The Circular Flow of Income Game

A classroom game that demonstrates the circular flow of income. Split your class into households and firms and give them the corresponding worksheet.

You need to cut out the slips at the end of the document. There are two rounds to this game. At the start of the first game allocate households factors of production and allocate firms money. The initial allocation of factors of production represents wealth and I divided these unequally between the households but distributed money certificates equally between firms to see who is a better businessman. I did a ratio of two money certificates for every one factor of production so the equilibrium wage should be two (don't let the students know this though). Any unused factors of production represent unemployment and should be taken off households at the end of the game.

In the second round change the firms factors of production into goods and services. I did one factor of production equals one goods and services. Ask firms to calculate there profits at the end of the game and find out who were the best business people. Ask the students to draw what they saw in the game. Then ask the students what is missing from the closed economy model.