(1) Fundamentals of Economics

Total Video Time: 167 minutes


This is the first course module for Principles of Macroeconomics Online. I like to begin each module by giving a short introduction of what you’re going to be learning and how it ties into the course as a whole. If you can figure out how each module fits into the overall course, and understand how those connections work, you’ll have an easier time with the material.

This module sets the stage for what we’re going to be doing in this course. We start by understanding that economics is a study of human behavior and it’s not always easy to answer some important questions we may have like: what’s the fastest way to get out of a recession? How do we decrease unemployment? What can government do to increase technological development and advancement? We’ll look a bit at economic models: our simplified versions of markets or economies that help us understand what is going on. We’ll talk about the difference between positive economics (what is) and normative economics (what should be). We’ll address a few common mistakes that students often make when learning economics for the first time — especially students that have difficulty graphing. Finally, we’ll look at five major economic principles that we’ll see repeatedly throughout this course. It’s important to remember these principles as we get into the material — most of what we are doing is using models to prove how these principles hold, or to develop sub-themes on these principles.

This format for these modules is a combination of text, videos, and links to online sources.

Note: I had been playing these videos back and didn’t notice any problems until after I finished the 6th one, when I let it play out near the end. I realized that the longer the video plays out, the more the audio and video are not in synch — the audio plays a bit before the video portion, and by the end of 10 minutes it’s a few seconds apart. Once I realized that, I fixed my settings in the screen capture software and this does not happen in any more videos. I apologize if it makes some of these initial videos a bit harder to watch at the end. But I’ve spent too much time on these videos to spend even more time rerecording them just to try to make them perfect. I’m a perfectionist and I told myself at the beginning of this project that I would not rerecord videos multiple times just to try to make them perfect. My lectures in class aren’t perfect either, so just consider this one more attempt at recreating the in-class lecture experience.


Finally, note that the last video in this blog post is about economic systems and the choices every system has to make. This material is NOT in the Asarta/Butters videos, and is fair game for the first exam, so you should definitely watch it and pay attention.

Video 1.1: What is Economics? (15 min)

This video explains what economics is and is not.


Video 1.2: Economics as a Social Science (12 min)

This video explains how economists go about answering questions, and explains what we can and cannot do.

If you want to look more closely at the gas price temperature map, you can go here and click on the Gas Price Maps link in the center of the top bar.


Video 1.3a: Economic Models, part 1 (6 min)

This video explains how economists go about answering questions by using an economic model. Much of the different economic concepts we will discuss in this course can be shown with simple economic models; in more advanced economics courses, we make our models more realistic and, as a result, more complicated.

In the middle of that video, for some unknown reason my tablet pen stopped working so I had to cut the video short. The next video picks up right where this one left off.

Video 1.3b: Economic Models, part 2 (7 min)


Video 1.4: Correlation vs. Causation (10 min)

This video explains the difference between correlation between variables (which can happen for a variety of reasons), and causation between variables. 


Video 1.5: Positive vs. Normative Economics (8 min)

This video explains a crucial distinction: positive economics and normative economics. Positive economics concerns the facts — what is the effect on the market of a particular event or government policy? Normative economics involves making a judgment based on those facts.


Video 1.6: Common Mistakes (8 min)

This video details some common mistakes students make in this course, so that you will hopefully not make them.


Video 1.7: Five Major Economics Principles (15 min)

This video gives a preview of the major principles that we’ll examine in much more detail throughout the semester. You may even want to come back to this video later in the semester, so that you don’t lose sight of the big picture while bogged down in more detailed analysis.


Video 1.8: Opportunity Cost (12 min)

This video explains one of the most fundamental concepts in economics: opportunity cost. Every time you do something, you’re choosing not to do something else, and that’s the opportunity cost of what you chose to do.


Video 1.9: Comparative Advantage (10 min)

The principle of Comparative Advantage is simple: if we all focus on what we’re relatively better at, we’ll all have more of everything.


Video 1.10: PPF Basics (11 min)

This video takes you through a simple example showing how to construct a PPF.


Video 1.11: PPF Concepts, part 1 (14 min)

This video and the next explains some of the important economic concepts that can be illustrated simply with a PPF.


Video 1.12: PPF Concepts, part 2 (13 min)

Note: there’s a small mistake in this video. At about the 6:00 mark, I do an example where corn acres becomes twice as productive. This should mean that the OC of 1C goes from 2W to 1W, while the OC of 1W goes from 1/2C to 1C. The OC of corn falls (because we became more productive at corn), and the OC of wheat rises. While I do say that, I initially write on the screen that the OC of 1W used to be 2C — that’s not correct so ignore that. 


Video 1.13: PPF Applications (10 min)

This video shows you how you can use the PPF to consider possible changes in the economy.


Video 1.14: Economic Systems (15 min)

This video explains the basic questions every economic system must ask and answer.

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