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Circular Flow Model

Circular Flow Model. Of Economics. Basic Questions of Econ. This comes back to those basic questions we talked about on the first day What to produce? How to produce? For whom to produce it?. What to produce?.

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Circular Flow Model

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  1. Circular Flow Model Of Economics

  2. Basic Questions of Econ • This comes back to those basic questions we talked about on the first day • What to produce? • How to produce? • For whom to produce it?

  3. What to produce? • DESCRIPTION: A society or business must decide whatto produce with its limited resources. • Business Example: “Should we make stereos or MP3 players?” • Gov’t Example: “Should we make weapons or build more schools?”

  4. How to produce? • DESCRIPTION: Society must decide howto produce various products to maximize efficiency and productivity. • Example: Should we use people or machines to make cars?

  5. For whom to produce? • DESCRIPTION: Society or business must decide for whomgoods and services will be made. • Example: Who do we want to buy our goods?

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