Explain how one's expense is anothers income???

Dear Student

in the economy , one expense is the income for the another because of the flow of goods and services and money between the different sectors of the economy.

we Assume that there are only 2 sectors :
  • Households : Households are generally the customers who provide factors of production to the producers and they buy the goods and services from the producers.
  • Producers : Producers generally sells the goods and services they produce , and hires the factor of production from households.
so there is flow of income and expense in the following ways :


Regards.

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