Yale ECON 1115
Introductory Microeconomics
Complete Study Guide
2026-2027 Edition
Markets - Scarcity - Choice - Firms - Prices - Policy
Independent study resource. Not affiliated with or endorsed by Yale University.
ECON 1115 Introductory Microeconomics - Independent Study Guide 1
, Contents
1 Scarcity, Choice, and Opportunity Cost
2 Demand, Supply, and Market Equilibrium
3 Elasticity and Responsiveness
4 Consumer Choice
5 Production and Costs
6 Perfect Competition
7 Monopoly and Market Power
8 Monopolistic Competition and Oligopoly
9 Game Theory and Strategic Choice
10 Externalities and Public Goods
11 Government Policy and Market Outcomes
12 Labor Markets and Income Distribution
13 International Trade and Market Allocation
14 Final Review and Exam Strategy
ECON 1115 Introductory Microeconomics - Independent Study Guide 2
, Chapter 1: Scarcity, Choice, and Opportunity Cost
Why economics starts with scarcity
Economics begins with a simple fact: resources are limited while wants and possible uses are many. Scarcity forces
people, businesses, and governments to make choices.
- Resources include time, labor, land, physical capital, and knowledge.
- Every choice uses resources that could have been used somewhere else.
- A good economic explanation focuses on the tradeoffs created by scarcity.
Opportunity cost
Opportunity cost is the value of the best alternative given up when a choice is made. It is not necessarily the money
paid. If you spend two hours studying instead of working, the opportunity cost includes the best alternative use of
those two hours.
- Think in terms of the best forgone alternative, not every forgone alternative.
- Opportunity cost can include time, income, enjoyment, or another valuable activity.
Marginal thinking
Many economic decisions are about one more unit: one more hour of study, one more worker, or one more item
produced. The key comparison is marginal benefit versus marginal cost.
- Choose an extra unit when marginal benefit is greater than marginal cost.
- Stop expanding an activity when marginal cost rises above marginal benefit.
Production possibility frontier
A production possibility frontier, or PPF, shows the maximum combinations of two goods that can be produced with
available resources and technology. Points on the frontier represent efficient production under the model.
- Inside the frontier usually indicates unused resources or inefficiency.
- Outside the frontier is unattainable with current resources and technology.
- A bowed-out PPF reflects increasing opportunity cost when resources are not equally suited to both goods.
Practice
1. A student can work for 20 dollars an hour or study. If the student chooses three hours of study, what is the obvious
monetary opportunity cost?
2. A factory can make either 10 bicycles or 50 helmets with the same resources. What is the opportunity cost of 10
bicycles?
3. Why does marginal analysis use changes rather than total values?
ECON 1115 Introductory Microeconomics - Independent Study Guide 3
Introductory Microeconomics
Complete Study Guide
2026-2027 Edition
Markets - Scarcity - Choice - Firms - Prices - Policy
Independent study resource. Not affiliated with or endorsed by Yale University.
ECON 1115 Introductory Microeconomics - Independent Study Guide 1
, Contents
1 Scarcity, Choice, and Opportunity Cost
2 Demand, Supply, and Market Equilibrium
3 Elasticity and Responsiveness
4 Consumer Choice
5 Production and Costs
6 Perfect Competition
7 Monopoly and Market Power
8 Monopolistic Competition and Oligopoly
9 Game Theory and Strategic Choice
10 Externalities and Public Goods
11 Government Policy and Market Outcomes
12 Labor Markets and Income Distribution
13 International Trade and Market Allocation
14 Final Review and Exam Strategy
ECON 1115 Introductory Microeconomics - Independent Study Guide 2
, Chapter 1: Scarcity, Choice, and Opportunity Cost
Why economics starts with scarcity
Economics begins with a simple fact: resources are limited while wants and possible uses are many. Scarcity forces
people, businesses, and governments to make choices.
- Resources include time, labor, land, physical capital, and knowledge.
- Every choice uses resources that could have been used somewhere else.
- A good economic explanation focuses on the tradeoffs created by scarcity.
Opportunity cost
Opportunity cost is the value of the best alternative given up when a choice is made. It is not necessarily the money
paid. If you spend two hours studying instead of working, the opportunity cost includes the best alternative use of
those two hours.
- Think in terms of the best forgone alternative, not every forgone alternative.
- Opportunity cost can include time, income, enjoyment, or another valuable activity.
Marginal thinking
Many economic decisions are about one more unit: one more hour of study, one more worker, or one more item
produced. The key comparison is marginal benefit versus marginal cost.
- Choose an extra unit when marginal benefit is greater than marginal cost.
- Stop expanding an activity when marginal cost rises above marginal benefit.
Production possibility frontier
A production possibility frontier, or PPF, shows the maximum combinations of two goods that can be produced with
available resources and technology. Points on the frontier represent efficient production under the model.
- Inside the frontier usually indicates unused resources or inefficiency.
- Outside the frontier is unattainable with current resources and technology.
- A bowed-out PPF reflects increasing opportunity cost when resources are not equally suited to both goods.
Practice
1. A student can work for 20 dollars an hour or study. If the student chooses three hours of study, what is the obvious
monetary opportunity cost?
2. A factory can make either 10 bicycles or 50 helmets with the same resources. What is the opportunity cost of 10
bicycles?
3. Why does marginal analysis use changes rather than total values?
ECON 1115 Introductory Microeconomics - Independent Study Guide 3
