![Modelo del FLUJO CIRCULAR de la RENTA | [ EXPLICACIÓN ] Economía de la empresa 04#](https://i.ytimg.com/vi/1bJY0n9gZ8A/hqdefault.jpg)
Modelo del FLUJO CIRCULAR de la RENTA | [ EXPLICACIÓN ] Economía de la empresa 04#
What is the Circular Flow of Income?
Introduction to the Circular Flow Model
- The circular flow of income is a simplified model explaining basic economic activity and relationships between different economic agents.
- This model focuses on an economy without a public or foreign sector, featuring only two economic agents: families and companies.
Economic Agents and Their Interactions
- Families and companies interact through two complementary markets:
- Market for Goods and Services: Companies sell goods/services to families in exchange for money.
- Market for Factors of Production: Families provide labor, land, and capital to companies for remuneration (salaries, rents, interest).
Understanding the Flows
- The circular flow consists of two circuits:
- Real Flow: Movement of goods/services and production factors between companies and families (represented by a red line).
- Monetary Flow: Payment made by families to companies for goods/services (represented by a blue line).
Why is it Circular?
- The flow is termed "circular" because money paid by companies to families for productive factors is used again by families to purchase goods from these companies, creating a continuous cycle.
Incorporating State Intervention
- In modern economies, state intervention adds complexity:
- The state acts as a company hiring production factors from families (e.g., workers like teachers).
- It also functions as a family purchasing goods from companies (e.g., school supplies).
- Additionally, the state collects taxes which are then redistributed as aid/subsidies to both families and companies.