Model answer to score 1/10 for Economics

Explain two ways in which an economy might move from a point within its Production Possibility Curve (PPC) to a point on it.

The first way is to increase the quality and quantity of resources. This includes increasing the amount of labour, improving the skills and technical know-how of the labour force to make them more efficient, increasing the amount of land, or increasing the size of the capital stock. The increase in the abovementioned point will result in more resources to tap on to produce more goods. With the increase of resources, the PPC will shift accordingly depending whether the resource is biased towards a particular good hence skewing the PPC to one direction, or beneficial in producing more of both goods hence making the PPC undergo an outward parallel shift. Both changes to the PPC indicate that there is an increase in the potential to produce more goods. The increase in resources will allow a point within the PPC to move onto a point on it as the potential to produce the goods are increased.

The second way is to increase the technological state of the producers. Technological improvement represents new and better methods of producing goods. For instance, technological improvements allow a unit of a certain raw material to be processed with less wastage, hence producing more units of the same output. Or the production time can be reduced with faster and more efficient machinery. If there is technological improvement in the production for a particular good, the PPC will skew towards that direction. Similarly, if the technology can enhance the production of both goods, the entire PPC will shift outwards. The potential of producing a particular good, or even both goods, are increased to its optimum. Hence, a point within the PPC will be able to move onto the PPC.

By Paul Yap, for education.