Question

In this discussion, we will link together and examine the circular flow diagram, and how that connects to alternative market systems. Think of a business that you recently frequented (Target, Macy’s, McDonald’s, anything).

What prompted the producers of the individual products in the store to produce them and offer them for sale?

How did they decide on how and what resources to use to produce them?

Who made those resources available, and why?

How does the market determine who will get the goods and services?

Who ultimately decides whether the products being offered should continue to be produced and sold?

How do these decisions differ between capitalist and socialist systems?

Answer 1

Q1-In refrence too the above circular flow diagram there can be two scenarios which prompted the producer to produce the particular product.

1.The availability of resources for thr production process, resources as in labour,raw material, land,etc.Lets take the example of McDonald's .McDonald's will open an restaurant at a place where there is proper supllly of both raw materials required for the production of the food like potatos for fries,Burger biuns,and so on and secondly if there are human resourcesavailable because it will first of all need the employees who will serve the customer or operate the machines.

2.This scenarios relates to the inner circle of circular flow diagram which involves the xchange to money between the firm and households.If there is flow of income in form of expenditure from households to the firm, it this particular example the McDonald's or in other words if there are people who are willing to pay for their product only then will McDonald's intiate the opening of an outlet in that area.

Q2- If we talk about these big chains then it first of all depends on the preference of the people in the area where they will be opening there outlet For example McDonald's opened its first ever fully vegeterian outlet in Amritsar,Punjab,India, therefore they adopt to the locality. Secondly it depends on the resources available in the surrounding areas.when it comes to the quality of resources then these multinational giants have there fixed quality standards that they adhere to.

Q3-Resources are made available by the local producers in the respective markets. How? These outlets make an agreement with the local producers and the farmers to supply their best produce to the outlet.Economically speaking these chains help the local farmers and markets in a big way as it increases the consumption of the produce and at the same time create job oppurtunities in the local market.

Q4-in the circular flow of diagram the determaination is straight and simple. Goods and services are provided to thoose who pay for it.As showcased aboved, In the outer circle it shows flow of factors of production from households to the firms and flow of goods and services from fiirms to households and in the inner circle flow of incomes in form of wages and salaries from firms to households and flow of money in the form of consumption or expenditure from households to the firms.in simple words the households get paid in form of salaries and wages for the factors of production or services provided by them to the firms and they give the money back to the forms in the form of consumption expenditure for the goods and services provided by the firms to them.