1.1
,Resource: Something used to produce something
- Limited and wanted
Land: Resources from nature
Labor: The effort and productivity of a pool of workers
Capital: Capital refers to the physical capital (machinery, equipment) and human capital (skills,
education)
Entrepreneurship: The technical means for the production of goods and services
Market Economy
- Quantity produced and consumed, for all goods, is dependent on decentralized choices
made by firms and households
- Relies on the protection of private property rights
- Factors of production are privately owned
Command Economy
- Quantity produced and consumed, for all goods, is decided by the government
- There is no private ownership
- Factors of production are publicly owned (owned by government)
Mixed Economy
- No economies are purely free-market or command
- Nations that show some characteristics of free-market economies and some
characteristics of command economies are called mixed economies
,1.2: Scarcity
,Sequence 1.2: Scarcity
Sequence 1.2 Assessment date: Thursday - Aug 21, 2025
Sequence 1.2 learning objective:
- Understanding what scarcity and opportunity cost are, and knowing how they are
connected.
Sequence 1.1 Essential Questions:
- Economics has been described as the “study of mankind in the ordinary business of life.”
How can we see the ordinary business of life as a constant question of scarcity?
- How does PPC inform our understanding of scarcity?
Scarcity:
- Humans have limited resources but unlimited wants.
- As a result, we are often forced to make tradeoffs. A tradeoff is when you give up
something to get something else.
- Economics is a study of scarcity and choice
- A scarce resource is not available in sufficient quantities to satisfy all of the ways in
which society wants to use it
Opportunity cost
- Choosing to do one thing means choosing not to do something else. In economics, we
try to calculate the cost of the forgone choices. These costs are opportunity costs (OC).
- OC is the value of the next best alternative that is forgone when an activity is pursued. It
is the real cost of an item. It is what you must give up in order to gain it.
OC Formulas:
1. OC = Loss/Gain
Output (measuring goods produced)
2. OC of Good X = (units of Y)/(units of x) = # of Y
Input (measuring time/resources)
3. OC of Good X = (time to make X)/(time to make Y) = # of Y
Aug 19, 2025
What is the PPF?
- The production possibility frontier (PPF) is a curve on a graph that illustrates the possible
quantities of two products that can be produced in an economy if both products depend
on the same finite resource for their manufacture.
The PPF and Opportunity Costs:
, - To make more of Good Y, you need to give up making some of Good X.
- To make more of Good X, you need to give up making some of Good Y.
Calculating Opportunity Cost on a Linear PPF:
B →C:
- Lose 30 Cars (60-30 on Y acis)
- Gain 20 Trucks (40-20 on X axis)
- OC of 1 Truck = 30/20 = 1.5 Cars
C →B:
- Lose 20 Trucks (40-20 on X axis)
- Gain 30 Cars (60-30 on Y axis)
- OC of 1 Car = 20/30 = ⅔ trucks
Constant vs. Increasing Opportunity Cost:
- The graph on the left shows bowed out PPF showing increasing opportunity cost.
- This means for every extra unit of Good B you want to produce, you need to
give up even more of Good A than you did for the last unit of Good B.
Efficient vs. Inefficient vs. Impossible Points:
,- Any point inside the PPF is a possible but inefficient combination (D)
- Any point on the PPF is a possible and efficient combination (A, B, and C). These points
are allocatively efficient and are at full employment.
- Any point outside the PPf is an impossible combination (F)
- Economic growth is shown on the PPF with an outward or rightward shift of the PPF
- Point N was an impossible combination of goods A and B before there was economic
growth.
- Economic growth can be caused by a number of factors, including increased resources,
better education, better technology, a larger labor force, etc.
,1.3: Comparative Advantage and Trade
, Sequence 1.3: Comparative Advantage and Trade
Sequence 1.3 Learning Outcome:
- Examining the key concepts and practices related to comparative advantage and
specialization
Sequence 1.3 Essential Questions:
- Why is it that even large, resource-rich countries engage in trade, if they are better at
producing goods than other countries?
- How does opportunity cost influence what countries and firms produce?
Specialization and Trade
- In a market economy, individuals or countries engage in trade. They provide goods and
services to others, and receive goods and services in return.
- Gains from trade come from specialization. Each party specializes in a task, good or
service production.
Absolute Advantage
- A party has an absolute advantage in a good service if they can produce more of it in the
same amount of time.
Comparative advantage
- A party has a comparative advantage in a good or service if they have the lowest
opportunity cost.
Imports and Exports
- Exports are goods a country sells to another country
- Imports are goods a country buys from another country
Why is trade beneficial?
- Trade allows countries to specialize and maximize production.
- Trade allows a country to consume beyond its PPC.
