Understanding the flow of dollars in an economy.
This exercise is about the interaction between households and businesses within any economy. Households 1) provide labor to businesses (Factor Market), and 2) also serve as consumers of the goods and services provided by businesses (Product Market). Businesses 1) hire employees to produce goods and services (Factor Market), and 2) are the producers of goods and services (Product Market). This exercise is intended to demonstrate the circular flow of dollars in an economy as described in Figure 11.1 on page 283. In this simplified economy, goods and services flow clockwise (Red), and the flow of dollars is counter clockwise (Green).
In order to provide a measure of reality to this exercise, we are going to do some role-playing. In your initial post, please assume one of the following roles.
1) Business- Dir. Of Human Resources. In this role you are the Dir. Of Human Resources for a mythical business. You are in charge of hiring two new employees. (Factor Market)
2) Business- Marketing Director. In this role your goal is to sell two widgets or other mythical gadgets to Households. (Product Market)
3) Household – Job Applicant. In this role you are applying for a job, describing your mythical talents and skills. Your goal is to get two job offers. (Factor Market)
4) Household- Consumer. In this role, you are seeking to purchase a mythical product i.e. a widget or gadget. (Product Market)
In your follow-up posts, assume a different role and
1) Describe why you would accept (or not accept) a particular job.
2) Indicate why you would (or would not) hire a particular person.
3) Describe why you would (or would not) buy a particular widget or gadget.
4) Respond (as a Marketing Director) to the demand in the Marketplace for a particular widget or gadget.