Macroeconomics Unit 1:
Foundations of Economics
Economics: macro vs. micro; rational behavior; scarcity; resources; land; labor; capital;
entrepreneurship; utility; opportunity costs; the “economizing problem”; production
bilities curve/frontier (PPC/PPF); utility; durable goods; nondurable goods; service;
law of rising opportunity costs; full employment; full production; allocative efficiency;
productive efficiency; absolute advantage; comparative advantage; free trade; Da
Ricardo; economic questions for a system; capitalism/free enterprise/demand economy;
Adam Smith; laissez faire; the “invisible hand”; communism/command economy; Karl
Marx; bourgeoisie; proletariat, socialism/mixed economy; circular flow model;
zation; division of labor;
Topical Questions/Learning Objective/Skills
What is economics? Distinguish between micro
Describe the “economic way of thinking” and apply it to personal decisions: include the
concepts of rational behavior,
marginal analysis (marginal costs and marginal benefits),
and opportunity costs.
Define the economizing problem: explain the necessary relationship between scarcity,
choice, and opportunity costs.
Differentiate between full employment and full production;
explain productive efficiency
and allocative efficiency.
Draw and explain the PPC and explain the law of rising opportunity costs; use PPC to
explain real world allocation decisions. Be prepared to construct and analyze the PPC.
Explain absolute and comp
arative advantage; given production rates for two nations
identify absolute and comparative advantage and calculate the range of trade options
available to improve both nations utility.
List the questions an economic system must answer: identify the main f
eatures of pure
capitalism, command systems, mixed economies, and traditional systems.
Identify the major works and contributions of these economic thinkers: Adam Smith,
David Ricardo, Karl Marx.
Identify decision makers and major markets in the circular f
low model; distinguish
between product and resource markets.
Give examples of under allocation and over allocation of resources.
Read Chapter 1, ans
wer questions 1, 6, 7, 12
Due January 9
Read Chapter 2, answer questions
4, 5, 6, 8, 10, 11, 12, 15
Due January 11
Read Chapter 6,
101, answer question 5
Unit I V
Unit I TEST JANUARY 18