ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -There are two major actors known as households and firms. Firms offer goods and services for households to consume. They also offer incomes to the households. Households then offer land, labor, and capital (known as factors) to firms so that they can then produce the goods and services.

Detailed explanation-2: -Households are sellers in the market for resources. Households sell land, labor, capital, and entrepreneurial activity in exchange for money, which in this case is called income.

Detailed explanation-3: -In the labour market, households provide labour and receive payment from firms through wages, salaries, and benefits. Firms produce and sell goods and services to households in the market for goods and services (or product market).

Detailed explanation-4: -In the basic (two-factor) circular flow model, money flows from households to businesses as consumer expenditures in exchange for goods and services produced by the businesses, then flows back from businesses to households for the labor that individuals provide.

Detailed explanation-5: -Households, in the Resource Market (factor market), are the owners of the productive resources (factors of production) in the circular flow model. They sell their land, labor, capital, and entrepreneurship to businesses (firms) in the Resources Market in exchange for income payments.