Draw a Production Possibilities Curve Showing Military Goods and Civilian

question 61

Essay

Draw a production possibilities curve showing military goods and civilian goods. Show how you would measure the increased output of military goods. Show how you would measure the cost of this increase in military goods in terms of civilian goods. Why does opportunity cost change the way that it does?

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Definitions:

Savings Function

A mathematical expression that depicts how savings vary with changes in income, usually stating that savings are a function of disposable income.

Induced Consumption

The portion of consumer spending that varies with changes in disposable income, suggesting that as people earn more, they spend more.

Autonomous Consumption

The level of consumption that occurs when income is zero, reflecting the basic level of consumption that does not vary with disposable income.

Disposable Income

Monetary provision for households to engage in saving and spending after the imposition of income taxes.