I need a discussion paragraph of about 200 words no more for my MBA class.
HERE IS THE DISCUSSION QUESTION:
Take a look at my sketch above(I will provide you with sketch). This is a modified circular flow diagram (like you might see in a macro economics course). For a brief introduction to (or review of) circular flow diagrams, go here: [url removed, login to view] (and/or google the phrase "circular flow diagram").
The three red circles are types of exchanges. Firms engage in exchanges to secure labor inputs, to secure capital, and to sell their output (goods/sevices). Interfirm transactions are ignored (because we're talking about firms in a collective sense), and there are a few other simplifications (e.g. the way government and the "rest of the world" are represented).
The law of value conservation states that if a firm creates economic value, it must "go" somewhere (it doesn't just disappear), and there are only three places (or exchanges) where it can go. This implies that created economic value has to go to either labor (in the form of wages that are above the value of labor inputs), to customers (in the form of consumer surplus) or to those who have supplied capital (the "owners") in the form of return on investment. It is assumed that the company receives collective inputs (or public goods, subsidies, etc.) that are equal to the value of any taxes paid, and any transactions with the "rest of the world" are ignored.
Here's what I want you to discuss.
Go back to our previous discussion, the textbook, and/or any readings and explain what it means to create economic value.
Then explain what it means for that value to go to labor, customers, and/or investors? What would (or does) that look like in each case?