Using the circular flow diagram, explain a way that a family interacts in the factor market and a way that it interacts in the products market.

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It is thought that the circular flow model was first published by Frank Knight. According to the circular flow diagram, there is an endless and circular association between firms and households. Households provide labor to firms, along with additional factors of production. The purpose of firms is to create goods that will be sold in the market. Afterward, households purchase said goods and sell their own factors of production to firms.

Families are involved in the factor market whenever one of its members provides his or her labor to a firm in exchange for payment. For example, my cousin participates in the factor market because he works at a restaurant and gets paid for it. On the other hand, families are also involved in the product market...

(The entire section contains 2 answers and 383 words.)

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