Explain how capital goods contribute to production in a modern economy and how capital is rewarded.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2018). The mark or mark type is shown in brackets.

1. [4] For knowledge and understanding of the factor capital. Capital refers to the factor of production that includes all the human-made aids to production, e.g. tools, equipment, plant, machinery and factories. Capital is a factor of production that can be used in the production process. It can be combined with the other factors of production to produce goods and services which can be sold in the market. Note: Do not credit answers that refer to capital as money. (KU: up to 4 marks)
2. [4] For application showing how capital is rewarded in a modern economy through interest payments. (APP: up to 4 marks)
3. [4] For analysis of an outward shift of the production possibility curve in a mixed economy. A production possibility curve shows the different combinations of products that can be produced if an economy is working at full capacity. Over a period of time, it is possible for there to be economic growth resulting from the availability of more resources and/or the more productive use of existing resources. Decisions in relation to the quantity and the quality of resources in a mixed economy can be taken by either the public sector, i.e. the government, or the private sector, i.e. firms. Decisions taken by entrepreneurs could contribute to the outward shift of an economy's production possibility curve. (Up to 4 marks)
4. [4] An outward shift of the production possibility curve of a mixed economy could take place as a result of investment decisions taken by a government. (Up to 4 marks)
5. [8] (AN: up to 8 marks total)
6. [4] For evaluative comment on whether enterprise is crucial to the outward shift of a mixed economy's production possibility curve. (EV: up to 4 marks, reserve 1 mark for a conclusion)