Part A1. a. i. At a point inside the production possibility curve the opportunity cost is zero. This is due to the fact that at this point the resources are underperforming. The resources can be used in a more effective way without affecting the other resources as in the case where machines can be used in a more effective way without affecting the production of food highlighting that there is no opportunity cost and the resources are underperforming. ii. Factors which helps to improve the efficiency of the resources and helps to produce more goods or service using the same resources results in the a shift in the production possibility curve.
For example, development of technology shifts the possibility curve outwards highlighting change in efficiency. Producing goods at the production possibility curve shows the most efficient point and any point other than it calls for the economy to move towards efficiency. Any point inside the curve represent inefficiency and wastage of resources as the economy is under producing. Any point outside shows growth in efficiency to produce more using the same resources.
The concept of production possibility was developed due “to the concept of scarcity”. (PPF, 2010) The unlimited wants depleted the natural resources forcing the economy to manufacture products which will provide them with the maximum advantage and help to achieve efficiency. This model thereby highlights an important fact that production has a limit in every economy and the economy needs to decide what it wants to produce and in what quantity. b. i. This is a positive statement because it brings forward a statement which can be true or false.
Since, the statement highlights the positive mood and is concerned about what in which doesn’t require any approval or disapproval it is a positive statement. ii. This is a positive statement because the value judgement is not desirable. It brings forward a statement which can be true or false. Since, the statement highlights the positive mood and is concerned about what in which doesn’t require any approval or disapproval it is a positive statement. The statement shows a fact which can be truthful or false which requires validation and shows a positive light.
iii. This is a normative statement because the value of judgement is desirable. It shows that interest rates in labour government are higher than in coalition bringing forward a judgement that coalition is better. This statement requires approval or disapproval which makes it a normative statement. 2. a. Ms Apple marrying her cook diminishes the GDP of that particular economy because while calculating GDP household work is not included. These measures are not included in the Gross Domestic Product because These transactions “doesn’t lead to the production of new goods and services “.
(Deng, 2009)These transaction like intermediate goods don’t have a market valueThese goods “are not produced locally rather imported”. (Deng, 2009)If transactions like intermediate goods are included “it will result in counting the value of goods twice as it is counted when the goods are finally produced and intermediate goods would mead double counting”. (Deng, 2009)