Question

"househlods and firms depends on each other in the circular flow of income." justify the statement in case of two - sector economy.​

Answer 1

Explanation:

Household sector spends it's entire income on purchase of goods and services from firm sector and it earns income by providing the factors of production to firm sector.

Firm sector generates revenue by selling it's goods to household sector. Firm sector hires factors of production from household sector. Firm sector sells it's entire output to household sector.