Economics
Scarcity and choice
Every economics question traces back to scarcity: unlimited wants, limited resources. Because of scarcity, every choice has an opportunity cost - the value of the best alternative forgone. The production possibilities curve illustrates tradeoffs, efficiency on the curve, and growth as an outward shift.
Markets
Demand is inversely related to price; supply is directly related. The crucial distinction is between a movement along a curve (caused by a price change) and a shift of the curve (caused by a non-price determinant). Demand shifters: income, tastes, expectations, prices of substitutes and complements, number of buyers. Supply shifters: input costs, technology, taxes and subsidies, expectations, number of sellers. Equilibrium price clears the market; a price ceiling below equilibrium creates shortages, a price floor above it creates surpluses. Elasticity measures responsiveness to price or income changes.
Macro and policy
GDP measures final output within borders; real GDP adjusts for inflation, measured by CPI or the GDP deflator. Unemployment types: frictional, structural, cyclical. Fiscal policy is government taxing and spending; monetary policy is central-bank control of money supply and interest rates. Comparative advantage explains gains from trade.
Traps
The most common errors: confusing fiscal with monetary policy; confusing shifts with movements along a curve; treating a rise in price as a demand increase; and mixing nominal with real values.
Rule of thumb
Ask what changed. If the good's own price changed, move along the curve; if anything else changed, shift it. Worked example: a new fertilizer lowers the cost of producing corn, shifting corn supply right and lowering equilibrium price.