Cambridge International as and a level Economics Ebook

Production (1000 tonnes)
2008
2012
Soybean oil seed
57,800
82,000
Corn
51,000
77,000
Table 1.4 
Biofuels in Brazil
Source:
US Department of Agriculture.
Read the information below and then answer the questions that follow.
1
Assume that Brazilian farmers can produce both 
soya beans and corn. Sketch a production possibility 
curve to show the choices they might make.
2
On your diagram:
a
show how a reduction in soybean production 
from 70% to 30% aff ects the production of corn
b
use the concept of opportunity cost to explain 
the trade-off .
3 a
Use the data above to draw production possibility 
curves for 2008 and 2012.
b
Suggest some reasons that might explain the 
diff erence between these two production 
possibility curves.
Capital consumption: 
the capital required to replace that 
which is worn out.
Investment: 
the creation of capital goods.
KEY TERMS
30
Cambridge International AS Level Economics

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Hard choices for developing economies
Developing economies are characterised by low standards 
of living. If they are to grow then they need to increase 
their capital stock. Like all economies they need to divert 
resources from current consumption to investment. Some 
resources must be devoted to consumption, however, to 
keep their expanding populations alive. Th
e problem they 
face is sometimes referred to as ‘jam today or more jam 
tomorrow’.
Th
e minimum amount of resources needed is sometimes 
referred to as the subsistence level of consumption. Th
e 
diffi
culty is that in the poorest developing economies almost 
all their production possibilities need to be devoted to 
subsistence.
In 
Figure 1.11
, 
0
–
a
represents the capital consumption 
in a