Identify each of the following as involving either demand or supply. Draw a circular flow diagram and label the flows A through F. (Some choices can be on both sides of the goods market.)

a. Households in the labor market

b. Firms in the goods market

c. Firms in the financial market

d. Households in the goods market

e. Firms in the labor market

f. Households in the financial market

Circular Flow:

The phrase "circular flow" in economics refers to a model that depicts the flow of goods and services between different sectors of the economy. Demand and supply are depicted in this flow by various manufacturing parameters.

a.) Households are on the supply side of the labor market. They serve as a source of labor for businesses.

b) Goods-market firms are on the supply side. Individuals are sold goods and services by the businesses.

c.) Financial market firms are on the demand side because they need money to run their businesses.

d.) In the goods market, households are on the demand side. Individuals in those houses require food and other necessities.

e.) Labor market firms are on the demand side. Labor is required by businesses to accomplish their products and services.

f)In the financial market, households are on the supply side. Households provide investment capital to the financial industry.

The supply and demand relationships in various markets are depicted in the circular flow diagram below.