Practise defining a PPC as maximum attainable output combinations from current resources and technology and using it to explain scarcity, choice and productive efficiency.
Explain, with the aid of a production possibility curve (PPC) diagram, why scarcity makes choice inevitable for firms and how each choice has an opportunity cost.
Up to 2 marks for Knowledge and Understanding
For correct diagram:
- Vertical axis correctly labelled, e.g. Good A, agricultural goods/consumer goods, and horizontal axis correctly labelled, e.g. Good B, manufactured goods/capital goods (1 mark)
- PPC drawn as a curve or a straight line, showing trade-off between production of two goods
(1 mark)
Up to 6 marks for Application
Use of the production possibility curve to explain:
- scarcity
(up to 2 marks)
- choice (up to 2 marks)
- opportunity cost (up to 2 marks)