Firms are the main anchor of supplying the goods and services

Firms are the main anchor of supplying the goods and services. In the circular-flow diagram, firms use the fund that they receive from selling goods and services to buy or hire the factors of production needed to make the goods and services. After the production process, the firm will sell the output in the goods market or commodity market. When a firm decides how much to produce in the output markets, it must simultaneously decide how much of each input it needs to produce the desired level of output. For instance, to produce smart phones like Samsung and Apple need many inputs, including hardware and software and various types of labor, both skilled and unskilled.

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