Q1) Kasur is a small farming community near Lahore. For several years most people in kaur have either worked on the farms or owned small businesses, or they have been jobless. Last December a manufacturer of office furniture bought 50 acres of land and announced it would build a new factory. The company would provide work for 250 workers and have a yearly payroll of nearly $6,000,000.

Describe the effects of new factory on the items below. Then place the number of each item on the circular-flow diagram to indicate whether the activity takes place in the product market or resource market

1. The number of people wanting to purchase homes in kasur

2. The sales of clothing and other goods in kasur’s stores

3. The number of people employed in kasur’s stores

4. The number of stores rented in the kasur

5. The number of cars sold at local dealership

6. The wages paid to local construction workers

7. The number of tickets sold at local movie theatre

8. The profit earned by local grocery stores

9. Assume you own a business that sells insurance in kasur. How will the new factory create entrepreneurial opportunities for you?

Q2). Is free market best solution to the fundamental economic problem? Discuss in detail.

Q3). Assume that an economy produces only two goods, X and Y.

a. Draw a reasonable production possibilities frontier for the economy. Elucidate why you drew it as you did.

b. Assume that a new technological advance makes the economy much more productive in producing good Y. Show how this discovery might affect the production possibilities frontier that you drew.  Elucidate.

c. Does this technological change let society to produce more of good X?

d. Pick a point on the original production possibilities frontier and label it A. After the technological change occurs is A an efficient production point?  Why or why not?

e. Elucidate what the opportunity cost of producing more X is at point A before and after the technological change occur

Q4). What describes why millions of economic resources tend to get arranged logically and productively rather than unproductively and haphazardly?

Q5). On average, household in china save 40 percent of their annual income each year, whereas household in US save less than 5 percent. PPC are grown at 9 percent annually in china and 3.4 percent in US. In your view why the difference in growth is rates .describe with the help of graph showing ‘present goods’ and ‘future goods’