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ENGR 3360U Winter 2012 Unit 2.1.3: Microeconomics: Production Possibilities

This document outlines a unit on microeconomics production possibilities from an engineering economics course. It uses the example of Salim, who is the only worker on Hans Island and can harvest either mollusks or blueberries. It shows his production possibilities curve and how it shifts based on changes in technology. Additionally, it discusses comparative advantage and international trade, and outlines the circular flow of income between households, firms, labor markets and output markets.

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24 views11 pages

ENGR 3360U Winter 2012 Unit 2.1.3: Microeconomics: Production Possibilities

This document outlines a unit on microeconomics production possibilities from an engineering economics course. It uses the example of Salim, who is the only worker on Hans Island and can harvest either mollusks or blueberries. It shows his production possibilities curve and how it shifts based on changes in technology. Additionally, it discusses comparative advantage and international trade, and outlines the circular flow of income between households, firms, labor markets and output markets.

Uploaded by

sunnyopg
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 11

ENGR 3360U Winter 2012

Unit 2.1.3
Microeconomics: Production Possibilities
Dr. J. Michael Bennett, P. Eng., PMP,
UOIT,
Version 2014-I-01

Unit 2.1 Introduction to Microeconomics

2.1.3 Production Possibilities


2.1.3.1 Exchange and Opportunity Cost
2.1.3.2 Production Possibilities
2.1.3.3 Comparative Advantage and
International Trade

2.1-2

2014-I-01

Dr. J.M. Bennett, P.Eng., PMP ENGR 3360U Eng Eco

Unit 2.1 Introduction to Microeconomics

2.1.3.2 Production Possibilities


Salim lives on Hans Island and is the only
worker there
He can harvest 1.5kg mollusks/hour or he
can pick 3kg blueberries/hour
Assume an 8-hour day

2.1-3

2014-I-01

Dr. J.M. Bennett, P.Eng., PMP ENGR 3360U Eng Eco

Unit 2.1 Introduction to Microeconomics

Salims Production Possibility Curve


12
Mollusks (kg/day)

Attainable efficient
points

Unattainable
point

3
Attainable
0 inefficient point
6
Blueberries (kg/day)
2.1-4

2014-I-01

18

24

Dr. J.M. Bennett, P.Eng., PMP ENGR 3360U Eng Eco

Unit 2.1 Introduction to Microeconomics

Malims Production Possibility Curve


Mollusks (kg/day)

12

3
0

2.1-5

6
Blueberries (kg/day)
2014-I-01

18

24

Dr. J.M. Bennett, P.Eng., PMP ENGR 3360U Eng Eco

Unit 2.1 Introduction to Microeconomics

18

Combo Production Possibility Curve

Mollusks (kg/day)

12

3
0
2.1-6

2014-I-01

6Blueberries (kg/day)

18

24

Dr. J.M. Bennett, P.Eng., PMP ENGR 3360U Eng Eco

Unit 2.1 Introduction to Microeconomics

They Produce Many Babies too


E
A

Mollusks (kg/day)

0
2.1-7

2014-I-01

Blueberries (kg/day)

Dr. J.M. Bennett, P.Eng., PMP ENGR 3360U Eng Eco

Unit 2.1 Introduction to Microeconomics

Mollusks (kg/day)

Outward shift of PPC (tek increase for both)

0
2.1-8

2014-I-01

Blueberries (kg/day)

Dr. J.M. Bennett, P.Eng., PMP ENGR 3360U Eng Eco

Unit 2.1 Introduction to Microeconomics

Mollusks (kg/day)

Outward shift of PPC (tek increase in BBs)

0
2.1-9

2014-I-01

Blueberries (kg/day)

Dr. J.M. Bennett, P.Eng., PMP ENGR 3360U Eng Eco

Unit 2.1 Introduction to Microeconomics

Flow of Income and Expenditure

wages received

labour supplied

wages paid

Labour Market

- households supply
labour

labour hired

- firms hire labourers

Households

Firms

- produce and
sell G&S
- hire labour

- sell labour
- buy goods and
services

Output Markets
G&S acquired

- firms supply G&S

G&S supplied

- households buy G&S


household $ on G&S

2.1-10

2014-I-01

firm $ from G&S

Dr. J.M. Bennett, P.Eng., PMP ENGR 3360U Eng Eco

Unit 2.1 Introduction to Microeconomics

2.1.3.3 Comparative Advantage and


International Trade
Should help out both countries by specializing
But not at all clear to average citizen!
Ask the CAW!

2.1-11

2014-I-01

Dr. J.M. Bennett, P.Eng., PMP ENGR 3360U Eng Eco

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