Answer to Question #96234 in Economics of Enterprise for greg

Question

Suppose an economy (Home) produces only two goods- Magnets and Neckties. Both goods require both capital and labour to produce. Assume capital and labour cannot be substituted for one another in the production process. The economy has 600 units of capital and 800 units of labour available. It takes 4 units of labour and 2 units of capital to make each Magnet and 2 units of labour and 6 units of capital to make each Necktie

Answer 1

The labour and capital constraints for the economy are:

4M + 2N = 800 and 2M + 6N = 600,

where M is the quantity of Magnets produced, N is the quantity of Neckties produced.