Scarcity and Choice: opportunity cost

Explain the factors causing a PPC/F to shift

A shift is caused when any factor other than the price on the x or y axis changes. These will cause a shift left, inwards, or right, outwards.

Explain what is meant by a 'trade-off' !

A trade-off is isolating what the forgone alternative is in decision making. It is the exchange of one thing for another. In order to see waht your trade-off is, you must pick your two top choices. The trade-off can change depending on the choice you make and what you view as the next best alternative.

Evaluate the usefulness of the concept of opportunity cost !

Whenever a choice is made, something is given up. Individuals, governments, and society all experience scarcity. The concept of opportunity cost gives all economic agents the knowledge and rules to approach the many forms of decision-making in an as efficient way as possible. Efficiency in an economy is a benefactor of economic growth, which is the goal of most countries.

Explain the concept of opportunity cost

Opportunity cost is the value of the next best alternative forgone in decision making. For example, let us assume I need to pick three A Levels. If I were to choose economics as my third, then I would be forgoing geography my the other subject I was considering. Opportunity cost involves calculating the cost of the trade-off.

Explain what is meant by a production possibility curve/frontier (PPC/F)d

PPC/PPFs show the maximum combination of good and services that can be produced in a set point in time with the given available resources.

Explain how a PPC/F can be used to illustrate scarcity, choice, opportunity cost and productive efficiency !

[draw curve on pg 17, figure one] The PPC/F shows the different combinations of economic goods which an economy is able to produce if all resources in the economy are fully and efficiently employed. If resourses are not fully/efficiently employed, it will appear as a point within the curve, in this case point F. This can be seen on the curve itself. This illustrates scarcity, there is not an unlimited amount of production possibilities because there is a scarce amount of resources. [For this, use figure one pg 17: on axis; manufactured, non manufactured goods] The curve itself displays opportunity cost. [explain, increase of 5 manufactured goods, opportunity cost 10 non-manufactured goods forgone] Since there is an opportunity cost, decisions and choices on production involving what amount of resources to forgone must be employed.