I'm really confused about the concept of the circular flow of income. Specifically, I'm confused about the following situation:
Imagine a simple economy where households don't save their income, so they spend it entirely on goods/services.
Now imagine there is only one firm in the economy producing a single good, say chocolates. Let's assume the firm has $5000 in total at first (obtained from all households, none of whom have any income at the moment).
Let's say the firm buys raw materials from households and pays households their wages, and let's assume altogether it costs the firm all \$5000. And now the firm decides to sell all chocolates produced at a price such that in total, the prices add up to \$6000, so that the firm earns \$1000 in profit.
But here I find a problem: no one can buy all \$6000 worth of chocolates because only \$5000 is in the economy at the moment. So firms can only sell a total of \$5000 worth of chocolates and thus never earn any profit.
Where did I go wrong? Did I go wrong? I'm assuming I did because to me the result I got is nonsensical.