This local Government Department provides two services: A and B. These two goods

Question

This local Government Department provides two services: A and B. These two goods require the use of two inputs: X and Y. More specifically, provision of a unit of A requires 4 units of resource X and 10 units of resource Y. Provision of good or service B requires two units of resource X and five units of resource Y. The productive capacity of the economoy is constrained by the maximum amount of resources: X=100 and Y=200,

A. Use the above information to develop the complete set of production possibilities of good A and B.

B. Suppose that based upon your analysis of country interest, you have determined that the population desires 15 units of public service A. Determine the maximum units of good B that can be provided to the population.

C. Suppose that a unit of resource X costs $10,000 and a unit of resource Y costs $15,000. Prepare a budget for your community corresponding to the choice that you made in part B above.

Explanation / Answer

b) If 15 units of good A are produced then maximum 10 units of good B can be produced.

c) 10000(15) +15000(10) = 3,00,000

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