Introduction

This unit will introduce you to the study of economics. This will include a discussion of
the basic economic dilemma of scarcity and the concept of opportunity cost. We will
build our first economic model, the production possibilities frontier, and use margins
analysis to discuss it's use for determining opportunity cost and in analyzing
economic growth and trade. We will also discuss the significance of and the use of
models throughout the course.

Prior Knowledge

 A two variable graph

 Positively and negatively sloped curves

Vocabulary

 scarcity

 opportunity costs

 resources

 production possibilities frontier

 economic model

 marginal analysis

practical application
As you plan for college are you including all of the costs? Typically, people look only
at the explicit costs of college and ignore the implicit costs or the additional
opportunity costs of the forgone income that could have been earned during this
time. An understanding of opportunity cost will give you a clearer way to evaluate
decisions that you will make throughout your life.

Learning Objectives

 You will be able to explain the concept of scarcity and apply it to economic situations.

 You will categorize resources into the categories of natural resources, human
resources, capital resources and entrepreneurial ability.
 You will be able to draw a correctly labeled production possibility frontier and use the
model for analysis.

 You will understand the significance of marginal decision making in economic

analysis.

 You will understand that all economic models are simplifications based on a set of
assumptions.

Introduction
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Introduction
In this section, you will learn about why the economic choices made by people, firms,
and societies are the result of the economic concept of scarcity, a dilemma that is at
the root of all economic issues.  You will come to understand that all choices involve
opportunity cost, which is whatever is sacrificed whenever a choice is made.  You
also will learn that the resources used in the production of goods and services are
limited and are not exempt from the issue of scarcity.