Economics starts from one fact: resources are scarce, so every choice gives something up. This unit turns that into the production possibilities curve, shows why countries gain by specializing and trading, and builds the supply-and-demand model you will use for the rest of the course.
Most resources are scarce: there aren't enough to satisfy every want. So individuals and societies must make choices, and every choice has a cost.
The PPC shows the combinations of two goods an economy can make with its resources fully used. Points on it are efficient, inside are inefficient, outside are unattainable. Its shape reflects constant or increasing opportunity cost, and growth shifts it outward.
Absolute advantage: producing more with the same resources. Comparative advantage: producing at a lower opportunity cost. Specializing by comparative advantage and trading at terms between the two opportunity costs lets both sides consume beyond their own PPCs.
The law of demand: price and quantity demanded move in opposite directions, so the demand curve slopes down. A price change moves along the curve; other factors (income, tastes, prices of related goods, expectations, number of buyers) shift it.
The law of supply: price and quantity supplied move together, so the supply curve slopes up. Own price moves along it; input prices, technology, taxes and subsidies, expectations, number of sellers and related-good prices shift it.
Equilibrium is where quantity demanded equals quantity supplied. Above it there's a surplus and the price falls; below it a shortage and the price rises. Shifts in demand or supply create a new equilibrium price and quantity.