Section outline

  • Foundational Concepts

    To grasp the principles of economics, students must recognize that the scarcity of resources means individuals and societies are constantly faced with choices. Rational decision-making occurs “on the margin,” with people weighing the additional costs and benefits of each choice. The fundamental economic concepts introduced in this unit serve as the groundwork for more advanced studies of consumer and producer behavior that will be explored later in the course.

    Developing Course Skills

    •    1.A
    •    1.C
    •    1.D
    •    2.C
    •    4.A
    This unit is designed to give students a solid grasp of core economic ideas, necessary for applying these concepts in more challenging subsequent units. As many students are new to the discipline of economics, thinking like an economist—such as analyzing constraints, trade-offs, and making marginal decisions—can feel unfamiliar. Introducing simulations and real-life examples at an early stage helps students start developing these skills. For instance, participating in an activity where students consume successive units of a good and record the utility received from each one (refer to the sample activities for Unit 1 on p. 33) enables them to better comprehend marginal analysis and diminishing marginal utility. By directly engaging with these concepts, students are more likely to describe and apply them confidently as the course progresses.

    Preparing for the AP Exam

    Analyzing quantitative data and performing calculations are common challenges for students on the AP Exam, especially within consumer theory. While students may understand the concept of consumer optimization, applying it in numerical problems can be difficult. To address this, it is essential to first strengthen students’ conceptual understanding, then provide ample practice with numerical problems. Emphasize the importance of showing all steps when performing calculations throughout the course.
    Additionally, this unit introduces graphical models—an essential skill tested in the AP Exam’s free-response section. Begin modeling how to set up and label graphs correctly, and offer students regular opportunities to practice graph construction and to interpret information presented visually.

    • 1.1 Scarcity Assignment

      MKT-1.A Define resources and the cause(s) of their scarcity.

    • 1.2 Resource Allocation and Economic Systems Assignment

      MKT-1.B Define how resource allocation is influenced by the economic system adopted by society.

    • 1.3 Production Possibilities Curve Assignment

      MKT-1.C
      a. Define (using graphs as appropriate) the production possibilities curve (PPC) and related terms.
      b. Explain (using graphs as appropriate) how the production possibilities curve (PPC) illustrates opportunity costs, trade-offs, inefficiency, efficiency, and economic growth or contraction under various conditions.
      c. Calculate (using data from PPCs or tables as appropriate) opportunity cost.

    • 1.4 Comparative Advantage and Trade Assignment

      MKT-2.A
      a. Define absolute advantage and comparative advantage.
      b. Determine (using data from PPCs or tables as appropriate) absolute and comparative advantage.

      MKT-2.B
      a. Explain (using data from PPCs or tables as appropriate) how specialization according to comparative advantage with appropriate terms of trade can lead to gains from trade.
      b. Calculate (using data from PPCs or tables as appropriate) mutually beneficial terms of trade.

    • 1.5 Cost-Benefit Analysis Assignment

      CBA-1.A
      a. Define opportunity cost.
      b. Explain the opportunity costs associated with choices.
      c. Calculate the opportunity costs associated with choices.

      CBA-1.B
      a. Explain a decision by comparing total benefits and total costs (using a table or a graph when appropriate).
      b. Calculate total benefits and total costs (using a table or graph where appropriate).

    • 1.6 Marginal Analysis and Consumer Choice Assignment

      CBA-2.A
      a. Define the key assumptions of consumer choice theory.
      b. Explain (using a table or graph as appropriate) how a rational consumer’s decision making involves the use of marginal benefits and marginal costs.
      c. Calculate (using a table or a graph when appropriate) how a rational consumer’s decision making involves the use of marginal benefits and marginal costs.

      CBA-2.B
      a. Define marginal analysis and related terms.
      b. Explain a decision using marginal analysis (using a table or a graph when appropriate).