Question

What is the relation between household units and production units?

• A. They are directly dependent.
• B. They are indirectly dependent.
• C. They are independent.
• D. None of the above

Answer 1

The correct option is C They are independent.

Household units and productions are directly dependent on each other. The production units produce goods and services based on the demands of the household units and these goods and services are bought by the household units. The household units also provide factors like land via rent, capital, labour for the production unit to function. This is also known as the circular flow of economy.