1.3 opportunity costs

Question 1

what is opportunity cost

Answer 1

the benefit lost of the next best alternative when making a choice

there is an opportunity cost for all decisions made by economic agents

Question 2

what causes the PPC to shift

Answer 2

change in any factors of production

Question 3

what is meant by a trade off

Answer 3

when you choose one thing which causes you to have to give up, or sacrifice, another

Question 4

what can the PPC show

Answer 4

concepts of scarcity
choice and opportunity cost
productive efficiency

Question 5

what does the production possibility curve show

Answer 5

different combinations of output for two products
e.g good x and good y

as the output of good x increases that of good y decreases and vice versa

the ppc illustrates the problem of choosing how to use scare resources when producing goods and services

there is an opportunity cost in deciding what combinations of good x and good y to produce

Question 6

what causes the PPC to shift outwards

Answer 6

economic growth caused by an increase in factors of production available in an economy will cause the PPC to shift outwards to the right.

this will result in an increase in the productive capacity of the economy from PPC to PPC1
greater output can be produced

Question 7

what is the basic economic problem

Answer 7

infinite wants but finite/scarce resources

Question 8

what can the PPC be used to show

Answer 8

concept of scarcity, choice and opportunity cost and productive efficiency