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Explain circular flow of income in …

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Explain circular flow of income in two sector economy?

    • Posted by Shahil Patel 4 years, 1 month ago

    CBSE > Class 12 > Economics
    • 2 answers

    Palak Suri 4 years, 1 month ago

    Circular Flow of income in a two sector economy : Households are the owners of factors of production. They provide factor services to the firms (producing units). Firms provide factor payments in exchange of their factor services. So, factor payments flow from firms (producing units to households) Households purchase goods and services from firms (producing units) for which they make payment to them. So, expenditure (spending on final goods and services ) flows from households to the firms. This makes the circular flow of income complete.

    0Thank You

    Jyotika Upadhyay 4 years, 1 month ago

    Circular flow of income in two sector economy refers to the flow of factor income from producers to households and then from households to producers in the form of expenditure on goods and services.

    2Thank You

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