Suppose that a simple society has an economy with only one resource, labor. Labor can be used to produce only two commodities axisX, a necessity good (food), and Y, a luxury good (music and merriment). Suppose that the labor force consists of 100 workers. One laborer can produce either 5 units of necessity per month (by hunting and gathering) or 10 units of luxury per month (by writing songs, playing the guitar, dancing, and so on).a. On a graph, draw the economy axis ppf. Where does the ppf intersect the Y-axis? Where does it intersect the X-axis? What meaning do those points have?b. Suppose the economy produced at a point inside the ppf. Give at least two reasons why this could occur. What could be done to move the economy to a point on the ppf?c. Suppose you succeeded in lifting your economy to a point on its ppf. What point would you choose? How might your small society decide the point at which it wanted to be?d. Once you have chosen a point on the ppf, you still need to decide how your society axis's production will be divided. If you were a dictator, how would you decide? What would happen if you left product distribution to the free market?

It means that when the society produces zero units of necessity, it can produce 1000 units of luxury goods and if they use all resources to produce necessity, they can produce 500 units only

b. The economy can produce at a point inside the curve IF (1) There is underutilized of the available resources. (2) There is inefficiency in the use of resources

c. I will want to produce more necessity than luxury. The decision on which point the society will want to be depend on the type of economic system being practiced by my society, if it is free market, the price system will determine it and for a socialist system, the government decides.

d. If I am a dictator, I will make decrees as to the economic direction I want for the society and where the product distribution is left to the free market, the price system decides.

Explanation:

The production possibility frontier is a graph that shows the trade-off between two commodities which a country can be assumed to produce. An economy can operate on the PPF in which case it is using its resources to the fullest. It can operate inside the curve which means under-utilization of resources or inefficiency in resources utilization. A country cannot operate outside the curve except there is technological progress or economic growth.

jayilych4real jayilych4real · Answer 2 · 2021-12-30T16:16:07+01:00

A. On a graph, if the economy axis ppf has been drawn, the place where the ppf intersect the Y-axis is:

At 1000 units of luxury goods

The place where the ppf intersect the X-axis is:

At 500 units of necessity goods

The meaning of these points is that there is no production of necessity and only 100 units of luxury goods can be made and if all the resources are employed to make necessity, then it's maximum capacity would be 500 units only.

B. The two reasons why the economy produced at a point inside the ppf are:

The available resources are not maximized
The use of resources are badly managed