In the market there are a large number of industries and companies that carry out various operations and sales, thus giving money movements that is known as the Circular flow of income. This article will explain what this concept consists of and its types.
Current or flow of money in the market
Circular flow of income
The movement of money in the market is in constant exchange with economic agents. Due to this, a model is applied that explains the economic activity and its operation in a general way. The relationship that exists in the market with the economic agents are in charge of distributing the resources that are in the specific market.
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Reference is made to the support generated in the market by the distribution of resources, being similar to a cycle but based on the economic state, so that it complements each other with each operation carried out. Through the own goods and the services offered, the sales that produce income are executed, so the exchange of resources occurs and the circular flow of income is applied.
Feature
The flow can vary according to the demand that is had in each sale of the services or with the products, in this way the movement of money is obtained from one agent to another, in this case the first agent being the company and the other agent the consumer of said product. Depending on the market that is established, sales can flow faster, thus increasing the circular flow of income.
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This method can also be affected depending on the factors of production. There are many cases that involve these factors, the most general is in the case that a family is the one that has the capital of a certain company, so this company must make the corresponding payment, be it a salary, the corresponding interest of each sale, the rent if it is the case of a land, and the benefits acquired in the market.
Classification
The model that determines the movement of money in a market segment is the circular flow of income, involving economic agents and possible third parties that participate in financial movements. However, some types or classification of this model could be highlighted, which is why the following shows how it is classified and its main characteristics:
actual flow
- It is the type of method that involves the factors of production
- It also involves the company's own assets.
- With each service offered, it performs the corresponding analysis to determine the income that should be obtained.
- It is each product made by the company
Monetary Flow
- It is of the type of method that covers the income obtained or the movements of money
- Involves economic agents and how the resource exchange proceeds
- It refers to the movement of money when obtaining the corresponding product
- It is the flow or current of money that passes from one point to another, in this case from the seller to the buyer.
Representation
To represent or expose the circular flow, in this article we explain that a simplified scheme is used where the process that occurs in the market with economic agents is explained. There are several versions, but in this case it can be highlighted how from the point of the company it is transferred to the essential factors that is the production of the articles, sales are made to the families that acquire the corresponding service.
