Question

Date!
observe the economic activities that take place in
your localty and identify the interrelationship-
between different sectors.​

Answer 1

Firms and households are the sectors in a simple economy. Households are the owner of the factors of production (land,labour, capital,andentrepreneurship). Using this factors the firms produce goods and services. They reward the owner of the factors of production in the form of rent ,wages, interest and profit.

Households uses the factors of income (rent,wages,capital and entrepreneurship) to buy goods and services made by the firm, which constitutes as consumer expenditure. In return the firms give goods and services to the households.

Now,we can substantiate that there exists a interdependence between firm and households in production and consumption as well as there exists a interrelationship between these two sectors of economy. It is through this interrelationship the economy develops.