Question

Passage: A new Indian car on 11th January 2008, Tata Motors, part of India’s Tata group, launched a new model, the Nano. On this day it became the cheapest car available, selling for half theprice of the next cheapest car. For the price of $1000 a brand new Nano could be bought or,for example, a second-hand 1993 Land Rover.

The Nano is now produced in Sanand in Gujarat, in a factory which has the capacity to
produce 250 000 cars a year. Tata Motors employs 2200 workers, including car designers, tomake the Nano at the factory. With cars becoming more sophisticated, and themanufacturing process becoming more complex, the production process at the Sanand factory, and other car factories in India, is becoming more automated. Robots are nowundertaking a number of functions that before were undertaken by humans.
The car was intended initially for the home market. It was hoped that millions could be sold in India. The firm also planned to export the car to Latin America, South-East Asia and Africa.Although selling the car at such a low price made car ownership more affordable for more people, there were still many millions of people who would like a car, but did not have the income to buy one.
The sales of the Nano have not yet met the hoped-for level. In 2014, only 19 000 Nanos were sold. A year later sales rose, but only to 24 200. The cost of producing the Nano was higher in 2016 than its selling price which was then $1500. The disappointing sales and loss being made, led some people to suggest that Tata Motors should devote fewer of its resources to Nano cars and more to other cars. Others point out that Tata Motors could produce more types of other cars and save costs by closing a number of its factories, as most are working with spare capacity.
From this source material answer:
a) Identify an example of the factor of production labour used in producing the Nano.
b) Calculate the average number of Nano cars produced per worker in 2015.
Hint: Production per worker=Total production of cars/total number of workers
c) Explain what was a possible opportunity cost of buying a new Nano car in 2008.
d) Identify two examples of the economic problem.
e) Analyze, using a production possibility curve, Tata’s output of cars in 2015.
f) Discuss whether a car is a capital or a consumer good.
g) Discuss whether the quality of workers used in producing Tata cars is likely to increase in the future.

Answer 1

a) Labor is a factor of production used in producing the Nano. b) In 2015, an average of approximately 11 Nano cars were produced per worker. c) The opportunity cost of buying a new Nano car in 2008 was the foregone opportunity to buy a different car.

Step-by-step explanation:

a) An example of the factor of production labor used in producing the Nano is the 2200 workers, including car designers, employed by Tata Motors at the Sanand factory to make the Nano.

b) To calculate the average number of Nano cars produced per worker in 2015, we divide the total production of cars (24,200) by the total number of workers (2200). This gives us an average of approximately 11 Nano cars produced per worker in 2015.

c) The possible opportunity cost of buying a new Nano car in 2008 was the foregone opportunity to purchase a different car, such as a second-hand 1993 Land Rover.

d) Two examples of the economic problem are the disappointing sales of the Nano, which led to suggestions of devoting fewer resources to Nano cars, and the production cost of the Nano being higher than its selling price in 2016.

e) Using a production possibility curve, Tata's output of cars in 2015 would depend on various factors such as the available resources, technology, and production capacity. Without specific data, it is not possible to analyze the exact output on the production possibility curve.

f) A car is considered both a capital good and a consumer good. It is a capital good because it is used in the production process, such as transporting goods or services. It is also a consumer good because individuals use cars for personal transportation and convenience.

g) The quality of workers used in producing Tata cars is likely to increase in the future as advancements in technology and automation continue to improve the manufacturing process. These advancements can lead to better training and specialization of workers, resulting in higher-quality output.