Explain the basic economic problem and show how a production possibility curve illustrates scarcity, choice and opportunity cost.
How to lay out the answer. Follow the frame, then write it in your own words.
1 · Open with definitions. Economics is the study of how scarce resources are used to satisfy unlimited wants. Define scarcity, choice and opportunity cost.
2 · State the three basic questions. What to produce, how to produce and for whom: every economy must answer them because of scarcity.
3 · Draw the PPC. [Diagram: bowed-out PPC, shirts on one axis and trousers on the other; points inside, on and outside the curve]
4 · Explain the points.
On the curve: full and efficient use of resources.
Inside: unemployment or waste.
Outside: unattainable with present resources and technology.
5 · Show opportunity cost with numbers. Use a short schedule to show the cost of each extra unit rising (e.g. 1, 1.5, 2, 2.5, 3 shirts per trouser).
6 · Explain shifts. Economic growth, better technology or more resources shift the PPC outwards; war or disaster shifts it inwards.
7 · Sri Lankan business link. An apparel factory choosing between two orders, or a tea estate choosing between tea and rubber, faces the same trade-off.
8 · Conclude. Scarcity makes choice unavoidable, and opportunity cost is the true cost of every economic decision.
Scoring tip: A neat, labelled PPC with three marked points earns more than a page of text.
