Question

Explain the most meaningful concepts that you have learned in Eco 2013 class. 250-300 words

Answer 1

Circular flow of income-

The process of production continues with the help of factors of production. In economics there are four main factors of production i.e., land, labour, capital and enterpEnte. Producer enterprises producegl goods and services with the help of these factors and make payments to these factors for their services. These payments are factor payments from the business inside and factor income from the view point of factors of production. The firms get these factors from the households, so households receive these factor incomes. Households in order to satisfy their wants purchase goods and services produced by the business and thus make payment for them to the business. These payments become the income of these firms. Thus in an economy, income is generated out of mutual payments between households and business sector for factor services and for goods and services.

In an economy, the flow of factor services from households to business and flow of goods and services from business to households, is known as real flow.

The cycle of monetary payment from business to the households for their factor services and in turn the monetary payment from households to the business against their goods and services is known as money flow.