Economics

Running head: ECONOMICS
Economics
Name of the assignment
Name of the university
Author note

1ECONOMICS
Table of Contents
Answer 1....................................................................................................................................2
a).............................................................................................................................................2
b)............................................................................................................................................2
c).............................................................................................................................................4
Answer 2....................................................................................................................................4
a).............................................................................................................................................4
b)............................................................................................................................................5
(c)...........................................................................................................................................5
(d)...........................................................................................................................................6
(e)...........................................................................................................................................7
f).............................................................................................................................................9
Answer 3..................................................................................................................................10
(a).........................................................................................................................................10
(b).........................................................................................................................................10
(c).........................................................................................................................................11
Reference list............................................................................................................................12

2ECONOMICS
Answer 1
a)
CARS Bicycles
30,000 0
28,000 1000
24,000 2000
18,000 3000
10,000 4000
0 5000
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000
0
1000
2000
3000
4000
5000
6000
PPF
Biclycle
Cars
Figure 1 PPF of cars and bicycles
b)
Production Possibility Frontier
PPF is also known for indicating the production possibilities of the commodities
which are cars and bicycles. With the help of the diagram it can be said that production of

3ECONOMICS
cars can be increased when the bicycles production will get reduced. Therefore, it can be said
that the production possibility curve can be graphed when resources are used efficiently with
the absence of a choice between the two commodities.
The production possibility frontier can be stated as a kind of curve which is used for
depicting the maximum possible outcomes of any two commodities. It is known to assume
that all the inputs are used efficiently. The factors that affects PPF are capital, technology
and labor. PPF is also known for indicating the production possibilities of the commodities
which are cars and bicycles. With the help of the diagram it can be said that production of
cars can be increased when the bicycles production will get reduced. Therefore, it can be said
that the production possibility curve can be graphed when resources are used efficiently with
the absence of a choice between the two commodities.
Assumptions are:
Two goods: the assumptions are that economy can produce only two goods.
Fixed resources: here resources are fixed and are available in limited quantities.
Fixed technology: it is also assumed that the technology is fixed in this case.
Properties of production possibility frontier includes
 Concave to the origin because of the rise in the opportunity.
 Resource utilization will in optimum nature.
 Increase in the marginal rate of transformation.
 Downward sloping in nature since a lot of production of any one good means decline
in the production of any one kind of good.