Define an economic good. Define resources. Define opportunity costs.
These are basic concepts and terms that an economics student needs to know. Learning about the Production Possibility Frontier or PPF is an awesome introduction to the study of economics because it introduces something called rationality.
What is a rational individual and how does he think? Okay, imagine that everything in the world is free. You can get anything you want without having to pay a single cent! Would you get a Ferrari? Heck, I’ll get myself 2! Or even 3! Am I being crazy? Am I being irrational? Why the hell would I need so many cars or houses?? Economically, I am not crazy and I am rational! I am maximizing my satisfaction or what we like to call utility!
Now imagine that you are given a billion dollars instead. Would you want to get your 2 or 3 luxury cars? You might, but you may want to use some of that money to buy a house or yacht or buy some investments. What are you doing? You are still maximizing your utility given a certain level of income!
Imagine that there is no such thing as money in the world and you need to use something else to exchange or better yet produce a car or a house or anything for that fact. How would you arrange these resources to do so?
Studying the PPF answers these questions. At the end of the video, you should be able to: