Gb 540 Economic for Global Decision Makers

Topics: Organ transplant, Economics, Human anatomy Pages: 5 (1292 words) Published: October 10, 2012
DATE: MAY 01, 2012


Production Possibilities of T-shirts and Knitting machines

............................... Production Alternative.. Type of ProductABCDE
....................................................................... T-shirts 01234
Knitting machines 109740

The above table represents a hypothetical economy where t-shirts (consumer goods) and knitting machines (capital goods) are being produced. At alternative A, all available resources are being utilized to produce knitting machines; at alternative E, all resources are being utilized to make t-shirts.A and E are both unrealistic extremes since an economy typically produces both consumer and capital goods as in B, C and D. When we move from alternatives A to E, the production of t-shirts increases at the expense of the production of knitting machines. [pic]

Each point (A,B,C,D and E) on the curve is a simulation of the maximum combination of T-shirts and Knitting machines that could be produced given all available resources are fully employed. The points inside the curve represents are attainable, but represents less than desireable output because there could be more of both goods if resources were fully utilized. The points outside the curve represents an unattainable but greater output because of the current availabilty of resources.

From the Production Possibilties curve, we can assume that more T-shirts mean fewer knitting machines because to produce more units of t-shirts, more units of knitting machines have to be compromised. As we move along from points A to E, we realize an important economic principle- the law of increasing opportunity cost. According to this law, the opportunity cost of each additional unit of t-shirt is greater than the opportunity cost of the preceding one and that the extra or marginal benefits that come from producing t-shirts decline with each successive unit of t-shirt. The optimal quanity of t-shirts will therefore be when marginal benefits equal marginal costs.


Right now there are more than 99,000 pieces of loose, natural diamond on sale on eBay.

Vigorous competition between firms is the lifeblood of strong and effective markets. Competition helps consumers get a good deal. It encourages firms to sellers to offer the best price along with the best product and service. Competitive markets exist when there is genuine choice for consumers in terms of who supplies the goods and services they demand. Competitive markets are characterised by various forms of price and non-price competition between sellers who are bidding to increase or protect their market share.

When there are more than one seller in a specific market, sellers start cutting price just a little bit lower than one another to get most of the business. This will cause a price war until each seller is pricing and producing at the point where average costs are at a minimum and neither firm ears profit; cost equals revenue. As more and more sellers enter a market, the price becomes more and more stable. For a good like diamond that is the same no matter where you buy it, the price is the same globally because if a seller priced higher, it would loose all its business. In short, competition causes the price for a good to be such that firms do not earn profit and the price lies at the value of a perfectly elastic demand curve.

There is competition among buyers because people are looking for the best deals on the most commonly used items. Places like eBay allows consumers to name their price to obtain their most prized items. Bidding on the item can boost the revenue that is made from the item when several people want it. Answer#3

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