What is the purpose of the circular


Two basic types of markets exist in any market economy: resource markets and product markets. The exchanges that take place in these markets benefit both the households and the firms that engage in exchanges. This lesson will introduce the circular flow of money, resources and goods and services in a market economy.

The correct answer is b) It shows the relationship between supply and demand.

The circular flow diagram is a model in economics that basically explains how the economy functions. The main characters are households which represent costumers and the firms which represent producers. Explains how the economics function in a circular way, where there has to be always a supplier and always a costumer, for there to be a flow and an equilibrium in the goods that are produced, and the goods that are demanded.

It shows how households and firms exchange money, resources, and products in the marketplace.

C. It shows how households and firms exchange money, resources, and products in the marketplace.


the diagram of circular flow, shows the graphical representation of the exchange of goods, services and money between households and companies, where both parties interact in a reciprocal manner in terms of what they offer and receive. in order to generate the flow of the economy.

C)It shows how households and businesses interact in a market economy.


A depiction of how money and products are exchanged within an economy. A circular flow diagram might be used by a business to show how a specific series of exchanges of goods, services and payments make up the building blocks of a given economic system of interest.

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