ECON6000 Economic Principles: Module 1 Assignment Solutions Analysis

This document presents solutions to an ECON6000 economics assignment, focusing on economic principles and decision-making. The assignment addresses two key problems. Problem A involves analyzing a production possibility frontier (PPF) for Schmeckt Gut, including a graphical representation and discussion of factors affecting output. It also explores the sustainability of technological growth, labor productivity, and changes in the labor force. Problem B delves into market equilibrium, calculating the equilibrium price and quantity for energy bars based on given demand and supply functions. The solution further examines the impact of price increases on demand, based on the law of supply and demand. The assignment utilizes economic concepts and quantitative methods to provide a comprehensive analysis of production and market dynamics.

Running head: PRINCIPLE OF PROJECT MANAGEMENT
Principle of project management
Name of the student:
Name of the University:
Author note

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.
0 5000 10000 15000 20000 25000 30000 35000
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 = QS and 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

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). A tradeoff frontier for global nitrogen use and cereal production.
Environmental Research Letters, 9(5), 054002.