Answer to Question #75728 in Economics for finanancial management diploma

Question

2.1 A community in Northern Namibia produces only two goods, TVs and CDs. With the aid of properly labelled production possibilities curves illustrate each of the following (putting TVs on the vertical axis).
2.1.1 A shift in production from CDs (services) towards TVs (goods). (5)
2.1.2 An increase in the potential output of the community due to a greater availability of the factors of production. (5)
2.2 Using well labelled diagrams, explain how the equilibrium price and equilibrium quantity of apples will change as a result of the following;
2.2.1 A change in the wages of farm workers from R150 per day to R200 per day. (10)
2.2.2 A decrease in the price of fertilizers and a concurrent increase in the demand for apple juice. (10)

Answer 1

2.1
2.1.1 A shift in production from CDs (services) towards TVs (goods) - a movement along the curve.
2.1.2 An increase in the potential output of the community due to a greater availability of the factors of production - PPC will shift outwards (to the right).
2.2
2.2.1 A change in the wages of farm workers from R150 per day to R200 per day - supply will decrease, so the price will increase, the quantity will decrease.
2.2.2 A decrease in the price of fertilizers and a concurrent increase in the demand for apple juice - supply will increase, the price will decrease, the quantity will increase.