EC1002: In an economy there are two goods, x and y, which are produced by capital and labour: Introduction to Economics Assignment, UOL

Assignment 1:

1. In an economy there are two goods, x and y, which are produced by capital and labour. One unit of labour can produce either 2 units of x or 1 unit of y (or any linear combination of them). One unit of capital can produce either 1 unit of x or 2 units of y (or any linear combination of them). There are 100 units of capital and 100 units of labour.

When the economy is producing 70 units of x there is bound to be unemployment and thus, inefficiency. True or false, explain.

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