BMME5103 JAN 2014
JANUARY SEMESTER 2014 BMME5103 MANAGERIAL ECONOMICS
ASSIGNMENT
Question 1
a. Explain the production possibilities frontier (PPF).
Answer:
A curve or a boundary which shows the combinations of two or more goods and services that can be produced while using all of the available factor resources efficiently.
b. Analyse what it means for the PPF to be bowed out from the origin (curved), and what it means for the PPF to be a straight line.
Answer:
When PPF bowed out ( concave), its shows that, different combination of goods and services that can be produce with a given amount of resources in their most efficiency way. Any point inside curve --- resource not being utilized efficiently. Any point outside curve --- not attainable with the current level of resources.
Straight line PPF shows constant opportunity cost between two products. The increasing output of goods B implies giving up of goods A.
s
c. State the Law of Increasing Opportunity Cost and explain why it holds.
Answer:
As production of product increase, the cost of produce additional unit of product will increase as well. Its holds or constant due to quantity of unit of product that must be foregone to obtain the unit of another product is same.
[3 marks]
[TOTAL: 8 MARKS]
Question 2
a. “As the price of oranges rises, the demand for oranges falls, ceteris paribus.” Explain.
[3 marks]
Answer:
Ceteris paribus – all others thing equal The effect of one of economic variable on another, if all other variables remain same.
In this case, changes in price resulted in changes of quantity demand. As the price rise, people will buy less orange, thus, demand for oranges will falls.
The only things that influenced by the price is quantity demanded and yet, the factor of price is can’t be one of the factors for demand curve
ASSIGNMENT
Question 1
a. Explain the production possibilities frontier (PPF).
Answer:
A curve or a boundary which shows the combinations of two or more goods and services that can be produced while using all of the available factor resources efficiently.
b. Analyse what it means for the PPF to be bowed out from the origin (curved), and what it means for the PPF to be a straight line.
Answer:
When PPF bowed out ( concave), its shows that, different combination of goods and services that can be produce with a given amount of resources in their most efficiency way. Any point inside curve --- resource not being utilized efficiently. Any point outside curve --- not attainable with the current level of resources.
Straight line PPF shows constant opportunity cost between two products. The increasing output of goods B implies giving up of goods A.
s
c. State the Law of Increasing Opportunity Cost and explain why it holds.
Answer:
As production of product increase, the cost of produce additional unit of product will increase as well. Its holds or constant due to quantity of unit of product that must be foregone to obtain the unit of another product is same.
[3 marks]
[TOTAL: 8 MARKS]
Question 2
a. “As the price of oranges rises, the demand for oranges falls, ceteris paribus.” Explain.
[3 marks]
Answer:
Ceteris paribus – all others thing equal The effect of one of economic variable on another, if all other variables remain same.
In this case, changes in price resulted in changes of quantity demand. As the price rise, people will buy less orange, thus, demand for oranges will falls.
The only things that influenced by the price is quantity demanded and yet, the factor of price is can’t be one of the factors for demand curve