ECON 6000 : Economic Principles and Decision Making – Laureate International Universities

Problem A:

Schmeckt Gut has several production facilities in Industria with different production capacities. In District B we are producing both of our energy bars: The Schmeckt Gut Energy Bar and Schmeckt Gut 2.0. The table below summarizes our production capacity:

1. Using the above figures and Microsoft Excel, map out the Production Possibilities Frontier (PPF) for the production of the Schmeckt Gut Energy Bar and Schmeckt Gut 2.0.

Hint A: If you are unsure how to use Microsoft Excel, review the Module 1 Learning

Activities and try to replicate the examples.

Hint B: If you are unsure how to create the PPF with the help of Microsoft Excel, do a

quick google search.

 

2. In your own words, while making use of the graph that you have created in part 1, explain

what the PPF is.

3. District D usually has a demand of 3,000 Schmeckt Gut 2.0 and 18,000 Schmeckt Gut Energy

Bars. Suddenly we receive notice that the demand has increased to 4,000 Schmeckt Gut 2.0

and 20,000 Schmeckt Gut Energy Bars.

a. Discuss and explain at least three possibilities how we could meet that demand.

Hint: Make appropriate assumptions.

b. For each solution that you have identified and discussed above, explain whether or

not your solution is sustainable.

 

Problem B:

At a local market in Industria, the following demand and supply information are given:

Demand for energy bars:

Supply for energy bars:

1. What are the market equilibrium price and quantity?

2. If the subsequent price increases by $1, how does demand and supply change? Explain with

the help of the concepts of the law of demand and supply.

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