In a circular flow diagram, households represent the elements of the
economy that:
A. sell products to consumers.
B. produce goods and services.
C. provide businesses with materials.
D. purchase and consume products,
In the circular-flow model of an economy, households own all the factors of production. Households earn their income when firms purchase or rent these factors of production to use them to produce goods and services. Firms, in turn, earn revenue when households buy goods and services.
In a circular flow diagram, households consume the goods offered by the firms. However, households also offer firms factors so that the firms can produce products for the household to later consume.
