Cover......Page 1
Title Page......Page 3
Copyright Page......Page 4
ABOUT THE AUTHOR......Page 6
ALTERNATIVE PATHWAYS THROUGH THE MICRO CHAPTERS......Page 8
ALTERNATIVE PATHWAYS THROUGH THE MACRO CHAPTERS......Page 9
Table of Contents......Page 10
PREFACE......Page 27
Acknowledgments......Page 34
CHAPTER 1 WHAT IS ECONOMICS?......Page 41
Definition of Economics......Page 42
Two Big Economic Questions......Page 43
The Economic Way of Thinking......Page 48
Economics as Social Science and Policy Tool......Page 50
Graphing Data......Page 53
Graphs Used in Economic Models......Page 56
The Slope of a Relationship......Page 60
Graphing Relationships Among More Than Two Variables......Page 62
MATHEMATICAL NOTE: Equations of Straight Lines......Page 64
Key Terms......Page 66
STUDY PLAN PROBLEMS AND APPLICATIONS......Page 67
CHAPTER 2 THE ECONOMIC PROBLEM......Page 69
Production Possibilities and Opportunity Cost......Page 70
Using Resources Efficiently......Page 73
Economic Growth......Page 76
Gains from Trade......Page 78
Economic Coordination......Page 81
READING BETWEEN THE LINES: The Rising Opportunity Cost of Food......Page 84
Key Points......Page 86
STUDY PLAN PROBLEMS AND APPLICATIONS......Page 87
ADDITIONAL PROBLEMS AND APPLICATIONS......Page 89
Understanding the Scope of Economics: Your Economic Revolution......Page 91
Talking with......Page 92
CHAPTER 3 DEMAND AND SUPPLY......Page 95
Markets and Prices......Page 96
Demand......Page 97
Supply......Page 102
Market Equilibrium......Page 106
Predicting Changes in Price and Quantity......Page 108
READING BETWEEN THE LINES: Demand and Supply: The Price of Coffee......Page 114
MATHEMATICAL NOTE: Demand, Supply, and Equilibrium......Page 116
Key Terms......Page 118
STUDY PLAN PROBLEMS AND APPLICATIONS......Page 119
ADDITIONAL PROBLEMS AND APPLICATIONS......Page 121
CHAPTER 4 ELASTICITY......Page 123
Price Elasticity of Demand......Page 124
More Elasticities of Demand......Page 131
Elasticity of Supply......Page 134
READING BETWEEN THE LINES: The Elasticities of Demand and Supply for Tomatoes......Page 138
Key Terms......Page 140
STUDY PLAN PROBLEMS AND APPLICATIONS......Page 141
ADDITIONAL PROBLEMS AND APPLICATIONS......Page 143
CHAPTER 5 EFFICIENCY AND EQUITY......Page 145
Resource Allocation Methods......Page 146
Benefit, Cost, and Surplus......Page 148
Is the Competitive Market Efficient?......Page 152
Is the Competitive Market Fair?......Page 156
READING BETWEEN THE LINES: Is the Global Market for Roses Efficient?......Page 160
Key Terms......Page 162
STUDY PLAN PROBLEMS AND APPLICATIONS......Page 163
ADDITIONAL PROBLEMS AND APPLICATIONS......Page 165
CHAPTER 6 GOVERNMENT ACTIONS IN MARKETS......Page 167
A Housing Market With a Rent Ceiling......Page 168
A Labor Market With a Minimum Wage......Page 171
Taxes......Page 173
Production Quotas and Subsidies......Page 179
Markets for Illegal Goods......Page 182
READING BETWEEN THE LINES: Government Actions in Labor Markets......Page 184
Key Terms......Page 186
STUDY PLAN PROBLEMS AND APPLICATIONS......Page 187
ADDITIONAL PROBLEMS AND APPLICATIONS......Page 189
CHAPTER 7 GLOBAL MARKETS IN ACTION......Page 191
How Global Markets Work......Page 192
Winners, Losers, and the Net Gain from Trade......Page 195
International Trade Restrictions......Page 197
The Case Against Protection......Page 203
READING BETWEEN THE LINES: A Tarriff on Tires......Page 208
Key Terms......Page 210
STUDY PLAN PROBLEMS AND APPLICATIONS......Page 211
ADDITIONAL PROBLEMS AND APPLICATIONS......Page 213
Understanding How Markets Work: The Amazing Market......Page 215
Talking with......Page 216
CHAPTER 8 UTILITY AND DEMAND......Page 219
Consumption Choices......Page 220
Utility-Maximizing Choice......Page 223
Predictions of Marginal Utility Theory......Page 227
New Ways of Explaining Consumer Choices......Page 234
