Explain how a supply curve can be obtained or derived from an increasing cost production possibility curve. Use Figure 4.3 to derive the supply curve for cloth. For a bit more challenge, use Figure 4.3 to derive the supply curve for wheat?
Figure 4.3: ln difference Curves and Production Possibilities without Trade
Without trade, the best an economy can do is to move to the production point that touches the highest community indifference curve. This best no-trade point is S0, where the nation both produces and consumes, reaching indifference curve I1.