Can you help me understand the circular flow diagram?
Looking at that circular flow economic diagram has been p*****g me off until just now. I realized, am I supposed to be looking at the Firm as simply a non-living machine? For example, this quote from my textbook: "Households buy goods and services from firms, and firms use their revenue from sales to pay wages to workers, rent to landowners, and profit to firm owners." It seems that no human is "The Firm", it's simply a machine. However, can a human be a firm and household as well? What if some kid mows someone's lawn? The kid is acting as the firm and avoiding the machine aspect, yeah? He's directly getting the funds from the household. But when it's a larger corporation (ex. dunkin donuts) it has to go through the middle man so the household working at Dunkin Donuts gets paid through that middle machine, instead of directly receiving payment, if you look at it that way. Does this make any sense?
Asked By: Asmodeous - 9/16/2010
Best Answer - Chosen by Asker
I think you're getting too hung up on a diagram that is merely a super-simplified model of complex real-word activity that is used as a learning tool. The model is trying to instruct you about money flows, based on how you as a student understand life, by separating out business entities (firms) from actual humans (... More
Answered By: Spotty J - 9/16/2010
Additional Answers (2)
I think I know what you are asking. Instead of thinking about removing the middle man, think of the kid as playing several different roles, depending on what he is doing. He is the firm when he collects the money for the lawn. When he puts the money in his pocket he becomes the worker. When he goes to the store and... More
Answered By: John M - 9/16/2010
Understand what you are trying to say- except for this... More
Answered By: Diana - 9/16/2010
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