Question

Explain how scarcity, choice and opportunity cost are related to each other using the production possibilities diagram

Answer 1

We can understand the above question , with the help of this graph -

a) From the above graph, we can conclude that the production of more machines is possible if the less of wheat is produced. Hence, we can say that the resources are to be withdrawn from the production of wheat for the greater production of machines.

b) If we are planning to produce more machines, the production of wheat to be sacrificed at the increasing rate.