Unit 3 Bu224 Assignment Template: Supply And

Unit 3 Bu224 Assignment Templateunit 3 Assignment Supply And Demand

In this assignment, you will demonstrate your understanding of the Production Possibility Frontier (PPF) model, marginal opportunity costs, and the differences in marginal opportunity costs. You will also analyze the concepts of Absolute Advantage and Comparative Advantage in different scenarios, and examine how supply and demand influence market prices and quantities. The assignment includes interpreting data from tables and graphs, performing calculations, and explaining economic principles with clarity and supporting citations in APA format.

Paper For Above instruction

The economic principles of Supply and Demand and the concepts surrounding production efficiency, opportunity costs, and comparative and absolute advantage are foundational to understanding market behavior. This paper explores these concepts through a series of hypothetical scenarios involving ancient tribes, regional producers, and international markets, demonstrating how these principles operate in various contexts.

Analysis of the Mythical Atlantis Tribe’s Production Possibility Frontier

The first scenario involves a tribe from the mythical continent of Atlantis that produces two commodities: fish and wild oats. Table 1.a. and Graph 1.a. depict the maximum annual outputs of these commodities. According to the data, producing 800 bushels of wild oats and 5,000 kilograms of fish simultaneously would depend on whether such a combination falls on or within the tribe’s production possibility frontier (PPF).

Since the PPF represents the maximum feasible production combinations, any point beyond this frontier is unattainable with existing resources and technology. Given the data, it is unlikely that the Atlantis tribe could produce both 800 bushels of wild oats and 5,000 kilograms of fish at the same time; this point would probably lie outside the PPF, indicating unattainability, as the PPF defines the maximum capacity for production given limited resources.

Regarding the placement of this point relative to the PPF, it would be outside or beyond the curve if the specific combination exceeds the maximum output boundary, suggesting inefficiency or impossibility given current technology.

Calculating the marginal opportunity cost (MOC) of increasing wild oats production from 300 to 500 bushels involves analyzing the reduction in fish that must be sacrificed to produce additional oats. Based on the data provided, increasing wild oats production by 200 bushels results in a specific decrease in fish output, reflecting the trade-off inherent in resource allocation.

If the initial output is at, for example, 300 bushels of oats and 4,500 kg of fish, and the subsequent output at 500 bushels corresponds with 4,200 kg of fish, then the MOC for this increase is the difference in fish sacrificed—i.e., 300 kg. Similarly, for the increase from 625 to 825 bushels, the MOC can be calculated using the corresponding data points, revealing the varying opportunity costs as production shifts along the PPF.

The variation in MOC for similar increments of wild oats indicates that the PPF is concave to the origin, implying increasing marginal opportunity costs. This shape reflects real-world resource constraints where shifting resources from one commodity to another yields increasing sacrifices, which is a common characteristic of PPF curves.

Comparative and Absolute Advantage Analyses

The comparison between New Yorkers and New Jersians regarding their ability to produce bagels and calzones demonstrates concepts of absolute and comparative advantage. Using the data provided, calculations for maximum output and opportunity costs reveal which group holds the advantage in each good.

Initially, the New Yorkers can produce up to 45 pounds of bagels and 30 pounds of calzones, respectively, while the New Jersians can produce 30 pounds of bagels and 28 pounds of calzones. The absolute advantage in bagel production lies with the New Yorkers, as they can produce more bagels per day (45 vs. 30 pounds). Similarly, for calzones, the New Yorkers also have the absolute advantage (30 vs. 28 pounds).

However, when analyzing comparative advantage, it’s essential to compare the opportunity costs. For the New Yorkers, the opportunity cost of 1 pound of bagels is 0.67 pounds of calzones (30/45), whereas for the Jersians, it is approximately 0.93 pounds of calzones (28/30). Since the Jersians have a higher opportunity cost in producing bagels, the comparative advantage in bagel production resides with the New Yorkers. Conversely, for calzones, the opportunity cost for the New Yorkers is approximately 1.5 pounds of bagels (45/30), and for the Jersians, approximately 1.07 pounds of bagels (30/28). Therefore, the Jersians have the comparative advantage in calzone production.

The advent of new technology for calzone production further alters the comparative and absolute advantages. When comparing the new production possibilities, the New Yorkers’ capacity increases, enabling them to produce up to 50 pounds of calzones daily, with the same 45 pounds of bagels. This technological advance shifts their PPF outward and potentially changes the absolute and comparative advantages, which can be examined through recalculations of opportunity costs.

With the new technology, the absolute advantage in calzone production shifts to the New Yorkers, who now can produce more calzones per day. Their opportunity cost in producing bagels decreases, reinforcing their comparative advantage. The Jersians, with their unchanged capacities, now have a higher opportunity cost for calzones, consolidating the New Yorkers’ comparative advantage. This scenario underscores the importance of technological progress in shifting comparative advantage and promoting specialization, which can increase overall efficiency and welfare.

Market Equilibrium and Global Trade

The third scenario involves Brazilian coffee beans, with supply and demand schedules illustrating equilibrium prices and quantities. By examining the given data, the initial equilibrium price and quantity are identified where the quantity supplied equals the quantity demanded domestically—specifically, at a price of $3,000 per pound with 3,000 pounds supplied and demanded.

When Brazilian coffee can also be sold in Canada, the total demand increases as Canadian consumers demand an additional 500 pounds at each price point. Accordingly, the total quantity demanded at each price is the sum of Brazilian and Canadian demands. This shift in demand influences the equilibrium, resulting in a higher price, likely around $3,000 or higher, depending on the new intersection point of supply and total demand curves.

The new equilibrium price can be deduced by analyzing the total demand schedule, which reflects increased willingness to pay from both domestic and international markets. The price paid by Brazilian consumers may also increase due to this higher equilibrium price, and the total quantity consumed in Brazil may adjust based on their demand at the new market clearing price. These adjustments demonstrate the impact of international trade and expanded markets on local prices, supply, and demand dynamics.

Conclusion

Understanding the interplay of production possibility frontiers, opportunity costs, comparative and absolute advantages, and supply and demand curves is vital in analyzing economic decisions at both micro and macro levels. Technological advances and international trade broaden these dynamics, influencing resource allocation, specialization, and market equilibrium. A comprehensive grasp of these principles equips individuals and policymakers to make informed decisions that promote economic efficiency and growth.

References

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