Explain how a production possibility curve can be used to demonstrate scarcity, choice and
opportunity cost. [8]
For knowledge and understanding of a production possibility curve (Up to 2 marks) e.g. a curve that
shows the maximum level of output that an economy can achieve (1) given its current level of
resources / technology (1) For application that demonstrates a clear understanding of what is meant by
scarcity (1) and explains how this would be shown on a PPC (1) For application that demonstrates a clear
understanding of what is meant by choice (1) and explains how this would be shown on a PPC (1) For
application that demonstrates a clear understanding of what is meant by opportunity cost (1) and
explains how this would be shown on a PPC (1)
Candidates are likely to provide a diagram although this is not essential if it is clear that the basis of a
PPC is understood. If a diagram is used to demonstrate knowledge and understanding without an
accompanying explanation then this is acceptable BUT it must be correctly labelled as 2 different goods
(i.e., not X and Y or P and Q) and the curve itself must touch both axes for both marks. Scarcity is shown
through the PPC as a production frontier and not a position outside the curve. Choice must be shown as
a movement along the curve. Opportunity cost is shown as the next best alternative foregone as one
product is sacrificed to produce the alternative. A diagram may be used to demonstrate scarcity, choice
and opportunity cost but must be accompanied by appropriate explanation to gain marks. However, a
diagram is not essential. The application for scarcity, choice and opportunity cost must be clearly
separated.
Explain with the help of a production possibility curve diagram(s) how a decision to re-allocate
resources in an economy to produce more capital goods and fewer consumer goods would affect
consumers in both the short run and the long run. [8]
For knowledge and understanding of production possibility curves showing an accurate diagram labelled
consumer goods and capital goods or equivalent (up to 2 marks). For application showing a movement
along the curve in the short run (1 mark) meaning fewer consumer goods and services available for
consumption (1 mark) leading to less choice / higher prices / lower living standards in the short run (1
mark). For application showing an outward shift of the curve in the long run (1 mark) perhaps leading to
more consumer goods and services due to an expansion of capacity in the economy (1 mark) and an
increase in living standards etc (1 mark
The PPC diagram should show consumer goods and capital goods on the axes. These terms do not have
to be used, but it must be clear that the candidate understands the distinction between the two. The
significance of the reallocation should be clearly understood. In the short run the consumer will have
less goods and services available to consume. In the long run there may be a shift outward in the PPC as
more capital goods are produced and the economy’s capacity expands. An accurate diagram must
include accurate labels with the PPC touching both axes
With the help of a production possibility curve diagram(s) compare growth in the productive capacity
of an economy and growth that results from a reduction in the quantity of unused resources in an
economy. Explain one reason that might cause each to occur.
For knowledge and understanding of a PPC shown through an accurate diagram i.e., a concave or
straight-line curve that meets both axes (1mark) with appropriate and correctly labelled axes (1 mark).
For application, identification of a reason why there may be a growth in the productive capacity of an
economy (1 mark) clearly explained (1 mark) using a fully accurate diagram to correctly illustrate a
growth in the productive capacity of an economy shown by a shift outward in the PPC (1 mark) (3 marks
maximum) For application, identification of a reason why there might be a reduction in the quantity of
unused resources in an economy (1 mark) clearly explained (1 mark) using a fully accurate diagram to
correctly illustrate a reduction in the quantity of unused resources in an economy shown by a
movement from within the curve to a point nearer the curve or onto the curve. (1 mark) (3 marks
maximum
Knowledge and understanding marks may only be given for an accurate diagram and not a written
explanation. Axes must be labelled correctly for the second KU mark i.e., not P and Q and not X and Y
although good X and good Y are acceptable. A growth in the productive capacity of an economy is
represented by a shift outward in the PPC. It can be caused by an improvement of technology or an
increase in productive resources. A reduction in the quantity of unused resources in an economy is
represented by a movement from within the PPC towards the curve. It can be caused for example by
increased aggregate demand or by an improvement in the aggregate supply that makes the labour
market more efficient. This may be illustrated on one diagram or more.
Use a production possibility curve diagram(s) to distinguish between the growth of an economy and a
reduction in the number of unused resources in an economy and explain one reason that might cause
each to occur. [8]
• For knowledge and understanding of a production possibility curve with appropriate and correctly
labelled axes. (2 marks) • For application using a production possibility curve diagram that shows the
growth of an economy illustrated through a shift outward of the curve with a valid example (1 mark) and
explanation (1 mark) of what might cause this to happen (Up to 3 marks) • For application using a
production possibility curve diagram that shows a reduction in the number of unused resources
illustrated through a movement from within the curve to a point on or nearer to the curve together (1
mark) with a valid example (1 mark) and explanation (1 mark) of what might cause this to happen (Up to
3 marks)
Show the difference between a movement along, and a shift in, a production possibility curve. Explain
what might cause each to occur. Use diagrams to support your answer. [8]
For Knowledge and Understanding and Application of a movement along a PPC: For an accurately
labelled diagram (1 mark) that shows a movement along a PPC curve representing a change in the
composition of output (1 mark). (Up to 2 marks) And explaining that this might be caused by
government direction in a centrally planned economy or through the operation of market forces in a
free market economy. (Up to 2 marks) 4 marks maximum For Knowledge and Understanding and
Application of a shift in a PPC For an accurately labelled diagram that shows a shift in a PPC curve (1
mark) and that this means that more (or less) of both goods can be produced (1 mark) (Up to 2 marks)
And explaining that this could be caused by a change in the quantity and/or quality of resources or a
change in technology. (Up to 2 marks) 4 marks maximum
Candidates need to provide appropriate diagrams that show the difference between the two changes.
They then need to explain that a shift in the curve could be caused by a change in the factors available
to an economy. The movement along the curve represents a change in the composition of goods
produced. The decision to change this composition could be a result of market forces or through
government policy.
