Dear learner,

Scarcity, the fundamental economic problem, arises because resources are limited while human wants are virtually infinite, leading to the necessity of making choices about how to allocate these scarce resources. This requirement to choose results in opportunity costs, which represent the value of the next best alternative that must be forgone when a decision is made. The concept of opportunity cost is crucial for understanding trade-offs in economics and is graphically illustrated by the Production Possibilities Frontier (PPF). The PPF demonstrates the various combinations of two goods that an economy can produce with its limited resources, and its concave shape reflects the law of increasing opportunity costs, indicating that producing more of one good requires larger sacrifices in terms of the other good due to the inefficiency of resources when shifted from one use to another. Economic growth, shown by an outward shift of the PPF, occurs when there are increases in resource quantity and quality or through technological advancements. This growth can be symmetric, affecting all sectors equally, or asymmetric, impacting only specific sectors. Asymmetric growth, for instance, results in a shift along one axis of the PPF, representing increased productivity in one sector without affecting the other, thereby demonstrating how targeted improvements can drive overall economic expansion.