HCI 2023 Econs Suggested Essay Answers (students) updated

Suggested Answers to A Level 2023 H2 Economics (ESSAYS) by Hwa Chong Institution Economics Unit Question 1 The amount of goods and services that can be produced in an economy is insufficient to satisfy the wants of its population. This leads to the economic consequences of scarcity and choice. (a) Explain how a production possibility curve can be used to show the concepts of underutilisation of economic resources and the opportunity cost. [10] (b) Discuss whether it is possible to increase the total production of goods and services in an economy without resulting in environmental damage or other unintended consequences. [15] ------------------------------------------------------------------------------------------------------------------------------------------ Suggested Answer (a) Introduction The Production Possibility Curve shows all the different maximum attainable combinations of goods and services that can be produced in an economy, when all available resources are fully and efficiently used at a given state of technology. When available resources are not utilized or underutilized (unemployed or underemployed?), production takes place at a point within the curve. Also, since resources are scarce, production of one good must imply trading-off the production of another good in that economy. Hence, all production of goods and services has an opportunity cost. Body R1: Explain how the PPC can show underutilisation of economic resources When the economy is producing at a point within the PPC, the economy is not fully utilising its resources as any point on the PPC frontier shows the combination of the maximum amount of consumer and capital goods that can be produced with efficient use of all available resources. If the economy is producing at potential and fully utilising all its resources, the economy should be anywhere on the PPC frontier. In diagram 1 below at point A, the economy is producing inside the PPC and thus is not fully utilising its resources. This is because firms and the government can decide to produce more consumer and capital goods by utilising greater use of existing resources (i.e. reducing unemployment of resources) and by utilising its resources more efficiently (i.e. reducing underemployment of resources). This will result in increased output of both capital and consumer goods as illustrated in the diagram at point C. Point C (along the curve) shows the combination of the maximum amount of consumer goods and capital goods that can be produced with efficient use of all available resources. Hence points on the PPC illustrate efficient and full employment of all available resources and points within illustrate possible underutilisation of resources.

Suggested Answers to A Level 2023 H2 Economics (ESSAYS) by Hwa Chong Institution Economics Unit R2: Explain how the PPC can show opportunity cost The standard PPC is usually concave to the origin, due to the Law of In