In the circular flow model, what do firms purchase?
Understand the Problem
The question is asking about the circular flow model in economics and specifically what firms buy in this context. The circular flow model illustrates how money and goods circulate in an economy, detailing the interactions between households and firms.
Answer
factors of production
The final answer is factors of production such as land, labor, capital, and entrepreneurship from households.
Answer for screen readers
The final answer is factors of production such as land, labor, capital, and entrepreneurship from households.
More Information
In the circular flow model, firms purchase the factors of production to produce goods and services. These factors include land, labor, capital, and entrepreneurship, which are provided by households.
Tips
A common mistake is confusing the product market with the resource market. Remember, in the product market, firms are the sellers, while in the resource market, firms are the buyers of production factors.
Sources
- Circular Flow Model - Economic Lowdown Video Series - stlouisfed.org
- Circular flow model, what do firms purchase? - Chegg - chegg.com
- Circular flow model.pdf - rcboe.org
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