Models, Production Possibilities, and the Market Economy 1. Provide an example f

Question

Models, Production Possibilities, and the Market Economy 1. Provide an example from your own life illustrating a cause-effect relationship between two variables (e.g, the relationship between hours of study per week and your course grade - but do not use this example). a. Describe the cause-effect relationship in a paragraph and then draw a graph illustrating your example. Remember to label the axes on your graph. b. What would cause the curve/line in your graph to shift/move? Explain. Assume that a firm finds that its profits will be maximized when it which it can sell for $20.00 each. Each of the techniques shown in the following table wil produce 50 units of product X 2. 50 units of product X Unit resource prices $ 20.00 $ 40.00 $ 60.00 Method #1 Method #2 Method #3 7 Land Labor Capital Entrepreneurship $ 50.00 2 5 a. Which method listed above is most efficient? Provide evidence to support your choice b. Suppose the price of labor falls to $20 without any other resource prices changing. Which of the methods (among methods 1 through 3) will the firm now choose? Why? 3. Draw a production possibilities curve (PPC) for a society illustrating possible production choices for capital goods and consumer goods. Measure capital goods on the vertical axis and consumer goods on the horizontal axis. a. What things are being held constant when you draw this PPC? Explain how a society's choice of what combination of goods to produce affects its future growth. In addition to this choice of capital vs. consumer goods, what can cause an economy to grow? Explain briefly. b.

Explanation / Answer

Can answer only one question at a time as per Chegg gjidelines

A The cause and effect relationship is between price change and demand for good. As price changes demand for good changes. If price rises demand will fall and if price falls demand will rise.see fig 1.

B It shifts due to change in price of substitutes, complements, change in income and tastes of consumer etc etc. They shift it because more or less is now demanded at same price due to above reasons. E. G if income rises more is demanded at same price and thus curve shifts rightwards

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