Basic Economic Concepts Overview — AP Macroeconomics
1. Unit at a Glance
This unit builds incrementally from the most basic problem of economics—scarcity—up to a working model of how entire markets function. We start with core definitions, build visual models of choice, explore how specialization and trade create value, and end with the core supply and demand model you will use throughout the rest of the course.
Every concept builds on the previous one: understanding opportunity cost is required to master comparative advantage, and understanding supply and demand separately is required to analyze market equilibrium. All concepts here will be referenced repeatedly in later units on inflation, unemployment, and macroeconomic policy.
Common Pitfalls
Why: Absolute advantage depends on total output, while comparative advantage depends on opportunity cost, which is what drives mutually beneficial trade.
Why: Movements along the curve are only caused by changes in the good's own price; shifts are caused by non-price determinants.
Why: Opportunity cost includes both explicit out-of-pocket costs and implicit costs like forgone time or wages.