Aqa A-Level Economics Paper 1 Study Guide Graded A+

What is a production possibility curve? {Ans: A production possibility curve (PPC) is a diagram which depicts the maximum combinations of two goods that can be produced by an economy, assuming all resources are fully employed and used efficiently. Any point on the production possibility curve, e.g. A, B or C, implies that all factors of production are fully employed. An economy operating at point D must therefore be operating inefficiently, with unused resources, e.g. unemployed labour or idle machines. Point E suggests economic growth.}What are normative economic statements? {Ans: Normative economic statements are subjective opinions or value judgements that cannot be tested against facts. These often concern views about what individuals, firms or governments should do, based upon people's ethical, moral or political standpoint. Some economists view such statements as being the concern of the field of politics rather than economics. However, much of economic policy rests on normative judgements about the 'right' levels of, for example, taxes, minimum wages or the amount of government intervention in markets.}What is the basic economic problem? {Ans: The basic economic problem is that of scarcity, i.e. that economic resources are limited relative to society's wants. This means that choices