Grade 10 Microeconomics Past Paper PDF

GRADE 10 MICROECONOMICS PAPER II TOPIC 2 Production Possibility Curve Description of the production possibility curves (reflecting on efficiencies), and explaining how they reconcile choice and scarcity. 3 weeks to cover content...

GRADE 10 MICROECONOMICS PAPER II TOPIC 2 Production Possibility Curve Description of the production possibility curves (reflecting on efficiencies), and explaining how they reconcile choice and scarcity. 3 weeks to cover content Week Week Learners should cover the following: the position of the maximising satisfaction effects of inefficiencies production possibility from limited resources by curve: means of indifference curves: - determined by internal factors - consumption - production - determined by external factors Learners must first give an description of the following words in their notebook: Vocabulary List 1 The Position of the Production Possibility Curve Describe the Production Possibility Curve (PPC) The Production Possibility Curve shows the alternative combination of any two goods or services that can be attained if all the available resources are fully and efficiently employed (used). The purpose of the PPC It shows all possible combinations of goods that can be produced with a given set of resources. The shape of the PPC  The production possibility curve is the boundary between attainable and unattainable output combinations.  The production possibility curve is concave to the origin (0). 2 The different combinations Possibilities Walka’s Cellphones A 0 600 B 175 575 C 450 275 D 500 0 The Curve  The production of Walka’s is measured on the horizontal axis.  The production of Cellphones is measured on the vertical axis.  The different attainable combinations in the table are represented by points A, B, C and D.  When we move from point A to point B, from Point B to point C, from C to point D, etc. the production of Walka’s increases while the production of Cellphones decreases.  If the business produces 600 Cellphones then 0 Walka’s can be produced.  To produce the first 175 Walka’s there is a sacrifice of 25 Cellphones (move from 600 to 575) (Point B).  To produce the 450 Walka’s there is a further sacrifice of 300 Cellphones (move from 575 to 275) (Point C).  If the business produces 500 Walka’s then 0 Cellphones can be produced.  This curve shows that more Walka’s can only be produced by sacrificing more Cellphones or producing less Cellphones. 3 Unattainable position  Production at point H is impossible with the given resources.  It is outside the Production Possibility Curve.  To produce at H the business needs more resources. Inefficient position  Production at point G is regarded as inefficient because it is inside the Production Possibility Curve.  If production occurs at point G then there is a waste of resources.  Production can be increased up to any point on the Production Possibility Curve. The Possibility Frontier Curve illustrates the following:  Choice  Sacrifice  Opportunity cost Choice  Choice is illustrated by the need to choose among the available combinations along the curve. Scarcity  Scarcity is illustrated by point H because all the points to the right of the curve are unattainable. Opportunity Cost  This is illustrated by the negative slope of the curve.  More of one good can only be obtained by sacrificing some of the other good.  Opportunity cost is the trade-off between two goods.  The opportunity cost of increasing the output of Walka’s from 175 units to 450 units is the decreasing output of Cell phones by 300 units (575 -275).  The opportunity cost of decreasing Cell phones from 575 units to 275 units is the increasing output of 300 Walka’s. Movement of the Production of the Possibility Curve  The quantity of the available resources can increase, or production techniques can improve.  If this happen the PPC will shift outwards.  If the PPC shift outward, then it illustrates economic growth. 4 1. Increase in the quantity of available factors of production and an improvement in the production of Walka’s.  An increase in the quantity of available factors of production and an improvement in the production of Walka’s make it possible to produce more Walka’s.  It is possible to produce more Walka’s with the available resources.  The PPC for Walka’s shift outward from point AM to point AN. 2. Increase in the quantity of available factors of production and an improvement in the production of Cellphones.  An increase in the quantity of available factors of production and an improvement in the production of Cellphones make it possible to produce more Cellphones.  It is possible to produce more Cellphones with the available resources.  The PPC for Cellphones shift outward from curve LO to curve LP. 5  3. Increase in the quantity of available factors of production and an improvement in the production to produce more Cell phones and Walka’s.  An increase in the quantity of available factors of production and an improvement in the production to make it possible to produce more Cell phones and Walka’s.  The PPC shift outward from curve AB to curve CD. Internal factors which determine a shift in the PPC  Improved production techniques Factories shift from a labour-intensive production process to a capital-intensive production process. (Replace manual labour with machines) PPC will shift to the right.  New and improved technology This leads to more efficient production methods which will increase output. PPC will shift to the right.  The improvement of skills of workers through training and motivation. Increased training and motivation will improve productivity and shift the PPC to the right. External factors which determined a shift in the PPC  The quality of factors of production  Efficient transport services  Efficient communication systems  Health care which leads to healthier workers 6 Effects of Inefficiencies in the market Describe the term Market inefficiency Market inefficiency refers to a market that functions inefficiently if it does not produce the maximum output with the minimum input, or if the income generated in the market is not fairly distributed among the participants as a whole. The effects of inefficiencies in the market Uneven distribution of income  Many people live in absolute poverty.  The government then steps in and pays welfare grants and pensions to help poor people.  These payments create a larger market and more consumers.  More firms can therefore enjoy economies of scale and the PPC therefore moves to the right. Monopolies  If there is not enough competition in the market, monopolies may develop.  A monopoly exists when there is only one supplier of a product.  The monopolies can dictate the prices of certain products or groups of goods and services in the marketplace.  This may exploit consumers, particularly if monopolies develop around the supply of essential goods and services such as basic foodstuffs.  The government steps in to prevent monopolies by making laws to forbid monopolies.  If established firms cannot form monopolies, it is easier for new competitors to enter the market.  More competition creates better efficiency. More efficient firms can therefore produce more with the same resources. This moves the PPC to the right. Inflation and extreme fluctuations in business cycles  High rates of inflation cause unstable economic conditions.  The Reserve Bank tries to control inflation to stabilise the economy.  Wild swings between troughs and peaks in the business cycle also cause instability, which undermines confidence in the economy.  The state can spend or save to counteract the ordinary business cycle and to limit its impact.  If producers know that demand will remain fairly stable and that inflation will not get out of hand, they can plan better. A stable economy moves the PPC to the right, because producers can produce more with the same cash resources as the cost of borrowing remains stable. Pollution and exhausted natural resources  Many businesses do not care what they do to make profit and they will pollute the environment and waste natural resources if that brings more profit.  The state puts in place and enforces laws to control the use of natural resources.  These laws can make production more expensive for producers.  More expensive production processes moves the PPC to the left; producers can produce less with the same resources as production is more expensive. 7