All of the elements of the above scenario represent a flow from household to a firm. Consider that a free market economy is an integrated economy – one element or aspect of this type of economy affects other aspects. This intertwining of elements means that an activity or action by one element, directly or indirectly affects other elements.
First of all, Rosa earns wages of $700 per week in her role as a flight attendant at Flyaway Airlines. The flow from household (Rosa) to firm (Flyaway Airlines) is the labor that Rosa provides to the company, in exchange for her wages. Her labor output flows to the firm and addresses their daily operating needs. There is freedom of labor in a free market economy – a worker can choose where to work and who to work for. In this case, Rosa has chosen Flyaway (and they have chosen her) and the flow of her labor to them represents a vital part of their business.
The $350 that Clancy spends to purchase air travel to Toronto from Flyaway Airlines also represents a flow from household (Clancy) to firm (Flyaway Airlines). Clancy’s money flows to the airline in exchange for tickets to be able to fly to Toronto. This funds flow from Clancy to the airlines secures his plane tickets and contributes to the revenue and profits of the airline.
The car detailing that Rosa receives also involves a flow from household (Rosa) to firm (Spotless Car Wash). Rosa gives $40 to Spotless in exchange for this company’s detailing services. She is a consumer who is spending money in a free market economy as she chooses. Spotless is the beneficiary of her buying decision and also the beneficiary of the resultant cash flow into their particular business.
The $400 per week that Clancy earns working for Spotless Car Wash represents a flow from household (Clancy) to firms (Spotless Car Wash and Flyaway Airlines). Clancy’s labor flows to Spotless Car Wash. For this labor, Clancy receives $400 per week. He uses $350 of this amount to buy the aforementioned airline tickets from Flyaway Airlines.
Therefore, Clancy is responsible for a labor flow and a funds flow, respectively, to two different companies. This further shows how a free market economy is integrated. Here, one member of one household affects the business operations of two different businesses because of how he chose to spend his time (his labor) and his money earned (subsequently spent to secure services).