Week 1 — The Macro Perspective: Scarcity, the PPF, Circular Flow & Economic Models

Welcome to your Week 1 Start Here page.

Why this matters

A nursing student weighing an extra shift against a night of study and a small-business owner choosing between new equipment and more stock are both paying for one choice with another.

In plain language

Economics is the study of how people and whole societies choose what to do with limited time, money, and resources. This week you zoom out from one shopper or one store to the whole economy, which is the job of macroeconomics (the study of the economy as a whole: total output, prices, jobs, and growth). You will learn that every choice gives something up, and the thing you give up has a name, the opportunity cost (the value of the best option you passed over). You will draw your first economic picture, the production possibilities frontier (a diagram of the most an economy can make of two goods). You will also trace how money circles between households and businesses, and learn to tell a statement of fact from a statement of values.

• This week: macro versus micro, opportunity cost, the frontier, the circular flow, and positive versus normative.
• How they connect: this is the foundation for every later week.
• Where we're going next: Week 2, Measuring Output: Gross Domestic Product.

Focus

What does every choice cost, and how do economists picture a whole economy's trade-offs?

By the end of this module, you should be able to:

• [ ] price a choice by its opportunity cost
• [ ] read a frontier's endpoints, slope, and points
• [ ] trace the circular flow
• [ ] label a statement positive or normative

To-do

Plan your week

1. Read Chapter 1 (about 35 minutes), then the lecture and slides.
2. Work the lecture tutorial (60–90 minutes) and the practice set (about 20 minutes).
3. Do the Model Workshop (about 90 minutes), the discussion, and the assignment.
4. Take the quiz.

This week's checkpoint: test whether a combination lies on, inside, or outside a frontier, and say what an inside point means.

You've got this

Take it in order, and ask your instructor if a step snags.

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