The Circular Flow diagram

| March 27, 2014

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Circular flow model is the basic and a classical model of displaying a consumer and producer relationship. Both of them are interdependiable on each other for their existence. A manufacturing firm produces material after studing the market needs and on other hand consumers purchase the material according to their needs. A lot of infrastucture, data analysis, labor, human resources, raw material, profit/ loss calculations etc go behind the scene. I strongly believe a ‘good’ governement should take responsibilty for a perfect circular flow model because their can serve the best coordination with-in system needs, bringing import-export business between different nations. governments can negogiate prices and have a better understanding of their countries economy. government can actively participate in providing cheaper incentives to R&D sector which in turn can bring innovation of new products which are not just cost efficent but can also bring bigger profits/ safer products in the market.
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