FLOW OF GOODS AND SERVICES FOR EDNA’S FOOTWEAR
Edna’s Footwear in Liliw, Laguna consists of individuals who own productive resources used in making shoes. These include raw materials for shoemaking such as coconut husks and rubber. Also utilized are land, knowledge in shoemaking and the capital used to fund the shoemaking business. These resources are used as factor inputs in the production process. The interaction of the household and the input market begins when the mentioned factor inputs are offered to the input market. By then, Edna’s Footwear will buy the land, hire factory workers, gain capital from past employment, and the raw materials are bought as well to be used for the production of the shoes. The firm is where the production of the shoes takes place. The goods (shoes) are then brought to the output market and sold to the public. After being sold, the goods are consumed by the members of the household and the cycle goes back to the first step and repeats again.
Money also travels around the circular flow of goods and services in Edna’s Footwear. Once the household members consume Edna’s Footwear’s products, the money is given to the output market. Revenue is generated for the firm once the money is brought to the firm from the output market. The firm’s revenue is then allocated to various factor payments such as wages, rent, interest and profit to the input market. The input market then gives its factor income to household members who are given their income so that they will be able to consume products found in the market once again. Thus, the cycle repeats once again.