Assume an economy producing only two goods (shoes and computers) with a fixed amount of productive resources and technology and employing all its productive resources to the maximum. The maximum output combinations of both goods are given in the table below: Combination Shoes Computers Shoes Computers A 0 1000 B 100 900 C 200 750 D 300 550 E 400 300 F 500 0 i. Draw the PPF using your knowledge about the shape and slope of PPC. ii. Does the PPF have the expected shape? iii. Explain why your PPF in (a) above depicts that shape.
Assume an economy producing only two goods (shoes and computers) with a fixed amount of
productive resources and technology and employing all its productive resources to the maximum.
The maximum output combinations of both goods are given in the table below: Combination Shoes
Computers
Shoes Computers
A 0 1000
B 100 900
C 200 750
D 300 550
E 400 300
F 500 0
i. Draw the
ii. Does the PPF have the expected shape?
iii. Explain why your PPF in (a) above depicts that shape.
iv. How many computers could society produce if it was willing to do without shoes?
v. Why are points outside the frontier unattainable?
vi. Identify three ways by which the economy can attain the level of production outside the PPF.
vii. What happens to the PPF when technological change overwhelmingly favours the production
of computers?
viii. What happens to the PPF when the economy discovers an improved technology for
producing shoes?
Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and specify the other subparts (up to 3) you’d like answered.
i)
The slope of PPF is negative. As we can see the curve is downward sloping which implies trade-off between shoes and computers.
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