Scenario

Agriland, a faux country known for its mineral-rich soil, specializes in producing oranges and apples. You have been hired to dissect and explain how technology impacts the economic growth of this lovely country.

Step 1: If all the fruit picking workers (without using any technology) are only picking oranges and no one picks any apples, you have data that show that the workers in Agriland can pick 140,000 oranges per day. That is 140,000 oranges per day and zero apples. On the other hand, fruit picking workers are capable of picking 40,000 apples if they don't pick any oranges (that is 40,000 apples per day and zero oranges). In each of these cases, the country is allocating 100% of its resources to either picking apples or oranges but not both. However, if the country wants to pick both apples and oranges, it has to decide how many of each to pick while still efficiently utilizing its workers. Those choices lie along a spectrum of choices that determine how to use 100% of the fruit picking workers and pick the maximum amount of fruit. For example, if the workers pick 20,000 apples, they can only pick 120,000 oranges. If the workers pick 35,000 apples, they can only pick 90,000 oranges.

• Draw a production possibilities frontier diagram that shows the production possibility frontier (PPF) of Agriland under these conditions.

Step 2: Agriland has found a new digital technology that it is adding to its mechanical fruit harvesters that will allow it to pick 200,000 oranges a day. If the country uses this new digital orange harvester, the original apple picking workers can continue to pick 40,000 apples; however, the country won't need as many orange pickers.

• Add this new production possibility curve to your diagram in blue.

Step 3 : Let's assume that Agriland decides to retrain the workers who were formerly orange pickers to pick apples.

• What will happen to the price of oranges and apples?
• How will it impact the net output of the country?

Step 4: The economy of Agriland was growing at 2% before the new digital, mechanical orange harvester. Using the harvester causes the economy to increase its growth to 3%.

• Using the rule of 72, how long would it take Agriland's economy to double at 2%?
• Using the rule of 72, how long would it take Agriland's economy to double at 3%?

Step 5: The leaders of Agriland believe that their economy will grow faster if the workers that are no longer needed for orange picking are trained to work in factories that will produce motorcycles.

• Do you agree with the leaders of Agriland? If so, why? If not, why not? Be sure you support your points with what you have learned about macroeconomics.

Create a document to share with Agriland's government officials that summarizes your responses to the tasks and questions. Include the diagrams requested and along with your detailed explanations about your thoughts as to what will happen to the workers in Agriland and to the economy of Agriland. Provide your recommendations to the country to help it grow its economy the fastest while ensuring that the unemployment rate does not increase. Do you think the country's economy will grow better if the former orange pickers are retrained to pick apples, or make motorcycles? What do you think will happen to the prices of apples, and oranges, and motorcycles given the scenarios above? Finally, state what combination of resource allocation will improve the standard of living in the country.