Basic Economic Concepts

Every decision in economics is a trade-off, and this unit makes that claim precise. Scarcity forces choice, and every choice has an opportunity cost: the next-best option you gave up. The Production Possibilities Curve is not a drawing exercise, it is a model of that trade-off, showing you the real cost of having more of one thing. Comparative advantage proves that even when one party is better at everything, specialization and trade still create gains, because relative cost, not absolute ability, determines who should produce what. Marginal analysis gives you the decision rule that runs through every unit after this: keep doing something as long as the additional benefit exceeds the additional cost.

8–14% of exam