ROLES OF FIRMS

AND HOUSEHOLDS
IN THE ECONOMY
Group Members:
Escala, John Rey Q.
Filasol, Christian Jay T.
Marcial, Francis Israel B.
Geganzo, Ian Adam G.
 In a market economy households
provide resources and labor and
purchase goods and services while
firms provide goods and services and
purchase resources and labor. You can
view the relationship between
households and firms as a “circular
flow."
ROLES OF HOUSEHOLDS FOR BUILDING AN ECONOMY
 The performances of the households are
categorised into two ways:

(a) It supplies the factor services to the firms in the form of

factors of production like land, labour, capital etc.
(b) It purchases all the final goods and services produced by the
firms from the markets directly. Hence, they supply different
factor services to the economy and on the other hand they create
demand for the final goods and services from the market.
 ACT AS PRODUCER:

There are several families in India who are the

owners of several small production units. These
households act as entrepreneurs or producers of
different goods and services. They form the
enterprises which are basically semi-corporate in
nature.
 ACT AS A CONSUMER:

The households are the final consumers of goods

and services produced by the firms. They create
demand in the market and according to their
tastes and preferences. The firms produced and
supplied goods in the market, as per their
demand. Therefore, households determine the
production line of a country.
 ACT AS A TAX-PAYER:

Households are the main sources of the government

tax-revenue. They are the main tax-payer. A household
pays income tax, wealth tax, estate duty, gift tax etc. as
direct taxes to the state. Similarly, a household pays
several indirect taxes to the government like sales tax,
customs duty, VAT etc. also. All these tax revenues are
collected for the welfare and development of the
economy.
 ACT AS A PROFESSIONAL:

All types of professional services like doctor,

teacher, lawyer, engineer etc. come from
households. Their activities are very much
required for the country to enhance economic
development. These professional services
increase the living standard of the people.
 ACT AS A SAVER:

Income left after consumption is saving. Hence

households earn money income after giving
several services to the economy. The portion of
their income left after the consumption, is saved
in the banks or financial institutions. These
savings are considered as one of the main
sources of capital formation in India.
ROLE OF THE BUSINESS IN THE ECONOMY

In any market economy, business plays a huge

role. Business is the engine of an
economy. Business provides jobs that allow
people to make money and goods and services
that people can buy with the money they
make. Without business, the economy would be
very inefficient and/or very primitive.
In any economy, people need jobs. In any but the most
primitive economies, people need to be able to buy
goods and services. Businesses provide for both of
these needs. Most businesses provide people with
jobs. If I open a restaurant, I will need to hire cooks,
wait staff, dishwashers, and other people. My business is
providing jobs for many people. Now imagine how
many people get their jobs from large companies. A
large company can provide thousands of jobs. This is
incredibly important to an economy
 These businesses also provide the things that
people need to buy. If you need a cell phone,
you have to buy it from a business because you
certainly cannot make your own. Most people
cannot make their own clothes and must buy
them from a business. Most people do not cut
their own hair and must pay a business for their
haircuts. Without businesses, people would not
have goods and services that they could buy.
FINNITO LA
MUSICA