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Gb 540 Economic for Global Decision Makers

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Gb 540 Economic for Global Decision Makers
UNIT 1 ASSIGNMENT
PREPARED FOR
PREPARED BY
COURSE: GB 540 ECONOMIC FOR GLOBAL DECISION MAKERS
DATE: MAY 01, 2012

Answer#1

Production Possibilities of T-shirts and Knitting machines

............................... Production Alternative.. Type of Product A B C D E ....................................................................... T-shirts 0 1 2 3 4 Knitting machines 10 9 7 4 0

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.
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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

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