ECON 2306 9 Trade

14 14 productionontheisland huts 60

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Unformatted text preview: lways the case! 32 23 15 7 3 6 9 12 15 18 20 Radios 13 13 Production on the Island The production possibilities frontier is a graph that shows all combinations of goods and services that can be produced given the resources of society and the existing state of technology. PPF follows the scarcity principal ­ given limited resources, having more of one good thing generally means having less of another. 14 14 Production on the Island Huts 60 Outside Production Possibilities – Not possible with current resources. 50 41 32 23 15 7 Inside of Production Possibilities – Not all resources are used. 3 6 9 12 15 18 20 Radios 15 15 Trade Suppose Gilligan’s Island gets in contact with the Swiss Family Robinson. Knowing that trade can make everyone better off, the two island occupants decide to trade huts for radios But who should produce what? How much should they trade? What should be the terms of trade? 16 16 Trade Recall, points on the GI PPF (Production Possibilities Frontier) are Number of Huts built in Number of Radios built a month in a...
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