What is opportunity cost? Draw a Production Possibility curve for a country producing two goods and show with help of an example, how principle of opportunity is applied in explaining the changes in production possibilities for the country.

Q1. In Riyadh City Road traffic congestion is increasing day by day. As an economist how you see this problem? Suggest and explain an economist’s solution to this problem. (3 Marks)

Q2. What is opportunity cost? Draw a Production Possibility curve for a country producing two goods and show with help of an example, how principle of opportunity is applied in explaining the changes in production possibilities for the country. (3 marks)

Q3. What is market equilibrium? Take an example of pizza (assume its price and quantity demanded) and analyse graphically, what happens to the equilibrium price and quantity when,

(a) there is increase in demand and

(b) there is increase in supply. (4 Marks)