MICRO ECONOMICS

CIRCULAR FLOW OF INCOME

Five sector economy consists of- consumers, producers, govt. sector, financial sector and
overseas sector.
In this sector consumer provides factor of production – land, labor, capital and
entrepreneurship to the producers and in exchange producers provide factor services-
rent, wages and salaries, profit and interest. Producers provides goods and services to
consumers and in return consumers spend their savings on business firms.
Producers and Consumers pay taxes to government sector in the form of service tax,
GST and government provides loans, subsidies and allowances to producers. Consumers
deposit their savings to financial sector and financial sector invest in producers / their
firms.
Consumers pays overseas sector in the form of import payment and producers pay
overseas sector in the form of export income
 WHAT REALLY IS COVID-19​?

 Coronavirus disease is an infectious disease caused by the

SARS CoV-2 virus. People who fall sick with COVID-
19 will experience mild to moderate symptoms and some
recover without special treatment however some
will become seriously ill and require medical attention.​
EFFECT OF COVID-19 ON INDIAN
ECONOMY  
• The negative impact of covid-19 come through variety of channels ,it includes
loss of employment ,loss of sales and income of household business, inability to
travel and maintain a distance from offline classes hence maintaining social
distance.​
• Almost all the sectors of the economy has suffered and adversely affected ,but the
sectors that have been most suffered are construction, manufacturing, education.​
• People were not getting salaries, no circulation in the market, no investments were
made by common man, some people moved back to their hometown as they were
unemployed and had really bad financial condition.
WHAT IS LEAKAGE & INJECTION?
 Circular flow of income or KEYNESIAN MODEL OF FLOW OF
THE INCOME means flow of income in a circular form. Each
sector performs in a particular pattern or in a LOOP in which you
can neither save nor invest anything else and leakage and injection
acts as a loop hole in this circular flow of income.
 As the name suggests, Leakage means that some components like-
savings, taxes and imports are leaked out of the circular flow.
 Injections means that components are being injected in the circular
flow like- investments.
CURRENT SCENARIO OF INDIA IN
LEAKAGE AND INJECTION
 CURRENT SCENARIO OF INDIA
• The covid -19 pandemic is a global crisis that has hit the world on
multiple fronts.​
• As for current scenario , there has been a sharp contraction in
economic activities of India and it is facing some economic crisis
however doing its best to improve the situation and is expecting
to do well in the future.​
• The covid -19 pandemic has changed the economic sentiments
and functioning in india which is expected to have some long-tern
effects.​
 SCENARIO OF LEAKAGES &
INJECTIONS DURING COVID
 During covid, so many leakages took place as the economy level went down,
people lost their jobs, business were shut down and if some people were getting
their salaries then it was almost half of what they used to get.
 People were using their savings to meet their daily life expenses
 Due to covid there is an slowdown of imports from other countries, so it will be
difficult to fill the gap either by increasing up the domestic production or via
imports from other countries.​
 As far as, injections i.e investments is concerned, govt. provided specific amount
of money in the form of susidies to the people that lies below poverty line.
 MEASURES TAKEN BY GOVERNMENT​
• As the disease was spreading very rapidly government started testing ,tracing
and placing the infected individual in quarantine.​
• Government also imposed restrictions such as weekend curfew,
night curfew ,closure of markets, no use of public transport.​
• There was complete lockdown all over the world and people are advised to
maintain social distance.​
• Government has ensured the availability of medical equipments and increased
the number of hospitals, beds, doctors ,nurses, medicines etc ​
• Government has also introduced new schemes for people and
has provided basic necessities to them.​
• Vaccines has also been made available to people by the government.