Sample Assignment on Microeconomics

Running head: MICROECONOMICS
MICROECONOMICS
Name of the Student
Name of the University
Course Id

1MICROECONOMICS
Table of Contents
Question 1........................................................................................................................................2
Question 2........................................................................................................................................4
Question3.......................................................................................................................................10
References......................................................................................................................................16

2MICROECONOMICS
Question 1
a) The Production Possibility Frontier (PPF) for the manufacture of cars and bicycles are
shown in the figure given below:
0 1000 2000 3000 4000 5000
0
5000
10000
15000
20000
25000
30000
35000
PPF CURVE
PPF CURVE
BICYCLE
CARS
Figure 1: PPF of cars and bicycles
Source: (author’s creation)
b) The PPF indicates maximum possible output of two goods provided the inputs. It
assumes that each input is efficiently utilized in total production. Some of the variables
such as workers, emerging technologies influence the resources in PPF (Baumol and
Blinder 2015). This curve aids in determining efficiency to manufacture two commodities
at one time.
The above figure shows the PPF curve for manufacture of bicycle and cars. Point
X and Y on the PPF curve indicates that all the resources are properly allocated by a
country. Point X denotes that if a country wants to manufacture more cars than bicycle,
then few resources must be diverted for producing bicycles. On the contrary, point Y

3MICROECONOMICS
depicts that if one country wants to manufacture larger number of bicycles, then few
resources should be given up for manufacturing cars. Moving from point X to point Y,
the country will decline production of cars with respect to increase in production of
bicycle. The point Z indicates inefficient allocation of resources, which means that this
nation is manufacturing lesser number of both cars as well as bicycles even if resources
are available.
Assumptions of PPF are given below:
 Technology that is used for producing commodities is assumed to be fixed
 All the resources in production are used in efficient way (Hall and Lieberman
2012).
 Resources utilized for production of one good must be relocated to manufacture
another good.
Properties of the PPF curve are-
 This curve is generally negatively sloped since change in one good inversely
relates to change in another good (Rios, McConnell and Brue 2013).
 PPF curve is concave shaped owing to increase in its marginal opportunity cost.
c) The three possibilities at which Newland can meet increase in total demand includes-
 Newland might introduce emerging technologies to meet rising product demand
 Newland must increase its total supply of goods for meeting increasing customers
demand
 Import of the products will aid this country to meet rising demand of the above
mentioned products and thereby will raise its total supply (Sloman Norris and
Garrett 2013).