Individual choice: The core of economics

Scarce resources, choices, and opportunity costs

The concept of opportunity cost is critical to understanding individual choice, because you always have to give up something in order to get another thing. In other words, the real cost of purchasing good A is equal to the value of the next best alternative (good B) that you give up in order to purchase good A. For example, what would you rather be doing instead of studying this course? The task that you have forgone in order to study economics is the opportunity cost of studying economics.

Activities

OpenStax College: "Principles of Microeconomics, Section 1.1: What Economics Is and Why It’s Important"

• Read "The Economic Problem” to learn about the basic problem of scarcity and the study of economics.

Principles of Microeconomics: "Chapter 1, Section 1: Defining Economics"

• Read this section to encounter the three fundamental questions that economists face and to learn about opportunity costs. Attempt the problems presented in the "Try It” section, and note how eventually every decision boils down to choosing between competing alternatives.

OpenStax College: "Principles of Microeconomics, Section 2.1: How Individuals Make Choices Based on Their Budget Constraint"

• Read this section to understand opportunity costs.

"Economic Problem: Scarce Resources"

• Watch this video.

Khan Academy: "Opportunity Cost"

• Watch this lecture about opportunity costs.

Khan Academy: "Increasing Opportunity Cost"

• Watch this video lecture about increasing opportunity costs.

TED Talks: "Bjorn Lomborg Sets Global Priorities"

• This is an optional lecture and not a requirement of the course. In this unit, you learned that scarce resources underlie every economic decision that is made in society. You also learned that because of these scarce resources, there are trade-offs between alternate choices. In this guest lecture, Bjorn Lomborg advances this idea by discussing some pressing issues that need to be addressed. This talk should help you to identify the economic way of thinking, which will be elaborated upon in the next subunit.

Getting to know economics

As you read the materials in this subunit, pay particular attention to what is meant by the "economic way of thinking." You will want to get used to using this lens or mode of thinking as a way to understand the work that economists do and why economic principles are so widely applicable across a number of fields. This subunit also examines the key differences between microeconomics and macroeconomics and between normative economics and positive economics.

Activities

Principles of Microeconomics: "Chapter 1, Section 2: The Field of Economics"

• Read this section, and take a moment to read through the stated learning outcomes for this chapter, which you can find at the beginning of the section. These outcomes should be your goals as you read through the chapter. Attempt the "Try It" problems at the end of the section before checking the answers.

Principles of Microeconomics: "Chapter 1, Sections 3: The Economists' Tool Kit"

• Read this section and its learning outcomes, which should be your goals as you read through the chapter. Attempt the "Try It" problems at the end of the section before checking the answers.

Review of data representation and mathematics for economics

Economics communicates information in a variety of formats: text, tables, graphs, mathematical expressions, and more. The following resources explain the form and function of a number of these formats, as well as their use within the context of economics.

Completing this section is optional. However, this course will expect you to have the following competencies, so be sure to review this subunit if you are not confident about your skill level:

• Read data from a table and transform it into a graph.
• Understand the coordinate plane (x, y) and its use for constructing graphs.
• Calculate the slope of a linear graph and be able to explain what the numeric value of a slope means and the significance of negative versus positive slopes.
• Understand the linear equation of a line, y=mx+b.
• Explain what an intercept is and how to determine it.

Activities

CK-12 Statistics: "Types of Data Representation"

• Please open and explore this collection of five resources on data representation. Devote time particularly to the "Graphic Displays of Data" resource, which contains a number of videos and example graphs. The "Analyzing Data" reading contains a very helpful chart listing the pros and cons of using each type of graph. Conclude by attempting the "Types of Data Representation Practice."

Khan Academy's "Graph from Slope-Intercept Equation"

• Watch this video, which provides a review of the basics of linear algebra you will need for this course, namely the ability to understand and graph straight lines, their slope, and their x- and y-intercepts. If you know this material well, don't dwell. Continue working your way through Unit 1.