This article discusses the principle of project management, including production possibility frontier and market equilibrium. It also provides answers to problems related to output rise and price changes.
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Running head: PRINCIPLE OF PROJECT MANAGEMENT Principle of project management Name of the student: Name of the University: Author note
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1PRINCIPLE OF PROJECT MANAGEMENT Table of Contents Answer to problem A:................................................................................................................2 1..............................................................................................................................................2 2..............................................................................................................................................2 3..............................................................................................................................................2 a..........................................................................................................................................2 b..........................................................................................................................................3 Answer to problem B:................................................................................................................3 1..............................................................................................................................................3 2..............................................................................................................................................4 Reference:..................................................................................................................................5
2PRINCIPLE OF PROJECT MANAGEMENT Answer to problem A: 1. 05000100001500020000250003000035000 0 1000 2000 3000 4000 5000 6000 PPF Schmeckt Gut Energy Bar Schmeckt Gut 2.0 Figure 1: Production Possibility frontier Source: (Created by Author) 2. Production Possibility Frontier (PPF) is a graphical presentation of the maximum output possibilities in case of the two different goods (Manning, 2014). As it can be seen from the figure 1, within the given technology and input, maximum Energy Bar can be produced 30000 unit and Schmeckt Gut 2.0 can be produced 5000 unit. Blue curve shows each point at which production of the two commodities can be maximised and if the production is not as per the PPF curve, there will diseconomies of scale leading to fall in production. 3. a. Following situations may lead to output rise (Mueller et al., 2014): Change in technology will enhance in the productivity of the goods leading to rise in production
3PRINCIPLE OF PROJECT MANAGEMENT Labour productivity can be enhanced through the specialisation Growth in the labour force can lead to rise in output b. Technological growth is not sustainable because in future occasion if demand rises, it may not be able to handle the enhanced demand. Considering the second condition it can be said that second option is sustainable because under rise in future demand, better productivity will enable the firms to produce more goods and service. As per the third possibility it can be argued that the same is sustainable because under the growing labour force it will be able to handle the same. Answer to problem B: 1. Given that, Demand for energy bars: P = 800 – 2QD Supply for energy bars: P = 200 + 1QS Market equilibrium will take place at: Qs = QD Therefore, 800 – 2QD= 200 + 1QS 800 – 200 = 2QD+ 1QS 3Q* = 600 [As QD= QSand it is assumed that the equilibrium output will be Q*] Q* = 200 Market equilibrium price P* = 800 – 2 x 200 [As QD= 200] = 800 – 400 = 400
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4PRINCIPLE OF PROJECT MANAGEMENT Market equilibrium output is 200 and the price is 400. 2. As per the law of demand and supply, if the price rises, then demand of the product will be reduced; however, with the rise in price, producers will prefer to increase their output, yet, consumers will fail to purchase the same amount of goods under the enhanced price (Friedman, 2017). Thus, in this scenario, with rise in the price of product by 1$, there will be fall in the demand.
5PRINCIPLE OF PROJECT MANAGEMENT Reference: Friedman, M. (2017). Price theory. Routledge. Manning, R. (2014). Production-possibility frontier. Production Sets, 51. Mueller, N. D., West, P. C., Gerber, J. S., MacDonald, G. K., Polasky, S., & Foley, J. A. (2014).Atradeofffrontierforglobalnitrogenuseandcerealproduction. Environmental Research Letters, 9(5), 054002.