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The Circular Flow of Income and Expenditure
This is an economic model illustrating the flow of payments and receipts between domestic firms and domestic households. The households supply factor services to the firms. In return, they get factor incomes. With factor incomes, they buy goods and services from the firms. These flows can be illustrated diagrammatically as follows:
The points at which flows from one sector meets the other sector and generate other flows are called critical points. In the above diagram, the critical points are A, B and C. At A, the flow of factor services from the households sector meets the firm sector and generates the flow of factors incomes from the firms to the households. At B, the flow of factor incomes meets the household sector and generates the flow of consumer spending. At C, the flow of consumer spending meets the firms sector and generates the flow of goods and services.
Using Factor Incomes for Calculating National Income A second method is to sum up all the incomes to individuals in the form of wages, rents, interests and profits t
The production function of a small shop that frames pictures is Q = 5 √ LK where Q is the number of pictures framed per day, L is labor hours and K is the machine hours.
Q. What do you mean by Cost Function? Cost function is a derived function. It's derived from the production function that describes the efficient method of production at any gi
The Circular Flow of Income and Expenditure This is an economic model illustrating the flow of payments and receipts between domestic firms and domestic households. The househo
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The market demand for brand X has been estimated as Qx=1500-3Px-0.05I-2.5Py+7.5Pz
The elasticity of a demand curve is frequently judged by its appearance: the flatter the demand curve, the greater the elasticity and vice versa. However this conclusion is mislead
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