Question

3. What concept best explains why you wouldn’t want to make your own clothes completely from scratch and instead will normally prefer to buy them from a retailer?
4. Barville is a country that produces either all dumbbells or all sandals or a combination of two. (30 points total)
   • Draw a production possibilities frontier and label the x and y axes appropriately.
   • Place a point that shows where the country would be operating if a recession hits and companies are laying off workers. Label this point B.
   • Place a point that shoes and unattainable point under the current situation. Label this point C.
   • If a point is unattainable now , will it always be unattainable? If you write that is can be attainable, what would cause it to become attainable?

Answer 1

1. The concept that best explains our need to buy clothes from outside is the concept of specialisation and exchange.

People specialise in the production of one kind of good and then sell it to others to earn money so that they can buy other goods. This way the resources are used efficiently and people become specialised in one kind of good by repeatedly making it through learning.

2. The concave curve shown is the required PPF. All the points lying on the PPF shows full utilisation of resources.

Point B shows that the resources are underutilised due to recession. Due to this, the point will lie inside the PPF.

Since point C is unattainable, it will be shown by the point outside the PPF. Because all the points on and inside PPF are attainable.

The point C will become attainable only if the advancement in technology shifts the PPF in the forward direction as is shown by the dotted lines.