ECO364H5 Study Guide - Midterm Guide: Edgeworth Box, Good Luck!!, Autarky
Document Summary
Instructions: answer all three of the following questions. Please keep your responses brief and to the point. All questions equally weighted: consider an economy, call it home. Home can produce two goods x and y, where each must be produced using some capital and labor (just like we"ve discussed in class). Home has a total factor supply of 80 units of labour and 120 units of capital : find the production pattern for home and show your answer on the edgeworth box for the two sectors, x and y. What do you notice from you edgeworth box about production patterns: let capital supply drop 85 units. What is the effect of this change on the production pattern for home: what can you conclude about production pattern (whether diversified or specialized) with reference to your responses in a) and b). What does the production pattern depend on: what if instead, capital rose from 120 units to 140 units of capital.
