ECON6000 Economic Principles and Decision Making Module 1 - Assessment 2

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 summarises our production capacity:
Table 1 – District D production capacity

Schmeckt Gut Energy Bar                       Schmeckt Gut 2.0
30,000                                                          0
28,000                                                          1,000
24,000                                                          2,000
18,000                                                          3,000
10,000                                                          4,000
0                                                                      5,000

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.