Micro Unit 1:

Unit 1 Organizing Principles

This unit starts with the concepts of scarcity, trade-offs, opportunity cost, and the need to make choices. These concepts are demonstrated on the Production Possibilities Curve (PPC). The production possibilities curve, or frontier, shows the different combinations of two products that can be produced at full employment of resources. You need to be able to draw, shift, and analyze this graph. Make sure that you understand the difference between constant and increasing opportunity costs and under what conditions the curve shifts. The hardest concept in this unit is called comparative advantage. You must be able to calculate a country's per unit opportunity cost and determine if they should trade with another country. The last thing you will learn is the difference between command economies and the free market and the circular flow model.