READING BETWEEN THE LINES: A Paradox of Value: Paramedics and Hockey Players......Page 236
Key Terms......Page 238
STUDY PLAN PROBLEMS AND APPLICATIONS......Page 239
ADDITIONAL PROBLEMS AND APPLICATIONS......Page 241
CHAPTER 9 POSSIBILITIES, PREFERENCES, AND CHOICES......Page 243
Consumption Possibilities......Page 244
Preferences and Indifference Curves......Page 247
Predicting Consumer Choices......Page 250
READING BETWEEN THE LINES: Paper Books Versus e-Books......Page 256
Key Terms......Page 258
STUDY PLAN PROBLEMS AND APPLICATIONS......Page 259
ADDITIONAL PROBLEMS AND APPLICATIONS......Page 261
Understanding Households’ Choices: Making the Most of Life......Page 263
Talking with......Page 264
CHAPTER 10 ORGANIZING PRODUCTION......Page 267
The Firm and Its Economic Problem......Page 268
Technological and Economic Efficiency......Page 271
Information and Organization......Page 273
Markets and the Competitive Environment......Page 277
Produce or Outsource? Firms and Markets......Page 282
READING BETWEEN THE LINES: Battling for Markets in Internet Advertising......Page 284
Key Terms......Page 286
STUDY PLAN PROBLEMS AND APPLICATIONS......Page 287
ADDITIONAL PROBLEMS AND APPLICATIONS......Page 289
CHAPTER 11 OUTPUT AND COSTS......Page 291
Decision Time Frames......Page 292
Short-Run Technology Constraint......Page 293
Short-Run Cost......Page 297
Long-Run Cost......Page 302
READING BETWEEN THE LINES: Cutting the Cost of Producing Electricity......Page 306
Key Terms......Page 308
STUDY PLAN PROBLEMS AND APPLICATIONS......Page 309
ADDITIONAL PROBLEMS AND APPLICATIONS......Page 311
CHAPTER 12 PERFECT COMPETITION......Page 313
What Is Perfect Competition?......Page 314
The Firm’s Output Decision......Page 316
Output, Price, and Profit in the Short Run......Page 320
Output, Price, and Profit in the Long Run......Page 323
Changing Tastes and Advancing Technology......Page 326
Competition and Efficiency......Page 330
READING BETWEEN THE LINES: Perfect Competition in Corn......Page 332
Key Terms......Page 334
STUDY PLAN PROBLEMS AND APPLICATIONS......Page 335
ADDITIONAL PROBLEMS AND APPLICATIONS......Page 337
CHAPTER 13 MONOPOLY......Page 339
Monopoly and How It Arises......Page 340
A Single-Price Monopoly’s Output and Price Decision......Page 342
Single-Price Monopoly and Competition Compared......Page 346
Price Discrimination......Page 349
Monopoly Regulation......Page 353
READING BETWEEN THE LINES: Is Google Misusing Monopoly Power?......Page 356
Key Terms......Page 358
STUDY PLAN PROBLEMS AND APPLICATIONS......Page 359
ADDITIONAL PROBLEMS AND APPLICATIONS......Page 361
CHAPTER 14 MONOPOLISTIC COMPETITION......Page 363
What Is Monopolistic Competition?......Page 364
Price and Output in Monopolistic Competition......Page 366
Product Development and Marketing......Page 370
READING BETWEEN THE LINES: Product Differentiation and Entry in the Market for Smart Phones......Page 374
Key Terms......Page 376
STUDY PLAN PROBLEMS AND APPLICATIONS......Page 377
ADDITIONAL PROBLEMS AND APPLICATIONS......Page 379
CHAPTER 15 OLIGOPOLY......Page 381
What Is Oligopoly?......Page 382
Oligopoly Games......Page 384
Repeated Games and Sequential Games......Page 393
Antitrust Law......Page 396
READING BETWEEN THE LINES: Gillete and Schick in a Duopoly Game......Page 400
Key Terms......Page 402
STUDY PLAN PROBLEMS AND APPLICATIONS......Page 403
ADDITIONAL PROBLEMS AND APPLICATIONS......Page 405
Understanding Firms and Markets: Managing Change and Limiting Market Power......Page 407
Talking with......Page 408
CHAPTER 16 PUBLIC CHOICES AND PUBLIC GOODS......Page 411
Public Choices......Page 412
Providing Public Goods......Page 417
Providing Mixed Goods with External Benefits......Page 421
READING BETWEEN THE LINES: Reforming Health Care......Page 426
Key Terms......Page 428
STUDY PLAN PROBLEMS AND APPLICATIONS......Page 429
