How Will The Frontier Be Affected By A Positive Change?

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Question One a. Why is the PPF concave to the origin? The production possibilities frontier is concave to the origin as it represents the increase opportunity goods along with the outputs of goods which is increasing. This is due to the law of opportunity goods – with one increase or production, an increase in opportunity costs follows (Layton, Robinson and Tucker, 2016). b. How will the frontier be affected by a positive change in technology for the product on the horizontal axis? The points represented on the production possibilities frontier represent the maxim outputs of each product (Layton, Robinson and Tucker, 2016. The amount of tables produced each year is presented on the vertical axis’s and the amount of chairs produced each…show more content…
Elasticity is not confined to demand curves as the demand of a product consumed is not always related to the price of the item. For instance the demand of meat products may be high during holiday seasons, while the price is the same throughout the year and vice versa. b. The demand for a product is price elastic and the product 's price is decreased by X%. What might be the expected change in quantity demanded and revenue? If a product is price elastic and the price decrease this will result in more people purchasing the product and therefor the revenue will increase. This is because more people are going to purchase the product in higher quantities if they see it at a cheaper price. For instance supermarkets often promote price dropped items, at a new cheaper price, this means more people are likely to buy that brand of product as opposed another that is a higher price – resulting in a higher revenue for the product (Layton, Robinson and Tucker, 2016). Question Four a. Explain why profits are maximised when MR = MC. Profits are maximised when market revenue = market cost because the amount of product being produced is equal to the cost of producing the output. If marginal revenue was left then marginal cost, this would be the cost of producing the output was less than the revenue, causing the profit to lower (Layton, Robinson and Tucker,
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