Chapter-1:
2. Economic agents and
Circular flow of economic activities
By: Dr. Solomon Getachew
Email: sol21get@gmail.com
Economic Agents
Economic agents shape the world we live in. The allocation of
resources is dependent on their choices.
Economic agents are economic decision makers who can
recognize the different factors that influence and motivate
different economic groups.
Economic agents are consumers, producers, and/or influencers
of capital markets and the economy at large.
Economic Agents
There are four major types of Economic agents
 Consumers
 Business or firms
 Government
 Central Bank
Some economists put governments and central banks together.
Economic Agents
Consumers: One who consumes a produced good or service.
Eg: street shoppers, stock brockers
Firms: economic agents whose role is to transform factors of
production into goods and services to sell.
They can be public/private.
Government: An economic agent which provides rules for how
firms and consumers should interact.
Banking Sector: An economic agent that facilitating business
transaction
Objectives of Economic Agents
 Consumers: maximizing utilities or satisfaction
 Business or firms: maximizing profit or sales
 Government: Welfare of the society, economic development
 Central Bank: Smooth business flow
Circular Model
References
1. Christopher R. Thomas, S. Charles Maurice. (2016) Managerial
Economics, Foundations of Business Analysis and Strategy 12th Edition.
2. Michael R. Baye. (2010) Managerial Economics and Business Strategy
7th Edition.
3. M.J. Alhabeeb, L.Joe Moffitt. (2013) Managerial Economics A
Mathematical Approach.