Title: Teaching economics outside the box: using the circular-flow diagram to indicate efficient resource allocation in intermediate microeconomics

Authors: Hideki Sato

Addresses: International College of Liberal Arts and Sciences, Department of International Liberal Arts, Fukuoka Women's University, 1-1-1, Kasumigaoka, Higashi-ku, Fukuoka-shi 813-8529, Japan

Abstract: This paper uses the circular-flow diagram to illustrate the efficiency of resource allocation at market equilibria. This diagram not only depicts the circulation of goods and money within a market economy but also suggests the efficiency of resource allocation at market equilibrium. However, economics instructors usually invoke the Edgeworth box diagram to demonstrate efficient resource allocation. Therefore, for an intermediate economics class, this paper proposes a simple method to describe the efficiency of resource allocation: the circular-flow diagram.

Keywords: circular-flow; market equilibrium; resource allocation; efficiency; intermediate microeconomics; Edgeworth box.

DOI: 10.1504/IJPEE.2019.104898

International Journal of Pluralism and Economics Education, 2019 Vol.10 No.3, pp.273 - 277

Accepted: 13 Oct 2019
Published online: 03 Feb 2020 *

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