Microeconomics studies choices by individuals and firms under scarcity. This unit sets up the tools: how societies allocate resources, the production possibilities curve, comparative advantage, and the habit that runs through the whole course, thinking at the margin.
Trade-offs exist because resources (land, labor, capital) are too scarce to meet all wants. Some factors, such as established knowledge, may not be scarce because they are non-rival: one person's use doesn't reduce another's.
Every society answers three questions: what to produce, how to produce it, and who gets it. Command, market and mixed economies answer them with different institutions and coordinating mechanisms.
The PPC shows the trade-offs of allocating resources. On it is efficient, inside is inefficient (idle resources), outside is unattainable. Its shape shows constant or increasing opportunity cost, and better factors or technology shift it out.
Absolute advantage is producing more with the same resources; comparative advantage is producing at lower opportunity cost. Specializing by comparative advantage, not absolute advantage, and trading at terms between the two opportunity costs lets both parties consume beyond their PPCs.
Rational agents count opportunity costs, explicit and implicit, as economic costs. Total benefit is utility for consumers and total revenue for firms. The optimal choice maximizes total net benefit (total benefit − total cost). Some decisions can be made at the margin; others need totals.
Consumers maximize total utility under a budget constraint. Marginal utility diminishes, and the best bundle equalizes marginal utility per dollar across goods. In general, do more of an activity while MB > MC and stop where MB = MC; sunk costs don't matter.