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H1/H2 Scarcity, Choice & Opportunity Costs Ace Responses

Scarcity, Choice & Opportunity Costs

H1/H2 Scarcity, Choice & Opportunity Costs Ace Responses

Scarcity, Choice & Opportunity Costs - Table of Contents
S/No Questions Question Type 1 : Essay Type Questions for Resource Allocation 1 Explain what is meant by the basic problem of scarcity [10] Question Type 2 : Opportunity Costs 1 You have just obtained your GCE A-Level results. You qualify to enter the University. If you study in the University for 4 years, the tuition fees will cost $40,000. Alternatively, instead of entering the University, you have the option to work as a data entry clerk where you will earn $1,000 per month. What is the economic cost of your University degree? [3] In Britain, the National Health Service (NHS) provides free healthcare to all. What is the opportunity cost of consumption of heathcare to society? Explain your answer. [3] Question Type 3 : Given a scenario and required to illustrate the impact Challenging Economics Essay ‘A’ Level

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on PPC [10 Examples]
(a) (b) (c) The Singapore government decides to decrease the average retirement age [2] An increase in unemployment in Singapore due to the poor economic outlook [2] The Singapore government increases subsidies to encourage firms to train their workers [2] There is a discovery of new resources within a country [2] -

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(d)

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H1/H2 Scarcity, Choice & Opportunity Costs Ace Responses
(e) (f) (g) (h) (i) (j) There is a war happening in a country [2] The government decides to raise the education level in a country [2] A natural disaster occurs in a country [2] Technological improvement in a country [2] Technological improvement in only Good X [2] Technological improvement in only Good Y [2] -

Pg. 6 Pg. 6 Pg. 7 Pg. 7 Pg. 8 Pg. 8

H1/H2 Scarcity, Choice & Opportunity Costs Ace Responses
Question Type 1: Essay Type Questions for Resource Allocation

Explain what is meant by the basic economic problem of scarcity? [10] Scarcity means ‘not enough’.The outcome of scarcity is not to be satisfied to the level we want to be. Scarcity arises because of the assumptions we make : Firsty, we assume that Man has unlimited wants. Man is greedy. If he has 10 houses, he would still want the 11th house. If he has 20 cars, he would still want another. If he has flown around the world 50 times, he would still want to fly again. Secondly, we assume that there are limited resources in the world. These are the factors of production of land, labor, capital and entrepreneurship. All countries have a finite amount of these. Consider our country, Singapore, where we have only have limited land, yet so many workers, only so many buildings and only so many entrepreneurs. Based on the above, it is clear that cannot produce all that we want. Singapore cannot produce a million bungalow houses, a million shopping centres and a million acres of rice fields! It will have to give up some goods to obtain more of another. This leads to the issue of scarcity. To illustrate scarcity: a man has only a certain amount of money to spend. If he buys more of chocolates, he knows that he has to buy less of sweets. A firm’s resources are limited. If it decides to produce product A, it will not be able to produce product B. The government, too, has limited funds: if it uses them to build a hospital, it will have to forego a polytechnic. Scarcity can be illustrated by using the Production Possibility Curve (PPC). The PPC shows combinations of 2 goods a country can produce using up all its limited resources. Assume that the 2 goods are guns and butter.

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Butter

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H1/H2 Scarcity, Choice & Opportunity Costs Ace Responses
Point X of the 2 goods is not attainable as the countries do not have the required resources to produce at that combination, hence showing scarcity. Combinations of...
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