ADDITIONAL PROBLEMS AND APPLICATIONS......Page 431
CHAPTER 17 ECONOMICS OF THE ENVIRONMENT......Page 433
Negative Externalities: Pollution......Page 434
The Tragedy of the Commons......Page 440
READING BETWEEN THE LINES: Tax Versus Cap-and-Trade......Page 446
Key Terms......Page 448
STUDY PLAN PROBLEMS AND APPLICATIONS......Page 449
ADDITIONAL PROBLEMS AND APPLICATIONS......Page 451
Understanding Market Failure and Government: We, the People, …......Page 453
Talking with......Page 454
CHAPTER 18 MARKETS FOR FACTORS OF PRODUCTION......Page 457
The Anatomy of Factor Markets......Page 458
The Demand for a Factor of Production......Page 459
Labor Markets......Page 462
Capital and Natural Resource Markets......Page 468
READING BETWEEN THE LINES: The Labor Market in Action......Page 472
MATHEMATICAL NOTE: Present Value and Discounting......Page 474
Key Terms......Page 476
STUDY PLAN PROBLEMS AND APPLICATIONS......Page 477
ADDITIONAL PROBLEMS AND APPLICATIONS......Page 479
CHAPTER 19 ECONOMIC INEQUALITY......Page 481
Economic Inequality in the United States......Page 482
Inequality in the World Economy......Page 488
The Sources of Economic Inequality......Page 490
Income Redistribution......Page 495
READING BETWEEN THE LINES: Trends in Incomes of the Super Rich......Page 498
Key Terms......Page 500
STUDY PLAN PROBLEMS AND APPLICATIONS......Page 501
ADDITIONAL PROBLEMS AND APPLICATIONS......Page 503
CHAPTER 20 UNCERTAINTY AND INFORMATION......Page 505
Decisions in the Face of Uncertainty......Page 506
Buying and Selling Risk......Page 509
Private Information......Page 512
Uncertainty, Information, and the Invisible Hand......Page 517
READING BETWEEN THE LINES: Grades as Signals......Page 518
Key Terms......Page 520
STUDY PLAN PROBLEMS AND APPLICATIONS......Page 521
ADDITIONAL PROBLEMS AND APPLICATIONS......Page 523
Understanding Factor Markets, Inequality, and Uncertainty: For Whom?......Page 525
Talking with......Page 526
CHAPTER 21 MEASURING GDP AND ECONOMIC GROWTH......Page 529
Gross Domestic Product......Page 530
Measuring U.S. GDP......Page 533
The Uses and Limitations of Real GDP......Page 536
READING BETWEEN THE LINES Real GDP Forecasts in the Uncertain Economy of 2010......Page 542
APPENDIX: Graphs in Macroeconomics......Page 544
MATHEMATICAL NOTE: Chained-Dollar Real GDP......Page 546
Key Terms......Page 548
STUDY PLAN PROBLEMS AND APPLICATIONS......Page 549
ADDITIONAL PROBLEMS AND APPLICATIONS......Page 551
CHAPTER 22 MONITORING JOBS AND INFLATION......Page 553
Employment and Unemployment......Page 554
Unemployment and Full Employment......Page 559
The Price Level, Inflation, and Deflation......Page 562
READING BETWEEN THE LINES: Jobs Growth Lags Recovery......Page 568
Key Terms......Page 570
STUDY PLAN PROBLEMS AND APPLICATIONS......Page 571
ADDITIONAL PROBLEMS AND APPLICATIONS......Page 573
Monitoring Macroeconomic Performance: The Big Picture......Page 575
Talking with......Page 576
CHAPTER 23 ECONOMIC GROWTH......Page 579
The Basics of Economic Growth......Page 580
Economic Growth Trends......Page 582
How Potential GDP Grows......Page 585
Why Labor Productivity Grows......Page 590
Growth Theories, Evidence, and Policies......Page 593
READING BETWEEN THE LINES: Economic Growth in China......Page 598
Key Terms......Page 600
STUDY PLAN PROBLEMS AND APPLICATIONS......Page 601
ADDITIONAL PROBLEMS AND APPLICATIONS......Page 603
CHAPTER 24 FINANCE, SAVING, AND INVESTMENT......Page 605
Financial Institutions and Financial Markets......Page 606
The Loanable Funds Market......Page 610
Government in the Loanable Funds Market......Page 617
The Global Loanable Funds Market......Page 619
READING BETWEEN THE LINES: Crowding Out in the Global Recession......Page 622
Key Terms......Page 624
STUDY PLAN PROBLEMS AND APPLICATIONS......Page 625
ADDITIONAL PROBLEMS AND APPLICATIONS......Page 627
CHAPTER 25 MONEY, THE PRICE LEVEL, AND INFLATION......Page 629
