Question

Ember (E) and Rajan (R) are a couple with individual productivities in both the market and their home. Each has 10 hours per day to devote to work. E can earn $9 per hour in the market, and can produce goods worth $8 per hour at home. R can earn $12 per hour in the market, and can produce goods worth $6 per hour at home. Market-produced goods cost $5 per unit. What is the slope of the couple's joint production possibility frontier (ppf)? What changes at the kink in the joint ppf?

Answer 1

Solution:

First we need to tabulate what each of them can do individually, and then plot their different combinations in the table below. We need all these combinations since the PPF here is not a smooth curve or a straight line due to differences in the productivites of E and R, and that also explains the kinks we see in the PPF. The kinks are points where we move from one combination to another.

Maximum production	Market	Home
Ember	90	80
Rajan	120	60
Combinations
Ember + Rajan in Market	120	0
Rajan Market + Ember Home	120	80
Ember Market + Rajan Home	90	60
Ember + Rajan at Home	0	140

Production at home is on vertical axis and production in market is on horizontal axis, and the intercepts represents when both E and R do the same thing (either market or home). And the two kinks are when we shift from one combination to another as per table above.

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