Basic Economic Concepts

This course is a part of AP®︎ Microeconomics, a 11-course Topic series from Khan Academy.

In any economy, the existence of limited resources along with unlimited wants results in the need to make choices. In this unit, we introduce concepts of opportunity costs and trade-offs, and illustrate these concepts by using the production possibilities curve. We then consider of how different types of economies determine which goods and services to produce, how to produce them, and to whom to distribute them. This unit also covers why and how specialization and exchange increase the total output of goods and services, with a discussion of absolute and comparative advantage. Finally, we touch on the importance of property rights, the role of incentives in the functioning of free markets, and the principle of marginal analysis.

This course contains 3 segments:

Introduction to economics

This tutorial (that only has one video) is an overview of what economics is. In particular it will tell you the difference between microeconomics (the subject you're in right now) and macroeconomics. Really good first watch to give you some context on the world of economics.

Production possibilities frontier

This tutorial goes back to the basics. You are a hunter-gatherer with only so much time to hunt or gather. How do you allocate your time and energy to maximize your happiness? This is what we try to understand through our study of the production possibilities frontier and opportunity cost.

Comparative advantage and gains from trade

Should you try to produce everything yourself or only what you are best at and trade for everything else? What if you're better than your trading partners at everything? This tutorial focuses on comparative advantage, specialization and gains from trade with a microeconomic lens.