What Is Money?......Page 630
Depository Institutions......Page 633
The Federal Reserve System......Page 636
How Banks Create Money......Page 639
The Money Market......Page 642
The Quantity Theory of Money......Page 646
READING BETWEEN THE LINES: Can More Money Keep the Recovery Going?......Page 648
MATHEMATICAL NOTE: The Money Multiplier......Page 650
Key Terms......Page 652
STUDY PLAN PROBLEMS AND APPLICATIONS......Page 653
ADDITIONAL PROBLEMS AND APPLICATIONS......Page 655
CHAPTER 26 THE EXCHANGE RATE AND THE BALANCE OF PAYMENTS......Page 657
The Foreign Exchange Market......Page 658
Exchange Rate Fluctuations......Page 663
Exchange Rate Policy......Page 668
Financing International Trade......Page 671
READING BETWEEN THE LINES: The Dollar and “Carry Trade”......Page 676
Key Terms......Page 678
STUDY PLAN PROBLEMS AND APPLICATIONS......Page 679
ADDITIONAL PROBLEMS AND APPLICATIONS......Page 681
Understanding Macroeconomic Trends: Expanding the Frontier......Page 683
Talking with......Page 684
CHAPTER 27 AGGREGATE SUPPLY AND AGGREGATE DEMAND......Page 687
Aggregate Supply......Page 688
Aggregate Demand......Page 692
Explaining Macroeconomic Trends and Fluctuations......Page 696
Macroeconomic Schools of Thought......Page 702
READING BETWEEN THE LINES: Aggregate Supply and Aggregate Demand in Action......Page 704
Key Terms......Page 706
STUDY PLAN PROBLEMS AND APPLICATIONS......Page 707
ADDITIONAL PROBLEMS AND APPLICATIONS......Page 709
CHAPTER 28 EXPENDITURE MULTIPLIERS: THE KEYNESIAN MODEL......Page 711
Fixed Prices and Expenditure Plans......Page 712
Real GDP with a Fixed Price Level......Page 716
The Multiplier......Page 720
The Multiplier and the Price Level......Page 725
READING BETWEEN THE LINES: Inventory Investment in the 2010 Expansion......Page 730
MATHEMATICAL NOTE: The Algebra of the Keynesian Model......Page 732
Key Terms......Page 736
STUDY PLAN PROBLEMS AND APPLICATIONS......Page 737
ADDITIONAL PROBLEMS AND APPLICATIONS......Page 739
CHAPTER 29 U.S. INFLATION, UNEMPLOYMENT, AND BUSINESS CYCLE......Page 741
Inflation Cycles......Page 742
Inflation and Unemployment: The Phillips Curve......Page 748
The Business Cycle......Page 751
READING BETWEEN THE LINES: The Shifting Inflation–Unemployment Tradeoff......Page 756
Key Terms......Page 758
STUDY PLAN PROBLEMS AND APPLICATIONS......Page 759
ADDITIONAL PROBLEMS AND APPLICATIONS......Page 761
Understanding Macroeconomic Fluctuations: Boom and Bust......Page 763
Talking with......Page 764
CHAPTER 30 FISCAL POLICY......Page 767
The Federal Budget......Page 768
Supply-Side Effects of Fiscal Policy......Page 774
Generational Effects of Fiscal Policy......Page 778
Fiscal Stimulus......Page 780
READING BETWEEN THE LINES: Obama Fiscal Policy......Page 786
Key Terms......Page 788
STUDY PLAN PROBLEMS AND APPLICATIONS......Page 789
ADDITIONAL PROBLEMS AND APPLICATIONS......Page 791
CHAPTER 31 MONETARY POLICY......Page 793
Monetary Policy Objectives and Framework......Page 794
The Conduct of Monetary Policy......Page 796
Monetary Policy Transmission......Page 799
Extraordinary Monetary Stimulus......Page 807
READING BETWEEN THE LINES: The Fed's Monetary Policy Dilemma......Page 810
Key Terms......Page 812
STUDY PLAN PROBLEMS AND APPLICATIONS......Page 813
ADDITIONAL PROBLEMS AND APPLICATIONS......Page 815
Understanding Macroeconomic Policy: Tradeoffs and Free Lunches......Page 817
Talking with......Page 818
C......Page 821
E......Page 823
F......Page 824
I......Page 825
M......Page 826
O......Page 828
P......Page 829
S......Page 830
T......Page 831
W......Page 832
B......Page 833
C......Page 834
D......Page 835
E......Page 836
F......Page 837
G......Page 838
I......Page 839
L......Page 840
M......Page 841
P......Page 843
R......Page 845
S......Page 846
T......Page 847
W......Page 848
Z......Page 849
Credits......Page 851