EXERCISE 5.6 BIOLOGICAL AND ECONOMIC FEASIBILITY Using Figure 5.6: 1. Explain wh
ID: 1153152 • Letter: E
Question
EXERCISE 5.6 BIOLOGICAL AND ECONOMIC FEASIBILITY Using Figure 5.6:1. Explain why a point on the biological survival constraint is higher (more grain is required) when Angela has fewer hours of free time. Why does the curve also get steeper when she works more? 2. Explain why the biologically feasible set is not equal to the economically feasible set. 3. Explain (by shifting the curves) what happens if a more nutritious kind of grain is available for Angela to grow and consume. EXERCISE 5.6 BIOLOGICAL AND ECONOMIC FEASIBILITY Using Figure 5.6:
1. Explain why a point on the biological survival constraint is higher (more grain is required) when Angela has fewer hours of free time. Why does the curve also get steeper when she works more? 2. Explain why the biologically feasible set is not equal to the economically feasible set. 3. Explain (by shifting the curves) what happens if a more nutritious kind of grain is available for Angela to grow and consume.
Angela's biological survival constraint 12 Feasible frontier Angela and Bruno combined 5 2.5 Angela's reservation option Angela's hours of free time4 Angela's reservation option Point Z, the allocation in which Angela does not work and gets only survival rations from the government, is called her reservation option.
Explanation / Answer
1. As Angela works more and more she gets lesser hours of free time. Thus, to give up that free time, Angela would require a certain higher amount of grains. This would give her an incentive to work. Also, as she gives up more and more of her free time, the curve becomes steeper which means that she should receive more grains to give up one hour of her free time. For eg: Suppose she is working for 8 hours in a day, to start working 9 hours she should be given an appropriate grain compensation in this case. After that from moving from working for 9 hours to 10 hours, she should get a higher amount of marginal compensation. This is represented by the increasing steepness of the curve.
2. The two curves have a negative slope. But, the rate of change of the slope for both the curves is different (opposite). This is because the biological constraint depicts Angela's behaviour whereas the feasible set gives all the feasible allocations possible (for Angela and Bruno combined).
3. The feasible frontier would shift outwards.
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