The Trotter exam solutions.

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Explain the relationship between opportunity cost and the VOICE OF THE
basic economic questions. [12] (N2006/3/Qn1a ZIMSEC) PROFESSOR
Examiner’s Comment: Candidates are expected to explain Nota Bene
opportunity cost in detail. They should also explain the basic
This question requires a
economic questions of what, how & for whom to produce.
two paragraph
Each question should be clearly linked to OC.
introduction
Opportunity cost (OC) is defined as the value of the next
(i) introduce
best alternative forgone when satisfying a particular want.
opportunity
The root cause of opportunity cost is scarcity. Economists
cost
pointed out that scarcity is a situation whereby finite factor
inputs are insufficient to produce all goods and services
which consumers want. Therefore economic agents should
make choices. This means that all economic units such as
government agencies, individuals and firms have to rank
their preferences in order of importance. Thus, the most
pressing wants are placed at the top of the list so that they
can be satisfied first. The other wants are left unsatisfied- (ii) Introduce
they are forgone. This introduces the concept of opportunity the basic
cost. economic
questions
Now that we have discovered the fundamental economic
problem of scarcity, choice and opportunity cost we will see
how societies attempt to overcome it. Owing to scarcity, all
societies need a mechanism that addresses the basic
economic questions of what to produce, how to produce and
for whom to produce. Since these questions are technically
economic choices, their answers result in opportunity cost.
Nota Bene
O.C has great implications on the way in which societies
answer these questions. Thus with full confidence, An explanation of
economists propound that there is a strong link between O.C opportunity cost in
and the basic economic questions. detail is what I’m doing
in this paragraph.
To illustrate opportunity cost, let’s assume that Mr. Hwati
had the following scale of preferences. Mr. Hwati is faced
with a budget constraint and has $200 only in his pocket.
Preference1. Buying his wife, blessing ,a romantic gift for
$200.
Preference2. Going to a zoo with his family spending $200.
Suppose that Mr. Hwati chooses to buy his wife a romantic
gift. The opportunity cost of doing so is the leisure he forgoes
by not going to the zoo.

1|P ag e T in o ped z a b ho r ah . Si ya qe da um d la l o .We s in k b l ac k

Inspired by Senzere The Hunter(Tinofamba nevanofamba)

The Trotter exam solutions. This question was answered by Sir Hwati using the alimentary canal
technique. This technique was put forward by prof. T Hwati (The trotter). The alimentary canal can
digest any food so this technique can answer any essay question. For questions, views & comments or
lessons contact: Sir Hwati 0774998145 Or visit QIA MSU campus Harare today.
VOICE OF THE
The concept of opportunity cost can be illustrated using a PROFESSOR
production possibility curve [PPC]. The PPC is also known as
Nota Bene
the transformation curve. It is a graph which shows all
combinations of two goods a country can produce using up Still explaining
all its limited resources with maximum efficiency. The opportunity cost in
diagram below shows a PPC depicting how capital and detail here.
consumer goods can be produced in an economy.

Capital goods (Y)

Y2 B .C
.A
Y1 D

PPC

X1 X2 Consumer goods (X)

Please note that any movement along the PPC will entail a Nota Bene
choice of what to produce between consumer goods [X] and
capital goods [Y]. The making of this choice undoubtedly links Remember to link to the
to opportunity cost. For example , moving from point B to question here.
point D represents an increase in consumer goods from X1-X2
and a decrease in capital goods from Y2 –Y1. The decrease in
capital goods represents opportunity cost of increasing
consumer goods, revealing that there is a connection
between answering economic questions and OC.
Nota Bene
When answering what to produce, a choice can be made to
produce capital goods, consumer goods or intermediate Now I’m explaining the
goods and this relates to OC. I f the society chooses to basic economic
produce more capital goods, for example, this would expand question of what to
the economy’s productive base and hence increase the scope produce in detail,
for future economic growth. However, this would mean less linking it to opportunity
of consumer goods such as bread and butter will be cost
produced. On another hand, if production is concentrated on
Always remember to
consumer goods, an economy’s future growth prospects will
link to the question.
be dampened. This clearly links to opportunity cost in the
sense that in both choices something has to be forgone.

2|P ag e T in o ped z a b ho r ah . Si ya qe da um d la l o .We s in k b l ac k

Inspired by Senzere The Hunter(Tinofamba nevanofamba)

The Trotter exam solutions. This question was answered by Sir Hwati using the alimentary canal
technique. This technique was put forward by prof. T Hwati (The trotter). The alimentary canal can
digest any food so this technique can answer any essay question. For questions, views & comments or
lessons contact: Sir Hwati 0774998145 Or visit QIA MSU campus Harare today.
After answering what to produce, the question of VOICE OF THE
production extends to “How to produce” which also links to PROFESSOR
OC. In this case a choice can be made on the methods of
Nota Bene:
production. Production can be labor intensive or capital
intensive .Production is said to be labor intensive if it uses Now on how to
more humans than machines. Likewise a system is said to be produce
capital intensive if it uses more machinery relative to
humans. Answering the question of how to produce has
implications on the economy’s productive efficiency and
levels of unemployment. An economy is said to be
productively efficient if it produces at minimum costs.
Particularly in a planned economy if more capital intensive
methods are chosen, the central planners may deem it as a
sacrifice of jobs that could have been created if labor Always remember to
techniques were used. This unquestionably points out that link to the question.
the question of how to produce has a bearing on opportunity
cost.
It is put forward that the third economic question is for
whom to produce and this too incorporates OC. A decision is Nota Bene:
made on who consumes or gets to eat the National cake. The Now on For whom to
determination of who gets to consume will be reflected in produce
what is produced. This is a core question of allocative
efficiency and equity concerns. Allocative efficiency means
producing goods and services that are demanded by the
consumers. However, the question is should we make
luxurious goods for the rich before an adequate amount of
basic commodities for the poor is produced? A sacrifice will Always remember to
have to be made and hence this question of “for whom to link to the question.
produce” has an implication on opportunity cost.

Nota Bene:
To wrap up, the basic economic problem relates to the
problem of scarcity, choice and opportunity cost. Owing to Conclude. Just say what
this fundamental problem, all societies following any you said. If you have
economic system have to address the basic economic other insights, bring
questions of what to produce, how to produce and for whom them in brief.
to produce. Opportunity cost has great implications on these
questions. The answering of the basic economic questions
also bear upon OC. Asante Sana

3|P ag e T in o ped z a b ho r ah . Si ya qe da um d la l o .We s in k b l ac k

Inspired by Senzere The Hunter(Tinofamba nevanofamba)