#1. Explain how the circular flow diagram relates to the current economic situation.
Using the circular flow diagram, explain a way that your family interacts in the factor
market and a way that it interacts in the products market.
Guided Response: Review the discussion board posts of your classmates. Respond to
at least two of your classmates and comment on their descriptions of the circular flow
diagram and factors of production. Discuss how circular flow relates to current economic
situations.
#2.Analyze how the law of demand applies to a recent purchase that you made.
Describe how the product has changed in price and explain whether the price change is
due to supply or demand. Did the change in price affect your decision to purchase the
item?
Guided Response: Review the discussion board posts of your classmates. Note their
analysis of a recent purchase and respond to at least two of your classmates. In your
responses, discuss the effects of a price change and how it might alter your decision to
make a purchase, according to the determinants of supply or demand.
Each response written in 200 words.
ANSWER:
Question 1
Indeed, the circular flow of income relates to the current economic situation in that it
shows the current production by the economic entities and the consumption levels by the
households. Basically, it represents the ability of the households to consume whatever is
produced by the economic entities. If the current economic situation is characterized by
low incomes by households, the consumer expenditure is also reduced. This in turn
affects the amount of goods and services produced by the economic entities. Therefore,
the circular flow of income relates to the current economic situation in a demand and
supply relationship.
Using the circular flow diagram, my family interacts with the factor market and the
product market in various ways. In the factor product market, my family provides labor to
various economic units which have employed them. My family members also hold
several investments in economic entities in form of shares and other holdings. In return,
we get payments in form of salaries and dividends from the economic units. On the other
hand, my family interacts with the product market by being a net consumer of economic
goods and services. These include food and non-food items manufactured by the
economic entities. Ideally, the economic units benefit from offering the goods and
services by our family’s expenditures on such goods.
Using the circular flow diagram, explain a way that your family interacts in the factor
market and a way that it interacts in the products market.
Guided Response: Review the discussion board posts of your classmates. Respond to
at least two of your classmates and comment on their descriptions of the circular flow
diagram and factors of production. Discuss how circular flow relates to current economic
situations.
#2.Analyze how the law of demand applies to a recent purchase that you made.
Describe how the product has changed in price and explain whether the price change is
due to supply or demand. Did the change in price affect your decision to purchase the
item?
Guided Response: Review the discussion board posts of your classmates. Note their
analysis of a recent purchase and respond to at least two of your classmates. In your
responses, discuss the effects of a price change and how it might alter your decision to
make a purchase, according to the determinants of supply or demand.
Each response written in 200 words.
ANSWER:
Question 1
Indeed, the circular flow of income relates to the current economic situation in that it
shows the current production by the economic entities and the consumption levels by the
households. Basically, it represents the ability of the households to consume whatever is
produced by the economic entities. If the current economic situation is characterized by
low incomes by households, the consumer expenditure is also reduced. This in turn
affects the amount of goods and services produced by the economic entities. Therefore,
the circular flow of income relates to the current economic situation in a demand and
supply relationship.
Using the circular flow diagram, my family interacts with the factor market and the
product market in various ways. In the factor product market, my family provides labor to
various economic units which have employed them. My family members also hold
several investments in economic entities in form of shares and other holdings. In return,
we get payments in form of salaries and dividends from the economic units. On the other
hand, my family interacts with the product market by being a net consumer of economic
goods and services. These include food and non-food items manufactured by the
economic entities. Ideally, the economic units benefit from offering the goods and
services by our family’s expenditures on such goods.
