Economics Guide: Micro, Macro and the Calculations Behind Them

All of economics grows out of one fact: human wants keep multiplying while the means to satisfy them stay limited. People therefore have to choose, and each choice leaves something behind. The value of the best alternative given up is called opportunity cost. Indonesia's Merdeka curriculum opens with this idea in Year 10 (Phase E), under the theme of people meeting their needs, and every later chapter runs on the same logic.

The trouble is that the idea sounds almost too simple. Students memorise the definition and then stumble when a question asks for the opportunity cost of two options measured in time or effort. The handiest practice material is a learner's own decisions. One hundred thousand rupiah of pocket money could buy a book or a data bundle; choosing the book means giving up the data. Put three everyday decisions in a small table and note what each one sacrifices, including study time or rest.

From that table learners move on to the split between basic, secondary and luxury needs, and to production, distribution and consumption, which many first met in lower secondary social studies. The idea is in place once a learner can point to the opportunity cost in any decision a question describes, including a factory choosing which product to make or a government choosing one project over another, without checking notes.

This is the misunderstanding that sinks more graph questions than any other. A change in the good's own price only moves the point along the same curve. A change in anything else moves the whole curve left or right. Exam questions mix the two on purpose, for example by asking how a rise in the price of sugar affects the demand curve for sugar itself.

The demand shifters are worth learning together with their direction. Higher income pushes demand for a normal good to the right. Tastes and population size change demand at every price. Prices of other goods matter too: substitutes such as tea and coffee pull in opposite directions, so expensive coffee lifts demand for tea, while complements such as phones and phone cases move together. On the supply side, dearer raw materials and wages push the curve left, more efficient technology pushes it right, taxes squeeze supply and subsidies expand it.

The most useful drill is a short story. Take one event, say a failed chilli harvest just before a major holiday, and answer three questions: which curve is hit, which way does it move, and what happens to equilibrium price and quantity? Work through ten different events with a small sketch beside each answer. Sorting shifters from movers at speed, even for events never discussed in class, is the signal to start the next stage.

Elasticity measures how sensitive quantity is to a change in price. The formula is the percentage change in quantity divided by the percentage change in price. A result above one is elastic, below one is inelastic, and exactly one is unit elastic. Two extreme cases are worth knowing as well: perfectly elastic, where quantity reacts enormously to price, and perfectly inelastic, where quantity stays put however much the price moves.

A worked example: price rises from Rp8,000 to Rp10,000 and quantity demanded falls from 20 units to 16. The price change is 2,000 divided by 8,000, which is 25 percent. The quantity change is 4 divided by 20, which is 20 percent. Elasticity is 20 percent over 25 percent, giving 0.8. Because that is below one, demand for this good is inelastic. Watch two traps: always use the starting value as the base for each percentage, and always keep the quantity change on top.

The minus sign that appears with demand elasticity is ignored, since it is the size of the number that gets interpreted. The most meaningful practice links numbers to real goods. Rice and petrol are classic inelastic examples, because people keep buying them when prices climb, while luxury goods tend to be elastic. Finish each question with one plain-language sentence on what the number means. Learners are ready when they can guess a good's elasticity before calculating and then confirm it with the figures.

National income is the entry point to Year 11 macroeconomics. It can be measured three ways: by output, by income and by expenditure. The expenditure approach turns up most in exams, using Y = C + I + G + (X - M). C is household consumption, I is business spending on capital such as machinery and buildings, G is government spending, and X - M is net exports.

A practice set: consumption 600, capital spending 200, government spending 150, exports 250 and imports 100, all in trillions of rupiah. The total is 600 + 200 + 150 + 150 = 1,100 trillion rupiah. Mind the sign on net exports, since imports always subtract. Income per capita is national income divided by population. As a rough practice figure, GDP of about Rp22,000 trillion over a population of about 280 million gives roughly Rp78 million per person per year. In an exam, always use the figures printed in the question.

Economic growth is this year's GDP minus last year's, divided by last year's, times one hundred percent. Statistics Indonesia recorded 5.03 percent growth for 2024, and that figure comes from exactly this year-on-year comparison. One terminology trap needs watching: GDP counts production inside the country's borders, while GNP counts income belonging to its citizens, including those working abroad. Invent a mini-country with your own numbers to practise both.

Employment questions test precision with definitions. The working-age population splits into two groups: the labour force and those outside it. The labour force contains people in work and people who are unemployed or actively looking for work. Those outside the labour force are working-age people who are in school, keeping house or doing something else that is not job-seeking. Many questions set a trap here, for instance by counting students as unemployed.

The safest way to hold these definitions is a tree diagram, with the working-age population at the top and employed and unemployed on the lowest branches. The open unemployment rate is the number of unemployed divided by the labour force, times one hundred percent. Statistics Indonesia recorded 4.82 percent in February 2024, meaning that out of every hundred people in the labour force, about five were looking for work. The divisor is always the labour force, so total population never enters this formula.

Types of unemployment should also be linked to real examples. Frictional unemployment appears when people are between jobs or have just graduated and are looking for the right role. Structural unemployment appears when job-seekers' skills no longer match what employers need, often after a change in technology. There are seasonal and cyclical types as well. Pair each type with one example job, then test yourself on case questions that describe the features without naming the type.