1-1.

Economics Study Plan Problems and Applications 2022

THE PRODUCTION POSSIBILITIES FRONTIER

Problem - a:

1/1.a. Use the equation below to fill in the missing data in the table of coordinate
points that characterize the PPF curve
X2
Y = 72 −
18

X 0 6 18
Y 40 22 0

Solution:

We can then find the missing data by substituting the X or Y value into the
equation for,
02
X=0 replaced by the basic formula Y = 72 − Y = 72
18
62
X=6 replaced by the basic formula Y = 72 − Y = 70
18
182
X = 18 replaced by the basic formula Y = 72 − Y = 54
18
X2
Y = 40 replaced by the basic formula 40 = 72 − X = 24
18
X2
Y = 22 replaced by the basic formula 22 = 72 − X = 30
18
X2
Y=0 replaced by the basic formula 22 = 72 − X = 36
18

The dominant coordinate value pairs:

X 0 6 18 24 30 36
Y 72 70 54 40 22 0

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1-1. Economics Study Plan Problems and Applications 2022

Problem - b:
Plot your exact curve (PPF) based on the data! b. Plot your exact curve (PPF)
based on the data!

Problem - c:

Plot the following points in the pareto figure,

A (XA = 10, YA = 40), B (XB = 5, YB = 60)

12 2
C (XC = 30, YC = 50) D (XD = 12, YD = 64) → 64 = 72 − = 72
18

72
70 D
64
60
B
50 C
A
40
30
20
10

X
12 36
10 20 30 40

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1-1. Economics Study Plan Problems and Applications 2022

Problem - d:

Describe the points according to the PARETO efficiency principle.

■ point A : inefficient use of resources

■ point B: inefficient use of resources

■ point C : not a real possibility

■ point D : since this point falls just on the pareto arc, here Pareto-efficient use of
resources

Problem - e:

Compared to point “A”, enter a coordinate that conforms to the Pareto

impruving principle.

In principle, there are an infinite number of such points, points up to and on the Pareto
arc, can be characterized by a value greater than the coordinates of point “A” in at least
one or both of its coordinates.

For example
X = 12 és Y = 50 satisfies this condition!