Week1-PPFconvexity.docx

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Department
Economics for Management Studies
Course
MGEA02H3
Professor
Michael Krashinsky
Semester
Fall

Description
A simple example to show why the PPF bows out (why the attainable set is convex) Robinson Crusoe (a fictional character in a novel by Daniel Defoe published in 1719, none of which matters for this example ) lives by himself as a castaway on an island (forget about Friday, a character who later joins him, or the cannibals, who later try to eat him). Suppose that Robinson needs food and can obtain it in two ways: by catching fish or by collecting coconuts. Robinson has 5 hours available each day to find food (he needs the rest of the time to build shelter, generate clothing, etc.). Robinson naturally discovers that he collects the most coconuts in the first hour, and fewer and fewer in each subsequent hour that he spends collecting coconuts (this is natural, because he collects the coconuts that are easiest to find in the first hour; each subsequent hour that he hunts for coconuts requires him to spend time looking in increasingly hard-to-get-to places). The following table tells you the number of coconuts that Robinson collects in total for the various number of hours that he spends collecting coconuts each day (NC= hours per day spent collecting coconuts, C = coconuts per day collected): N C 0 1 2 3 4 5 C 0 15 25 32 36 37 Similarly, Robinson find
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