Circular Flow Diagrams

This is the simplified version of the Circular Flow Diagram. It is a drawing of the flow of money in the economy. "Households" would be the individuals or consumers within the economy, in the games it is represented by the player. "Firms" are the businesses or producers within the economy, in the games it would be the Pokemarts or anyone you do a job for, really. "The Market for Good/Services" is just that, the exchange of money for goods or services. "The Market for Factors of Production" is the market for the things a firm needs to produce its goods/services.

The diagram shows how the Households give factors of production to the Firms in exchange for money. The Firms get money from selling Households goods or services that they created from the factors of production. The unsimplified version shows other aspects, such as Banks and the Government, but this is the basics of it.

As the player in the game, you buy goods from the Pokemarts, pay the Daycare center to raise your Pokemon, pay to play in the Game Corner, and so forth. In the game, the player can get things from people in exchange for work. The usual method of getting money in the games, battling trainers, is more along the lines of Satistics, or Gym, but Economics does apply to the smaller tasks in the game. Your reward for stopping Team Rocket/Magma/Aqua/Galactic/Plasma is usually the Master Ball or an item to get a legendary Pokemon, as well as all the money you get from the battles. In Johto, you help some a woman by defeating her husband(the 5th gym leader) so he comes home, and she pays you with HM02 Fly. Various jobs like those show the other side of the diagram. Economics is the study of trade, so money is not always involved in economics, which is why the previous examples can count.

What are the Factors of Production? There are 3 of them: Land, Labor, and Capital. Land is needed for their factories or stores, Labor is used to make the good/service, and Capital is the initial money used to pay for the Labor and Land and whatever other costs there are to make the good/service. Why is a Pokeball $200? They have to cover the cost of making the Pokeball, they have to pay for the Land, and they have to pay for the Labor of the cashier and other such emloyees.

That is the simplified Circular Flow Diagram that is required for any understanding of the subject matter. Now we can move on.