ACC 818 — Module 1: Economic Issues and Concepts
Foundations of microeconomics. Establishes the core problem economics addresses (scarcity), the analytical tool used to think about trade-offs (the production possibility boundary), and the broad systems through which societies allocate resources (market vs. centrally planned).
Learning Outcomes
- Recognize the four main characteristics of market economies
- Explain scarcity, choice, and opportunity cost
- Illustrate the production possibilities boundary
- Discuss the four key economic problems
- Distinguish economic systems and the role of government in a mixed economy
- Distinguish positive vs. normative advice
Topic 1: Scarcity, Choice, Opportunity Cost
- Scarcity — limited resources vs. unlimited wants. The foundational economic problem.
- Opportunity cost — value of the next best alternative given up when a choice is made. Applies at both societal and individual level.
- Marginal analysis — decisions made by weighing marginal cost vs. marginal benefit of one more unit (e.g. one more video game vs. a case of Coke).
Topic 2: Production Possibility Boundary (PPB)
- A curve showing combinations of goods/services an economy can produce efficiently with available resources.
- Movement along the curve = trade-off (more of one means less of another).
- The PPB shifts outward via technological progress or trade.
- Comparative advantage — produce what you have the lower opportunity cost in, then trade. Both parties can consume outside their individual PPB.
Topic 3: Economic Systems
- Free-market economy — consumers’ wants drive what producers create; the market self-organizes resource allocation.
- Centrally planned — historical context: USSR, China, Eastern Europe pre-1990s. Most have transitioned to market mechanisms.
- Modern economies are mixed: market dynamics with government intervention.
Key Terms
Scarcity · Opportunity Cost · Marginal Analysis · PPB · Comparative Advantage · Market Economy · Mixed Economy · Positive vs. Normative