The circular flow means the unending flows of production of goods and services, income and expenditure in an economy. It shows the redistribution of income in a circular manner between the production unit and households.
These are Land, Labour, Capital and Entrepreneurship
- The contribution made by fixed natural resources (called ‘land’), payment for which is called ‘rent’
- The contribution made by a human worker (labour), payment for which is called ‘wage’.
- The contribution made by capital, payment for which is called ‘interest’.
- The contribution made by entrepreneurship, payment for which is ‘profit’.
