Draw the ppf for scotlands economy showing situation before

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Reference no: EM13451823

Developing dynamic comparative advantage doesn't always work. A notable case was in Scotland were there was an attempt to develop a region of specialisation in high tech electronics manufacturing - it was referred to as "Silicon Glen.

In 2003 it contributed one-seventh of Scotland's gross domestic product, directly employed 45,000 workers and accounted for more than half the country's exports. At its peak it produced approximately 30% of Europe's PCs, 80% of its workstation, 65% of its ATMs and a significant percentage of its integrated circuitas.

Most of the big companies (like Motorola) that moved in to take advantage of government support and left when it was cheaper to produce abroad. By 2009 most of the jobs disappeared in this sector.

a) Sketch a PPF for Scotland's economy showing the situation before and after the collapse of Silicon Glen. Explain your PPF.

b) Explain (in terms of opportunity costs and the gains from trade) why our economic model of the PPF would say that this is a good thing.

c) Use the link on Moodle "When trade isn't free". Choose one of the issues that is covered and explain the problem in terms of our basic model (opportunity costs, comparative advantage etc). Why were the subsidies used and do you think they were justified?

Reference no: EM13451823

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