Answer to Question #88972 in Microeconomics for Jaydene

Question

Tom is a full-time lecturer at a private higher education institution and is considering a career in carpentry. He wishes to pursue a career in carpentry (a childhood dream) which he has studied part-time and is now equipped to take on clients. In his current position he earns a rate of R1000 per day and if he were to pursue a career in carpentry, he would earn R800 per day. Due to the flexibility of the employment conditions at the higher education institution he works for, Tom can negotiate the number of days he works at and will receive a rate of remuneration based on the number of days worked.
Question 1
1.1 Construct a production possibility frontier to illustrate Tom’s earnings potential between the two careers if initially he was not working as a carpenter, then he worked one week per month, then two, then three and finally four weeks per month (assuming only four weeks in a month). (5 marks)

Answer 1

PPF is a line that illustrates Tom’s earnings potential between the two careers. Initially he was not working as a carpenter at point (0; 20,000), then he worked one week per month at point (4,000; 15,000), then two, then three and finally four weeks per month at points (8,000; 10,000), (12,000; 5,000), and (16,000; 0) respectively (assuming five working days in a week and four weeks in a month).