1. Two leading electronic goods produced by a business are streaming devices (SD) and gaming devices (GD). The average monthly production of each good is reflected in the table below

PRODUCTION POSSIBILITIES. GD SD

A 0 200

B 25 175

C 40 140

D 50 80

E 60 0

Based on this information, the business wants to analyze its production possibilities to determine whether it should invest to increase the production of one good or to expand the production of both goods.

As an economist, you have been hired for that purpose.For the analysis you want to:

1.1 Graphically, show how the production possibilities look like(Put GD on the horizontal axis).

1.2 Demonstrate mathematically the increasing sacrifices the business would face if it wanted to invest in producing more GDs.

1.3 Demonstrate mathematically the increasing sacrifices the business would face if it wanted to invest in producing more SDs.

In this second section, with the information you gathered above, you have to analyze investment decisions. The following are important production information that can help in your advice:

*Currently, the business is producing 175 SDs and 25 GDs (point D).

*There is an unsatisfied demand of GDs in the market. The maximum a business will be able to sell is 50 GDs.

*The business is interested in producing those 50 GDs.

*The firm does not want to stop producing SDs.

1.4 Based on the law of increasing opportunity cost analysis, mathematically show the sacrifices of increasing its production to 40 or to 50 GDs. Advice whether you think the business should increase its production to 40 GDs or to 50 GDs, as desired.

1.5 If the business does not want to reduce its current production of SDs, which implies losing its share in the SDs market; based on the economic theory learned in class, what other possibility exists that satisfies those wishes? Explain.