What is the difference between comparative advantage and absolute advantage?

Absolute advantage means producing more with the same resources, while comparative advantage means producing at a lower opportunity cost.

How does the law of demand affect the demand curve?

Holding other factors constant, a higher price leads to a lower quantity demanded, shown as movement up along the demand curve.

What does a production possibilities curve show?

A PPC shows the maximum combinations of two goods an economy can produce with its available resources and technology.

Free online course Intro to Economics

Duration of the online course: 3 hours and 46 minutes

(1)

Learn to think like an economist in this free online course—master scarcity, opportunity cost, supply & demand, and trade with practice exercises.

In this free course, learn about

Scarcity: limited resources force tradeoffs and choices
Adam Smith's 'invisible hand' and unintended social benefits
Four factors of production: land, labor, capital, entrepreneurship
Rival vs nonrival goods and why rivalry matters
Positive vs normative statements; what can be tested empirically
Why economists use simplified models and ceteris paribus
Command vs market economies and how decisions are made
PPC/PPF: tradeoffs, efficiency, growth, and opportunity cost
Increasing opportunity cost and what a bowed-out PPC implies
Comparative vs absolute advantage; specialization and gains from trade
Terms of trade and when trade may not create gains
Law of demand and key demand shifters (income, complements, expectations)
Normal vs inferior goods and income effects on demand
Supply, supply shifters (input costs), and equilibrium changes after shocks

About the free online course

Economics is less about memorizing formulas and more about learning a practical way to explain everyday choices. This free online course helps you build that economic mindset, so you can understand why trade-offs exist, how markets coordinate decisions, and what happens when conditions change. Whether you are preparing for school assessments, strengthening your foundation for business studies, or simply trying to make sense of prices and headlines, you will develop tools that make complex issues clearer and more measurable.

You will start with the core idea that resources are limited, which forces individuals, firms, and governments to choose. From there, you will learn how economists separate testable claims from value judgments, and why simplified models are used to highlight the most important relationships. These habits of thinking are essential for analyzing real situations without getting lost in noise, and they help you argue more clearly about what is happening versus what should happen.

As you progress, you will practice reasoning with opportunity cost and the production possibilities framework, building intuition for efficiency, trade-offs, and what it means when the cost of producing more of one thing rises. You will also explore how specialization and comparative advantage can create gains from trade, even when one party appears better at producing everything. This part connects personal decision-making to international exchange and shows how smart allocation can expand what is possible.

The course then brings the ideas together with supply, demand, and market equilibrium. You will learn how prices signal scarcity, why quantity demanded changes differently from demand itself, and how shifts in income, expectations, or input costs ripple through markets. Through short videos and targeted exercises, you will repeatedly apply each concept, strengthening both your vocabulary and your ability to predict the direction of changes in price and quantity.

By the end, you will be able to read basic economic arguments with confidence, explain market outcomes using clear cause-and-effect logic, and approach new problems with a structured, analytical process. It is a strong starting point for further study in microeconomics or macroeconomics and a valuable skill set for school, work, and everyday decisions.

Course content

Video class: Intro to Economics - Course Trailer 02m
Exercise: What economic concept refers to the need to make choices due to the limited availability of resources?
Video class: Introduction to economics | Supply, demand, and market equilibrium | Economics | Khan Academy 09m
Exercise: What concept in Adam Smith's 'The Wealth of Nations' describes unintended societal benefits from individual self-interest?
Video class: Scarcity | Basic economics concepts | Economics | Khan Academy 05m
Exercise: Which of the following is an example of a scarce resource?
Video class: Four factors of production | AP Microeconomics | Khan Academy 06m
Exercise: What are the four factors of production in economics?
Video class: Scarcity and rivalry | Basic Economic Concepts | Microeconomics | Khan Academy 06m
Exercise: In economic terms, what makes a good a 'rival' good?
Video class: Normative and positive statements | Basic economics concepts | AP Macroeconomics | Khan Academy 05m
Exercise: What type of statement can be tested or verified in economic analysis?
Video class: Economic models | Basic economics concepts | AP Macroeconomics and Microeconomics | Khan Academy 06m
Exercise: In economics, why are models with simplifying assumptions used?
Video class: Command and market economies | Basic economics concepts | AP Macroeconomics | Khan Academy 09m
Exercise: What characterizes a command economy?

