Indonesia's output is influenced by its factors of production. A production possibility curve diagram can be used to show this relationship between resources and output. Indonesia does have extensive fishing waters but does not actually catch many fish. Most of its fishing firms are small and they compete against much larger foreign firms. These larger foreign firms have been attracted into Indonesia's waters because of increasing demand for fish. The price elasticity of demand for different types of fish has changed in the last few years.

Mark scheme

Marking points from the official mark scheme (May/June 2017). The mark or mark type is shown in brackets.

1. [1] (a) Labour
2. [1] (a) entrepreneur/enterprise
3. [1] (b) opportunity cost
4. [1] (b) scarcity/economic problem/unlimited wants and limited resources
5. [1] (b) choice
6. [1] (b) efficiency/full employment
7. [1] (b) specialisation
8. [1] (b) economic growth/the difference between actual and potential economic growth
9. [1] (b) The curve shows that if more of one type of product is produced, less of another product can be made
10. [1] (b) The curve shows that there is a limit to the amount that can be produced with existing resources/maximum output of two products
11. [1] (b) The curve shows that more than one production point cannot be selected
12. [1] (b) Any point on the curve is efficient/any point inside the curve is inefficient
13. [1] (b) The curve shows the maximum amount of a product that can be produced if all resources are devoted to one good
14. [1] (b) Economic growth is shown by a shift to the right of the curve/actual growth is shown by a movement towards the curve and potential growth by a shift to the right
15. [1] (c) More substitutes may be available for the product
16. [1] (c) due to more firms/more competition/more innovation/improved versions
17. [1] (c) which means people are more willing to switch to and from the product
18. [1] (c) The product may be seen to be more of a luxury
19. [1] (c) and less of a necessity
20. [1] (c) Demand becomes more price sensitive the higher the price
21. [1] (c) as the product becomes less affordable
22. [1] (c) The product may become less habit forming
23. [1] (c) addictive products have price inelastic demand
24. [1] (c) It may become easier to postpone purchasing the product
25. [1] (c) so a rise in price may result in more consumers delaying its purchase
26. [1] (c) The product may take up a higher proportion of income
27. [1] (c) change in price would become more significant
28. [1] (c) Demand will become more price sensitive as the price of complements rises
29. [1] (c) as the two products combined become less affordable
30. [1] (d) May provide a personal service
31. [1] (d) operate in a niche market
32. [1] (d) may be more in touch with consumers
33. [1] (d) may be more adaptable/flexible in response to changes in consumer demand
34. [1] (d) May be subsidised by the government
35. [1] (d) which would reduce costs of production
36. [1] (d) allowing small firms to charge lower prices
37. [1] (d) May be operating in an industry where economies of scale are not significant
38. [1] (d) or there are diseconomies of scale
39. [1] (d) raising average cost
40. [1] (d) example (max 2 for EoS/DoS)
41. [1] (d) May be able to take advantage of external economies of scale
42. [1] (d) reducing average cost
43. [1] (d) example (max 2 for external EoS)
44. [1] (d) Large firms may benefit from economies of scale
45. [1] (d) enjoy lower average costs
46. [1] (d) example (max 2 for EoS)
47. [1] (d) Large firms may take over small firms
48. [1] (d) may drive small firms out of business by charging lower prices
49. [1] (d) Large firms may have more market power
50. [1] (d) use barriers to entry
51. [1] (d) drive firms out of the industry by e.g. using predatory pricing
52. [1] (d) Large firms may be better known
53. [1] (d) have brand loyalty
54. [1] (d) Large firms may have more finance
55. [1] (d) which may enable them to purchase more efficient capital/machinery/technology
56. [1] (d) spend more on advertising