Unit 1A: The Economizing Problem, International Trade & Finance

What better way to begin a study of Macroeconomics then to take a look at the basics? In this unit we will look at the important ideas of scarcity and opportunity costs. This is the introduction on how to think like an economist. In economics we will have to examine all choices from a cost - benefit perspective, "What is there to gain? What has to be given up? And is the cost too high?" To get a good look at this we will examine two important concepts, comparative advantage and trade. We will understand how opportunity costs are important to understand why we trade and why people benefit from trade.

I have chosen to include parts of Unit 6 Open Economy: International Trade and Finance in Unit 1A since it relates directly to Comparative Advantage. We will revisit this topic in more depth at the end of the course in Unit 6.

Unit Topics

Topic Krugman OpenStax
1.1 Scarcity 2-4 1.1, 2.0, 2.1
1.2 Opportunity Cost and the Production Possibilities Curve (PPC) 4-5, 16-23 2.2
1.3 Comparative Advantage and Gains from Trade 24-31 2.2
6.1 Balance of Payments Accounts 406-416 9.0, 9.1, 9.2, 9.3
6.2 Exchange Rates 417-425 5.4, 15.0
6.3 The Foreign Exchange Market 417-425 15.1, 15.2

Topic 1.1: Scarcity

Required Course Content

Suggested Skill(s):

Principles and Models 1.A
Describe economic concepts, principles, or models.
1.1 Required Course Content


Slideshows are best if viewed in full screen.

Do You Think Like an Economist?

As an introduction to economics, test your thinking and get your mind ready for the economic way of thinking.

Handout: Do You Think Like an Economist?

Ten Principles of Economics

When it comes to thinking like an economist, these ten principles are the guiding ideas. The biggest change that will happen this semester is in how you will look at the world and how that view will make you a better decision maker. (Videos embedded in the PowerPoint below are not active. They can be viewed VIDEOS section below.)


Videos are best viewed full screen.

Mankiw's "10 Principles of Economics" Part 1

Although we are currently forgoing the use of Mankiw's textbook, his ideas on the basic principles of economics are still useful. He claims that there are 10 Basic Principles. This first segment focuses on How People Make Decisions.

Mankiw's "10 Principles of Economics" Part 2

Coninuing from the first segment, this second segment focuses on How People Interact.

Mankiw's "10 Principles of Economics" Part 3

Coninuing from the second segment, this third segment focuses on How the Economy Works as A Whole.

Economics Made Memorable: Trade-Offs and Opportunity Costs, part 1: Costs

This basic video introduces the concept of Opportunity Costs and illustrates, albeit, in a very mechanical way, that there are hidden costs to every decision beyond the obvious money costs.

Economics Made Memorable: Trade-Offs and Opportunity Costs, part 2: Benefits

The second part of this series demonstrates that benefits are sometimes difficult to determine thereby making it even more difficult to compare them to the costs.

1.1 Thinking Like An Economist

From the publisher, A NEW school year means NEW videos! I'm going to be making new videos covering every topic in your introductory college econ or AP econ course. This episode is about scarcity, guns and butter (trade-offs), the factors of production, and the difference between microeconomics and macroeconomics. What do you think?

Principles of Economics Translated, by the Standup Economist

Now that you spent 40 minutes viewing the 10 Principles of Economics, why not take 5 minutes to step back and laugh at them.

Topic 1.2: Opportunity Cost and the Production Possibilities Curve (PPC)

Required Course Content

Suggested Skill(s):

Principles and Models 4.A
Draw an accurately labeled graph or visual to represent an economic model or market.
1.2 Required Course Content

Online Textbook Resources

Unfortunately, due to the age of the textbook, the publisher has removed all online content associated with our textbook.While we will use the book as an important source, the links given therein are no loner functioning. As a result, I will look online for other sources related to the topics in our text. Likewise, I encourage you to let me know of any useful websites that you come across in your studies so that I may add them to the site and share with everyone.


Slideshows are best if viewed in full screen.

The 10 Principles of Economics

Circular Flow Model




Jacob Clifford's ACDC Economics

Among AP Econoics teachers, Jacob Clifford is the most discussed resource available. He has authored dozens of videos for Macroeconomics and Microeconomics. These videos are a great resource and supplement to the course material and can help prepare you for the exam, especially with regard to the FRQs. They are organized by topic within each Unit as created by the College Board. I suggest using them throughout the unit to help review or clarify concepts throughout. Many videos have practice questions at the end. To see the answers you will need to go over to YouTube to see them in the comments.

Video Link: Learner.org

Each episode is nearly 30 minutes and originally aired on PBS in the 1980s. This series investigates important economic concepts through historic events in American History. In the last 4-5 years, each episode has been updated with an additional, more current event that demonstrates the concept at hand.

Return to Mocha

This is a fun video from the 1980s (broken into three parts to fit on YouTube). This video illustrates the operations of the three basic economic systems: Command, Traditional, Market. On a deeper level, it also illustrates the concepts of absolute advantage and comparative advantage.

Copyright M. Caggia 2016