TCEP

Question 1

Scarcity

Answer 1

Scarcity is the problem that arises because limited resources cannot fully satisfy unlimited human wants

Question 2

Opportunity cost

Answer 2

Opportunity cost is the net benefit that could have been derived from the next best alternative forgone as a result of a decision made

Question 3

Production Possibility Curve (PPC)

Answer 3

The Production Possibility Curve (PPC) shows the maximum attainable combinations of two goods that can be produced by an economy within a specified period of time with all its resources fully and efficiently employed, at a given state of technology.

Question 4

Note:

The concept of opportunity cost is illustrated by the DOWNWARD SLOPING nature of the PPC, where in order to produce more of one good, the economy must forgo the net benefit derived from the production of the other good

Answer 4

Note:

The PPC can also illustrate the concept of INCREASING opportunity cost. This means an increasing amount of one good has to be given up to produce additional units of another good. This is illustrated by the shape of the PPC that is CONCAVE TO THE ORIGIN.

Question 5

Note:

Increasing opportunity cost reflects that some resources are better suited to the production of certain goods rather than others.

THIS IS BECAUSE RESOURCES ARE NOT HOMOGENOUS (Perfect substitutes)