3. FIRMS (suppliers of goods and services, demanders of factor services) HOUSEHOLDS (demanders of goods and services, suppliers of factor services)
4. P Q P Q (1) Consumer demand (4) Factor supply (3) Factor demand (2) Producer supply O O Q 1 P 1 Q F 2 P F 2 Q 2 P 2 P F 1 Q F 1 D 2 D 2 £ £ £ £ Factor services Goods Goods Factor services S S D 1 D 1
5.
6. The circular flow of income Firms Households Factor payments Consumption of domestically produced goods and services (C d )
7. Factor payments Consumption of domestically produced goods and services (C d ) The circular flow of income WITHDRAWALS INJECTIONS Investment ( I ) Government expenditure ( G ) Export expenditure ( X ) BANKS, etc Net saving ( S ) GOV. Net taxes ( T ) ABROAD Import expenditure ( M )
