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UNIT 1

M A C R O

Basic Economic Concepts

Module 1.1 Scarcity and Choice Module 1.6 Market Equilibrium, Disequilibrium,
Module 1.2 Opportunity Cost and the and Changes in Equilibrium
Production Possibilities
Curve
®
Module 1.3 Comparative Advantage and Gains AP Economics Skills
from Trade
Module 1.4 Demand 1. Principles and Models (1.A, 1.C)
Module 1.5 Supply 4. Graphing and Visuals (4.A, 4.C)

Economics: What’s individual choices make up the econ- gains from trade. Finally, we look at the
omy as a whole. In our global economy, basic supply and demand model, which
It All About? even the simplest decisions — say, what serves as the foundation for much of

to have for breakfast — shape, and are what we cover in later units. Because
Did you know that economics is about shaped by, the decisions of thousands of graphical models are central to the
far more than money? Consider your other people, from the farmer in Costa study of economics and therefore fea-
®
breakfast this morning. Did you take Rica who decided to grow bananas ture heavily on the AP Exam, they are
the time to assemble a balanced meal rather than beets, to the landowner in emphasized throughout this course.
of fruits, grains, and protein, or did you Iowa who decided to use their land as For further review, an appendix on the
grab a quick snack before heading out a dairy farm instead of a housing devel- use of graphs is available at the end of
the door? Did you eat cereal purchased opment. The economy as a whole is the this book.
in bulk days before, or did you buy sum of all of the economy-wide inter-
a breakfast sandwich at an eatery on actions of individual decision makers.
the way to school? Were you in such a Understanding the
hurry that you skipped breakfast alto- effects of these inter-
gether, or did you arrive at school early actions allows us
to take advantage of their breakfast to understand, and
offerings? Each of these options comes even to change, the state of the
with its own costs in terms of time, economy.
money, and resources. Similar consid- Put simply: Microeconomics helps
erations attend decisions related to us understand many important eco-
sports, food, the environment, families, nomic interactions by looking at
health, tourism, and many elements individual choice and the markets for
of your daily life. Economics can help individual goods — for example, the
us understand the necessary trade-offs market for bananas. Macroeconomics is
and make better choices. The study of our window into economy-wide inter-
individual decisions such as these is the actions that shows us how they lead to
focus of microeconomics . the ups and downs in the economy as
Economics can also help us under- a whole.
stand the health of the overall economy. In this Unit, we discuss the impli-
The study of the overall economy is cations of scarcity to the study of
called macroeconomics and is the focus of economics. We present the production
this course. To understand how an econ- possibilities curve model and use it to pp1/Shutterstock
omy works, we need to understand how understand opportunity cost and the

Macro • Unit 1 Basic Economic Concepts 3
Copyright © Bedford, Freeman & Worth Publishers.
Strictly for use with its products. For review purposes only. Not for redistribution.

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