LBE 100 - MICROECONOMICS - ASSESSMENT TASK 1

a) The economy might not be able to produce all the schools and clinics the Minister's want because the Minster might want all those schools and clinics, but we have limited resources. We have two broad categories of economic resources; property resources and human resources. Property resources including land, raw materials and capital and human resources consisting of labour and entrepreneurial ability. This can put a constraint on the economy's product. There might not be enough natural resources that go into making goods and services or in this case enough resources to produce the schools and clinics. There might not be enough money for income for the people who will build these schools and clinics therefore that's another constraint. Also theres a constraint of technology might not be as advance as we'd hope it to be therefore it pulls the Minister back a step into producing these schools and clinics.

b)

A production possibilities curve shows the maximum possible outputs of 2 goods that can be produced. It shows how much we can produce with a fixed amount of resources and the given state of technology. The reason why it is curved and not straight is because a slope of a curve shows opportunity cost. Opportunity cost is the amount of other products that must be sacrificed to obtain an addition unit of a good. So therefore more technical schools that are produced, more health clinics need to be given up in order to produce technical schools.

The economy cannot produce 6 schools and 30 clinics at once, because it doesn't fall on the production possibility curve therefore it is using resources that the economy doesn't have therefore cannot produce this amount of clinics and schools at once. It is unattainable to produce that many because the production possibility curve shows the maximum outputs of two goods and we can't have both trying to reach the maximum amount of schools or clinics it can because as it's on a slope of curve, an amount of product has to be sacrificed in order to obtain an addition unit of good. So therefore the Minister cannot product 6 schools and 30 clinics at once.

c) Efficiency involves maximising satisfaction from out limited resources. There is productive efficiency which is producing those goods in the least costly manner and is shown by any position on the PPC. Allocative efficiency is allocating resources to produce the right goods and services shown by a specific point on the PPC. Inefficiency can arise from various sources. For example if the government was keeping imports from foreign countries, this limits reduces efficiency by keeping goods from being produced at a lower cost therefore creating inefficiency. Inefficiency relating to PPC is when they choose a point inside the curve. This is inefficient as it is a wastage of resources. It can be produced, but there is a gap between the point chosen and the maximum point that could of been chosen that would of had all resources fully and efficiently employed. The point of inefficiency is inside the curve that that is a waste of resources.

The Minister for Health's second choice is to produce 5 schools and 29 clinics. This combination is outside the curve therefore it is not possible. We do not have the resources or technology to produce this many schools or clinics. It is not efficient either because we cannot produce this many schools and clinics as the