Problem: Exchange in an island economy - Robin and Terry are stranded on a deserted island and can consume two products, coconuts and fish. In a day, Robin can catch 2 fish or gather 8 coconuts, and Terry can catch 1 fish or gather 1 coconut.

Required:

a) Assuming a 6-day work week and that each person is initially self-sufficient. Create a chart and graph similar to that on page 49 of your textbook. Note initial weekly production and consumption points of 32 coconuts and 4 fish for Robin and 3 coconuts and 3 fish for Terry.

b) Now show how specialization and exchange (at a rate of 3 coconuts per fish) allows Robin to consume more coconuts and the same number of fish and allows Terry to consume more coconuts and the same number of fish. Create a production and consumption graph similar to that on page 51 of your textbook to illustrate the gains from trade.