Curricular Flow Diagram Economics Unit 2 Standard E

Curricular Flow Diagram Economics Unit 2 Standard: E 2. 12

Success Criteria • Construct a circular flow diagram for an open-market economy including elements of households, firms, government, financial institutions, product and factor markets, and international trade.

Class Activity • Today you will be participating in a simulation game…… • Everyone has a role you are either a business owner or resource owner • Business Owners will have “cash” • Resource Owners will have “resource cards” • Natural • Human • Capital

Explanation • Resource Owners – Household (Have Resource Cards) • Trading resource cards • Buying Products • Business Owners – Firms (Have Cash) • Buying Resources • Produce Goods: Need 1 of each to produce a product (human, natural and capital) • Sell products

Rules • Only 1 Rule……Business Owners are the only ones who can trade in resources for product card

Simulation Time! • Move Around……. let’s see how successful you can be! • Good Luck!

Round 1 • Last for 2 minutes – then take your seats • Debrief: • So what happened? • What was working, what did not? • Who has resources…. cash…. . product?

Simulation Time! Round 2 • Move Around……. let’s see how successful you can be! • Good Luck!

Round 2 • Debrief: • What is happening? • What is working…. not working? • Do we have a healthy Economy?

Simulation Time! Round 3 • Move Around……. let’s see how successful you can be! • Good Luck!

Reflection • These questions will appear on the following slides…be prepared to share your answers • How do individuals & families in households depend on people in businesses? • How do businesses depend on individuals & families in households?

Design Time • The following slide is “draw it” • Use the tools provided to create a circular flow diagram based on what you have learned from the activity today in class

Market Economy Circular Flow Diagram of a Market Economy Product Market • 2 groups • Household • Firms • 2 Markets • Product • Factor • 2 Flows • Monetary • Physical monetary flow physical flow Households Firms physical flow monetary flow Factor Market

Product Market Circular Flow Diagram of a Market Economy • Households are going to give money to firms to buy g/s (good and services) = monetary flow Transfer $ H buys g/s from F Product Market monetary flow physical flow Households Firms • Firms supply households with g/s (goods and services) = physical flow Transfer g/s F supplies g/s to H physical flow monetary flow Factor Market

Factor Market Circular Flow Diagram of a Market Economy Product Market monetary flow • Firms are going to give money to households to buy l, l, c (land, labor, capital) = monetary flow • Households supply firms with l, l, c (land, labor, capital) = physical flow Households Firms Transfer l, l, c H supplies l, l, c to H Transfer $ F buys l, l, c from H physical flow monetary flow Factor Market

Explain Flow Circular Flow Diagram of a Market Economy • Monetary flow. Households buy g/s from firms. Firms buy factors of production from households. • Physical flow. Firms provide g/s to households. Households provide factors of production to firms. Transfer $ H buys g/s from F Product Market monetary flow physical flow Households Transfer g/s F supplies g/s to H Firms Transfer l, l, c H supplies l, l, c to H Transfer $ F buys l, l, c from H physical flow monetary flow Factor Market

Questions/Discussion • Any questions? • How accurate was your drawing compared to the previous slide? • What terms are familiar from previous units? • Any other Economic System that could have a circular flow diagram? What would be the same? Different?

Mixed Circular Flow Diagram of a Mixed Economy monetary flow physical flow • Product market: The government purchases g/s from firms and receives taxes from households. • Factor market. The government purchases the factors of production from households and receives taxes from firms. ta xe t en s m e rn as e h v c gopur s expenditures Government expenditures Households t- s en tor m c rnd fa e v e go wn o physical flow monetary flow ta xe s Firms

Mixed Circular Flow Diagram of a Mixed Economy monetary flow physical flow • Monetary Flow: Transactions between households and firms are taxed by the government (How the gov gets $) • Physical Flow: Government receives g/s from firms, and factors of production from households ta xe t en s m e rn as e h v c gopur s expenditures Government expenditures Households t- s en tor m c rnd fa e v e go wn o physical flow monetary flow ta xe s Firms

Review Time • Share your ideas on the next slide: • How are the Market Diagram and Mixed Market Diagram different? Similar?