Consider two countries, Korea and Malaysia, and two goods, lumber and automobiles. Korea’s PPF is biased towards automobiles, and Malaysia’s PPF is biased towards lumber. They have the normal, concave to origin, increasing opportunity cost shape.1. Draw the PPFs of both countries with lumber on the horizontal axis.2. Illustrate the autarky equilibria in both countries given our strong assumption about preferences (e.g. consumption in both countries always lies on the same line from the origin).

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Welfare Analysis

Welfare analysis of the society is related to welfare economics. From the economic point of view former welfare economics refers to that subject which uses the techniques of microeconomics to analyse and evaluate the welfare at the economic or aggregate level.