Question 1 - Assume an economy can produce 10 000 cars but no food. On the other hand if all the factors of production are used, the economy can produce 12 000 kg of food but no cars. Draw a production possibility frontier diagram and determine and depict three (3) points showing the feasible and non-feasible alternatives, including an efficient outcome.
Question 2 - The market for a new refrigerator is in equilibrium with an equilibrium price of $1,250 and an equilibrium quantity sold of 20,000. There has been a consumer incomes rise and the equilibrium price increased to $1,425 and the equilibrium quantity sold increased to 22,000.
Sketch the supply and demand diagram for this market before and after income rise. Mark all curves and axes and showing any shifts or movements along the curves. Analyse and explain your diagram.