The government has £900m available and can choose only one proposal.
| Proposal | Use of £900m | Forecast effect |
|---|---|---|
| A | Improve cargo-handling links between ports and factories | Productive capacity 0.4% higher after six years |
| B | Reduce taxes on business profits | Productive capacity 0.3% higher after three years |
Which evaluation is best?
Since both proposals use £900m, they have equal effects on productive capacity and equal opportunity costs.
Proposal A has the larger forecast effect on productive capacity, but choosing it forgoes Proposal B's earlier forecast gain.
Proposal A has the larger forecast effect on productive capacity, but its opportunity cost is the £900m spent on Proposal A.
Proposal B has the earlier forecast effect on productive capacity, so current output will be 0.3% higher after three years.
121 exam-style questions on OCR GCSE Economics 3.7 Supply side policies, covering 3.7.1 What are supply side policies and 3.7.2 Costs and benefits of supply side policies. Each one has a worked solution and a mark scheme showing where the marks go.