3: -Households sell land, labor, capital, and entrepreneurial activity in exchange for money, which in this case is called income. Households are buyers in the market for goods and services. Households exchange income for goods and services. Businesses are sellers in the market for goods and services.
Detailed explanation-4: -Factor markets are markets in which households supply factors of production-labor, capital, and natural resources-demanded by firms. Our model is called a circular flow model because households use the income they receive from their supply of factors of production to buy goods and services from firms.