Intermediate Microeconomics Its Application â€Myassignmenthelp.Com

Question: Discuss About The Intermediate Microeconomics Its Application? Answer: Introducation Production Possibility Frontier for the production of the Schmeckt Gut Energy Bar and Schmeckt Gut 2.0. Figure 1: Production Possibility Frontier Production Possibility Frontier of an economy symbolizes for different possible combination two goods produced within the economy while making use of all of the available resources (Friedman, 2017). Any point on the PPF implies efficient production point. The PPF is drawn based on some basic assumptions. On important assumption is increasing opportunity cost of production. In order to increase production of one good resources must be move out from the other industry which is costly. The two extreme points on the PPF shows the maximum amount of each of the good that can be produced in the economy (Yang Ng, 2015). From the above PPF, it can be said that the economy can have a maximum 30,000 Schmeckt Energy bar while the maximum number of Schmeckt Gut 2.0 is 5000. Currently district D is producing 3000 Schmeckt Gut 2.0 and 18,000 Schmeckt Gut Energy bars. This is a point on the PPF. This means District D is operating on an efficient scale. Now, demand has increased to 4,000 Schmeckt Gut 2.0 and 20,000 Schmeckt Gut Energy Bars. This means demand for the goods has increased. Given, the assumption of PPF that to increase the production of one good the production of other good must be increased this is not possible to attain by the current range of PPF. It is possible only when PPF shifts outward. PPC shifts outward only when output capacity increases (Nicholson Snyder, 2014). When there is an advancement of existing technology then output for both the product increases. Another possibility is finding a new resource base. Allowing specialization within the industry or hiring more labours can also increases output and can help District D to achieve its increased demand. Among the solution given above, finding a new source of human resources management and exploiting it is not sustainable. Hiring more labours also has limitations because of diminishing marginal returns. Advancement of technology and using existing resources efficiently is can sustainable way to increase productivity and increasing output. Demand for energy bar, Supply of Energy bar, At equilibrium, Demand = Supply Market equilibrium price is 400 and equilibrium quantity is 200. The law of demand suggests an inverse relation between price and demand when other factors remain constant. The law of supply on the other hand implies a positive relation between price and quantity supplied given all other factors (Rios, McConnell Brue, 2013). Therefore, when price increases by $1 then according to law of demand people will demand less energy bars. Suppliers on the other hand, supplies on the other hand increases their quantity supplied. This will create an excess supply condition in the market for energy bars. Figure 2: Market condition when price rises (Source: as created by Author) References Friedman, L. S. (2017).The microeconomics of public policy analysis. Princeton University Press. Nicholson, W., Snyder, C. M. (2014).Intermediate microeconomics and its application. Cengage Learning. Rios, M. C., McConnell, C. R., Brue, S. L. (2013). Accounting: Principles, problems, and policies. McGraw-Hill. Yang, X., Ng, Y. K. (2015).Specialization and economic organization: A new classical microeconomic framework(Vol. 215). Elsevie