Objective: What is the circular flow diagram? How do you draw it? How does it represent a market economy? How can we represent the interaction between buyers and sellers through the market model as well?
Topics for Exploration:
• circular flow
◦ "individuals"
◦ households
◦ market economy
◦ flows
◦ factors of production
◦ goods and services
◦ revenue
◦ wages
◦ mixed economy
• market model
◦ supply
◦ demand
◦ market equilibrium
Directions: As you watch Circular Flow , take notes & answer questions
Draw and label the phases of the circular flow model
How does it change to represent the
U.S. economy?
(hint: include government activities)
Practice drawing the model and explaining it verbally as you draw it. You’ll understand it better,  .

1. What helps the resources and goods and services move around the circular flow?
A. Labor
B. Land
C. Capital
D. Money
2. In which market would a producer sell bicycles to consumers?
A. Market for resources B. Market for goods & services
In which market would a producer buy the equipment and technology needed to manufacture bicycles?
A. Market for resources B. Market for goods & services
3. Which of the following is not an economic resource?
A. Entrepreneurial ability
B. Land
C. Capital
D. Money
4. In which market would a household buy the food they need to make dinner?
A. Market for resources B. Market for goods & services
5. What payment do households receive for providing resources in the market for resources?
A. Income
B. Revenue
C. Costs of Production
6. Ultimately, who owns all economic resources?
A. Households B. Businesses
7. What payment do businesses receive for the goods and services they sell in the market for goods and services?
A. Income
B. Revenue
C. Costs of Production
8. In which market do households sell their labor?
A. Market for resources B. Market for goods & services