Task: Suppose that a simple society has an economy with only one resource, labor. Labor can be used to produce only two commodities- X, a necessity good (food) and Y, a luxury good ( music and entertainment). Suppose that the labor force consists of 100 workers. One laborer can produce either 5 units of necessity per month ( by hunting and gathering) or 10 units of luxury per month ( by writing songs, playing the guitar, dancing, and so on).
Problem 1: On a graph, draw the economy's production possibility frontier (ppf). Where does the ppf intersect the Y-axis? Where does it intersect the X-axis? What meaning do those points have?
Problem 2: Suppose the economy produced at a point inside the ppf. Give at least two reasons why this could occur. What could be done to move the economy to a point on the ppf?