Market Systems & Circular Flow Diagram AP Microeconomics
Circular Flow Diagram: Free Market Resource Markets A market is a mechanism or institution that brings together buyers and sellers for a particular good or service. Firms Households (a. k. a. Businesses) ØBuy resources ØSell products ØSell resources ØBuy products Product Markets
Circular Flow Diagram-with Government (Mixed Model) Resource Markets Firms (a. k. a. Businesses) Government Product Markets Households
Circular Flow Diagram: Mixed Model Resource $ Markets Productive Resources $ Productive Resources Government Goods & Services $ Firms (a. k. a. Businesses) Taxes Goods & Services $ $ Productive Resources Government Goods & Services $ Product Markets Taxes $ Households Goods & Services $
Some notes… n The circular flow diagram only shows money that’s actually exchanged for SOMETHING. q q n Money that’s just transferred, not as payment for something, doesn’t count. E. g. $50 gift for your birthday, $20, 000 scholarship from H&R Block, welfare or social security payments from the government Watch your arrows! q q Money might be the outside flow. Businesses and households might be the top and bottom…