A-LevelEconomicsBasic economic ideas and resource allocation9708/21 · May/June 2019 · Q220 Marks

Explain, with the help of diagrams, how (i) constant and (ii) increasing opportunity costs determine the shape of an economy's production possibility curve.

(a)Explain, with the help of diagrams, how (i) constant and (ii) increasing opportunity costs determine the shape of an economy's production possibility curve.[8]
(b)Discuss what the most significant issues of transition are that a country will face as it moves from a planned economy to a mixed economy.[12]

This question uses a diagram from the original paper, which isn't shown here. Open the full paper from the past papers archive to see it.

Mark scheme

Marking points from the official mark scheme (May/June 2019). The mark or mark type is shown in brackets.

[1] (a) Knowledge and Understanding: Explanation of opportunity.
[1] (a) Knowledge and Understanding: Explanation of production possibility curve.
[3] (a) Application: Explanation of constant opportunity costs, involving a movement from one point on the PPC to another with an equal sacrifice of resources; this will be shown by a straight line PPC.
[3] (a) Application: Explanation of increasing opportunity costs, involving a movement from one point on the PPC to another where ever increasing amounts of one good will need to be sacrificed to produce more of the other; this will be shown by a curved PPC.
[4] (b) Analysis: Problems of Inflation (e.g., state-controlled vs. market-determined prices leading to instability).
[4] (b) Analysis: Problems of Output (e.g., inefficient firms may not survive in a mixed economy, leading to a fall in output).
[4] (b) Analysis: Problems of Employment/Unemployment (e.g., private sector firms aiming for profit maximisation may lead to layoffs and increased unemployment).
[4] (b) Analysis: Problems of Industrial unrest (e.g., greater likelihood of industrial unrest in a mixed economy).
[4] (b) Analysis: Problems of International trade (e.g., new international trading relationships needed).
[4] (b) Analysis: Problems of Welfare (e.g., reduction in welfare provision compared to a planned economy).
[4] (b) Analysis: Problems of Specialised support markets and services (e.g., banking and legal services may take time to establish). (Allow up to 4 marks for each issue analysed, AN: up to 8 marks).
[3] (b) Evaluation: For exercising some judgement on the extent to which the issues of transition will make a change from a planned economy to a mixed economy extremely difficult for a country to achieve.
[1] (b) Evaluation: For a conclusion.