I have installed audacity 2.3.1 and using soundflower 2. I have also set Dictation to enhanced and set to soundflower. However when I play audacity and start dictation on pages or textedit for transcription, nothing happens. Seems the microphone remains static. Assistance will be greatly appreciated.

Seems like SoundFlower isn’t working properly. This could be due to a setting in SoundFlower, or perhaps SoundFlower isn’t compatible with your system.

If you’re using the old version of SoundFlower, then as far as I’m aware, support is no longer available for that product because it is obsolete.
If you’re using the new version of SoundFlower, then you would need to try and contact the developer "mattingalls

A modern alternative to SoundFlower is “loopback” from ($119 USD)