Micro - Economics

ASSIGNMENT ON MICRO-ECONOMICS
SUBMITTED TO:
Md. Ridwan Reza Lecturer Department of Business Administration Leading University,Sylhet.
SUBMITTED BY:
Rahat Sarwat Md. Sal Sabil Md. Saddam Hussain Adnan Islam Syed Shaker Ahmed Md. Lahinur Rahman Department:Business Administration Semester:3rd Section:C ID: 1001010143 ID: 1001010101 ID: 1001010144 ID: 1001010125 ID: 1001010129
DATE OF SUBMISSION:
28.09.2010
Question No: 3
Define each of the following terms carefully and give examples: PPF,scarcity, productive efficiency,inputs,outputs.
Answer: Production possibility frontier (PPF): PPF shows the maximum quantity of goods
that can be efficiently produced by an economy,given its technological knowledge and the quantity of available inputs. For example: If the choice is reduced to two goods,guns and butter.Points outside the PPF are unattainable.Points inside it are inefficient since resources are not being fully employed, resources are not being used properly or outdated production techniques are being utilized.
Scarcity: The distinguishing characteristic of an economic good.That an economic good

is scarce means not that it is rare but only that it is not freely available for the taking. To obtain such a good, one must either produce it or offer other economic goods in exchange. For example: Gas, coal etc.
Productive efficiency: A situation in which an economy cannot produce more of one

good without producing less of another good;this implies that the economy is on its PPF. For example: If we produce more butter without reducing gun production.
Inputs: Inputs are commodities or services that are used to produce goods and services.
An economy uses its existing technology to combine inputs to produce outputs. For example: Consider the production of Pizza, we say that the eggs, flour, heat, oven and skilled chef are the inputs.
Outputs: Outputs are the various useful goods or services that result from the
production process and are either consumed or employed in further production. For example: Consider the production of Pizza, we say that the tasty Pizza is the output.
Question No: 5 Assume that Econoland produces haircuts and shirts with inputs of labor. Econoland has 1000 hours of labor available. A haircut requires 1 hours of labor, while a shirt requires
5 hours of labor. Construct Econolands production-possibility frontier. Answer: Alternative production possibilities Possibilitie s A B C D E F Haircuts (units) 2000 (1000hrs) 1600(800 hrs) 1200(600 hrs) 800(400 hrs) 400(200 hrs) 0(0 hrs) Shirts (units) 0 40 80 120 180 200
Based on this chart we can represent alternative production possibilities more vividly in the diagram shown in figure. (Shirt) 200 160 120 80 40 0 400 800 1200 1600 2000 (Haircut) F E D C B A
In the above graph we illustrate the alternative production possibilities .between two products haircuts and shirts. When econoland use more houses in haircuts than shirts production decreased. As well as if decrease use of hours in haircuts than increased shirts production. This production possibility reflects in the point A, B, C, D, E, F. so there production increased efficiently. Question No: 6
Assume that scientific inventions have double the productivity of societys resources in butter production without altering the productivity of gun manufacture. Redraw society production possibility frontier in figure 1-2 to illustrate the new tradeoff. Answer: Alternative production possibilities Possibilitie s A B C D E F Gun (thousand ) 0 1 2 3 4 5 Butter (millions of pound) 15 14 12 9 5 0 Butter double 30 28 24 18 10 0
(Gun) 5 4 3 2 1 0 5 10 15 20 25 30 (Butter)
This frontiers shows the schedule along which socity can chose to substitute guns for butter. It assumes a given state of technology and a given quantity of inputs. Points outsides the frontiers are infeasible or unattainable.
Question No: 8 Say that diligent has 10 hours to study for upcoming test in economics and history . draw a PPF for grades, given Diligents limited time resources. If Diligent student inefficiently by
listening to loud music and chatting with friends, where will Diligents grade output be relative to the PPF ?what will happen to the grade PPF if Diligent increases inputs from 10 hours to 15 hours? Answer: Alternative production possibilities Possibilitie Hours Economic s s A 10 4.00 B 8 3.75 C 6 3.50 D 4 3.00 E 2 2.00 F 0 0.00 Hours 0 2 4 6 8 10 Histor y 0.00 2.0 3.00 3.50 3.75 4.00
Based on this chart we can draw the alternative production possibilities more vividly in the diagram shown in below
(Economics) 4.00 3.75 3.50 3.00 2.00 0 2. 3.0 3.50 3.75 4.00 (History) Let, if diligent provide 10 hour in economics he or she get 4.00 in this subject and he or she get 0.00 in other subject. As well as if he decreases the hours in Economics then the result of History increased. Now an imaginary chart shown. In the above graph we can illustrate the G.P.A between two subject economics and history .when diligent studies 10hours efficiently in the both subjects then the result of this two subject increased . But if diligent studies with friends then the result of both subject decreased. This inefficient point reflects decreased. These inefficient points reflect in the graph in point U. again if he or she study 15 hours efficiently than the results increased highly. U

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ASSIGNMENT ON MICRO-ECONOMICS

Scarcity: The distinguishing characteristic of an economic good.That an economic good

Productive efficiency: A situation in which an economy cannot produce more of one

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