Question

1. Country Z has an economy that produces two goods: Food (A) and Housing (B). These goods require the use of two resources. A unit of Food requires the use of 2 units of labor and 4 units to capital while one unit of housing requires the use of three (3) units of labor and five (5) units of capital. Country Z only has 150 units of labor and 200 units of capital available. Dl BL A. Use the above information to determine the production possibilities curve or line for country This must be an algebraic equation relating the maximum amounts of Food and housing that this country is capable of producing with its limited resources. Y=mxtb SK mtsort AS OPL 150L/L anfon 1504/3L per bal Sounits of ORA 200k, 75 units of L F 4K pera = (50 A) 2004/5k per B=0 so units of Kapitel 48 units of taber 90HD kapital B. Assume that country Z produced 25 units of Housing (B). What is the maximum amount of Food (A) this country can produce? Show all work. Bloe Barbade Bee99dd 125F er B +8 25 B 32 perß/=75 75L/ C.Draw a neat graph to illustrate the production possibilities of Food and Housing for country 7

Answer 1

A)total L=150

Total C=200

One unit Food requires 2 L and 4C

How much food country z can produce using all resources=200/4=50

The main things that we must notice here is labour requirement for 50 food unit=50*2=100

So there is 50 unemployed labour.

Same for home, the maximum unit of home that can be produced using all resources=200/5=40

And required labour to produce 40units of home=40*3=120

30 units of labour are unemployed..so we can ignore the labour while making production possibilities frontier.

What is capital opportunity cost of producing 1 unit of home=4/5

MAXIMUM H=40

H=40-4/5*F

If we use all resources to produce food then F=50 and H=0

So production possibilities frontier equation,

H=40-0.8F

B)H=25

25=40-0.8F

-15/-0.8=F

F=18.75

C)

PPFA.country Houning stopez0.8 50 food