Video class: Production possibilities frontier | Microeconomics | Khan Academy 10m
Exercise: In the context of the hunter-gatherer scenario described, what is the concept of 'ceteris paribus' used to illustrate?
Video class: Opportunity Cost 05m
Exercise: What is the opportunity cost of catching one more rabbit in scenario E?
Video class: Increasing opportunity cost | Microeconomics | Khan Academy 06m
Exercise: In economics, what does the concept of increasing opportunity cost demonstrate when choosing between two production options?
Video class: PPCs for increasing, decreasing and constant opportunity cost | AP Macroeconomics | Khan Academy 05m
Exercise: Which production possibility curve represents an increasing opportunity cost?
Video class: Production Possibilities Curve as a model of a country's economy | AP Macroeconomics | Khan Academy 06m
Exercise: Based on the concept of production possibilities curve (PPC) in economics, which of the following best represents the idea conveyed by the PPC for Utenslandia?

Video class: Comparative advantage specialization and gains from trade | Microeconomics | Khan Academy 08m
Exercise: Who has the comparative advantage in producing plates?
Video class: Comparative advantage and absolute advantage | Microeconomics | Khan Academy 10m
Exercise: In the context of international trade, what does having a 'comparative advantage' in producing a good imply for a country?
Video class: Opportunity cost and comparative advantage using an output table | AP Macroeconomics | Khan Academy 09m
Exercise: Which country has a comparative advantage in basketballs?
Video class: Terms of Trade and the Gains from Trade | AP Macroeconomics | Khan Academy 09m
Exercise: In the given economic model, what should Country A focus its production on according to the theory of comparative advantage?
Video class: Input approach to determining comparative advantage | AP Macroeconomics | Khan Academy 08m
Exercise: Which country has a comparative advantage in producing belts?
Video class: When there aren't gains from trade | Basic economics concepts | AP Macroeconomics | Khan Academy 06m
Exercise: In the simplified economic model described in the text, what is the reason why there would be no gains from trade between Country A and Country B?

Video class: Law of demand | Supply, demand, and market equilibrium | Microeconomics | Khan Academy 08m
Exercise: What does the law of demand suggest about price and quantity demanded?
Video class: Price of related products and demand | Microeconomics | Khan Academy 05m
Exercise: If the price of related products, which are complements to an eBook, increases, what would likely happen to the demand curve for the eBook?
Video class: Change in expected future prices and demand | Microeconomics | Khan Academy 04m
Video class: Normal and inferior goods | Supply, demand, and market equilibrium | Microeconomics | Khan Academy 05m
Exercise: According to the video, how does the demand for an inferior good react to an increase in income compared to a normal good?
Video class: Change in demand versus change in quantity demanded | AP Macroeconomics | Khan Academy 08m

Video class: Law of supply | Supply, demand, and market equilibrium | Microeconomics | Khan Academy 08m
Exercise: What does the law of supply state regarding the relationship between price and the quantity supplied?
Video class: Factors affecting supply | Supply, demand, and market equilibrium | Microeconomics | Khan Academy 06m
Video class: Change in supply versus change in quantity supplied | AP Macroeconomics | Khan Academy 06m
Exercise: If the price of inputs for producing a good decreases, how would this generally affect the supply curve for that good?
Video class: Market equilibrium | Supply, demand, and market equilibrium | Microeconomics | Khan Academy 10m
Video class: Changes in Market Equilibrium 09m
Exercise: If a new disease-resistant variety of apples becomes available, what is the most likely immediate impact on the apple market?
Video class: Changes in equilibrium price and quantity when supply and demand change | Khan Academy 06m
Video class: Changes in income, population, or preferences | Microeconomics | Khan Academy 03m
Exercise: Which of the following factors, when held constant, allows economists to analyze movements along a single demand curve without shifting the curve?