,Resource: Something used to produce something
- Limited and wanted
Land: Resources from nature
Labor: The effort and productivity of a pool of workers
Capital: Capital refers to the physical capital (machinery, equipment) and human capital (skills,
education)
Entrepreneurship: The technical means for the production of goods and services
Market Economy
- Quantity produced and consumed, for all goods, is dependent on decentralized choices
made by firms and households
- Relies on the protection of private property rights
- Factors of production are privately owned
Command Economy
- Quantity produced and consumed, for all goods, is decided by the government
- There is no private ownership
- Factors of production are publicly owned (owned by government)
Mixed Economy
- No economies are purely free-market or command
- Nations that show some characteristics of free-market economies and some
characteristics of command economies are called mixed economies
,1.2: Scarcity
,Sequence 1.2: Scarcity
Sequence 1.2 Assessment date: Thursday - Aug 21, 2025
Sequence 1.2 learning objective:
- Understanding what scarcity and opportunity cost are, and knowing how they are
connected.
Sequence 1.1 Essential Questions:
- Economics has been described as the “study of mankind in the ordinary business of life.”
How can we see the ordinary business of life as a constant question of scarcity?
- How does PPC inform our understanding of scarcity?
Scarcity:
- Humans have limited resources but unlimited wants.
- As a result, we are often forced to make tradeoffs. A tradeoff is when you give up
something to get something else.
- Economics is a study of scarcity and choice
- A scarce resource is not available in sufficient quantities to satisfy all of the ways in
which society wants to use it
Opportunity cost
- Choosing to do one thing means choosing not to do something else. In economics, we
try to calculate the cost of the forgone choices. These costs are opportunity costs (OC).
- OC is the value of the next best alternative that is forgone when an activity is pursued. It
is the real cost of an item. It is what you must give up in order to gain it.
OC Formulas:
1. OC = Loss/Gain
Output (measuring goods produced)
2. OC of Good X = (units of Y)/(units of x) = # of Y
Input (measuring time/resources)
3. OC of Good X = (time to make X)/(time to make Y) = # of Y
Aug 19, 2025
What is the PPF?
- The production possibility frontier (PPF) is a curve on a graph that illustrates the possible
quantities of two products that can be produced in an economy if both products depend
on the same finite resource for their manufacture.
The PPF and Opportunity Costs:
, - To make more of Good Y, you need to give up making some of Good X.
- To make more of Good X, you need to give up making some of Good Y.
Calculating Opportunity Cost on a Linear PPF:
B →C:
- Lose 30 Cars (60-30 on Y acis)
- Gain 20 Trucks (40-20 on X axis)
- OC of 1 Truck = 30/20 = 1.5 Cars
C →B:
- Lose 20 Trucks (40-20 on X axis)
- Gain 30 Cars (60-30 on Y axis)
- OC of 1 Car = 20/30 = ⅔ trucks
Constant vs. Increasing Opportunity Cost:
- The graph on the left shows bowed out PPF showing increasing opportunity cost.
- This means for every extra unit of Good B you want to produce, you need to
give up even more of Good A than you did for the last unit of Good B.
Efficient vs. Inefficient vs. Impossible Points:
,- Any point inside the PPF is a possible but inefficient combination (D)
- Any point on the PPF is a possible and efficient combination (A, B, and C). These points
are allocatively efficient and are at full employment.
- Any point outside the PPf is an impossible combination (F)
- Economic growth is shown on the PPF with an outward or rightward shift of the PPF
- Point N was an impossible combination of goods A and B before there was economic
growth.
- Economic growth can be caused by a number of factors, including increased resources,
better education, better technology, a larger labor force, etc.
,1.3: Comparative Advantage and Trade
, Sequence 1.3: Comparative Advantage and Trade
Sequence 1.3 Learning Outcome:
- Examining the key concepts and practices related to comparative advantage and
specialization
Sequence 1.3 Essential Questions:
- Why is it that even large, resource-rich countries engage in trade, if they are better at
producing goods than other countries?
- How does opportunity cost influence what countries and firms produce?
Specialization and Trade
- In a market economy, individuals or countries engage in trade. They provide goods and
services to others, and receive goods and services in return.
- Gains from trade come from specialization. Each party specializes in a task, good or
service production.
Absolute Advantage
- A party has an absolute advantage in a good service if they can produce more of it in the
same amount of time.
Comparative advantage
- A party has a comparative advantage in a good or service if they have the lowest
opportunity cost.
Imports and Exports
- Exports are goods a country sells to another country
- Imports are goods a country buys from another country
Why is trade beneficial?
- Trade allows countries to specialize and maximize production.
- Trade allows a country to consume beyond its PPC.
