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| Preface | |
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| Introduction to Economics | |
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| The Scope and Method of Economics | |
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| Why Study Economics? | |
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| To Learn a Way of Thinking | |
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| To Understand Society | |
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| News Analysis: Economics and Global Affairs in 2005 | |
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| To Understand Global Affairs | |
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| To Be an Informed Voter | |
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| The Scope of Economics | |
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| Microeconomics and Macroeconomics | |
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| The Diverse Fields of Economics | |
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| Further Exploration: The Fields of Economics | |
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| The Method of Economics | |
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| Theories and Models | |
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| Economic Policy | |
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| An Invitation | |
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| Summary | |
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| Review Terms and Concepts | |
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| Problem Set | |
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| How to Read and Understand Graphs | |
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| The Economic Problem: Scarcity and Choice | |
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| Scarcity, Choice, and Opportunity Cost | |
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| Scarcity and Choice in a One-Person Economy | |
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| News Analysis: Opportunity Costs and Internships | |
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| Scarcity and Choice in an Economy of Two or More | |
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| The Production Possibility Frontier | |
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| Comparative Advantage and the Gains from Trade | |
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| The Economic Problem | |
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| Economic Systems | |
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| Command Economies | |
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| Laissez-Faire Economies: The Free Market | |
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| Mixed Systems, Markets, and Governments | |
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| Looking Ahead | |
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| Summary | |
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| Review Terms and Concepts | |
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| Problem Set | |
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| Demand, Supply, and Market Equilibrium | |
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| Firms and Households: The Basic Decision-Making Units | |
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| Input Markets and Output Markets: The Circular Flow | |
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| Demand in Product/Output Markets | |
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| Changes in Quantity Demanded Versus Changes in Demand | |
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| Price and Quantity Demanded: The Law of Demand | |
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| Other Determinants of Household Demand | |
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| Shift of Demand versus Movement Along a Demand Curve | |
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| From Household Demand to Market Demand | |
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| Supply in Product/Output Markets | |
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| Price and Quantity Supplied: The Law of Supply | |
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| Other Determinants of Supply | |
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| Shift of Supply versus Movement along a Supply Curve | |
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| From Individual Supply to Market Supply | |
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| Market Equilibrium | |
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| Excess Demand | |
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| Excess Supply | |
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| Changes in Equilibrium | |
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| Demand and Supply in Product Markets: A Review | |
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| Looking Ahead: Markets and the Allocation of Resources | |
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| News Analysis: Mad Cow Disease Cuts Demand for Cattle in 2005 | |
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| Summary | |
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| Review Terms and Concepts | |
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| Problem Set | |
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| Demand and Supply Applications | |
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| The Price System: Rationing and Allocating Resources | |
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| Price Rationing | |
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| Constraints on the Market and Alternative Rationing Mechanisms | |
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| News Analysis: Hurricane Katrina and Gasoline Prices in 2005 | |
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| Prices and the Allocation of Resources | |
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| Price Floors | |
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| Supply and Demand Analysis: An Oil Import Fee | |
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| Supply and Demand and Market Efficiency | |
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| Consumer Surplus | |
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| Producer Surplus | |
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| Competitive Markets Maximize the Sum of Producer and Consumer Surplus | |
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| Potential Causes of Deadweight Loss from Under- and Overproduction | |
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| Further Exploration: The Drug Wars: A Matter of Supply and Demand | |
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| Looking Ahead | |
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| Summary | |
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| Review Terms and Concepts | |
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| Problem Set | |
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| Elasticity | |
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| Price Elasticity of Demand | |
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| Slope and Elasticity | |
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| Types of Elasticity | |
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| News Analysis: Elasticity of Supply and House Prices | |
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| Calculating Elasticities | |
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| Calculating Percentage Changes | |
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| Elasticity Is a Ratio of Percentages | |
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| The Midpoint Formula | |
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| Elasticity Changes along a Straight-Line Demand Curve | |
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| Elasticity and Total Revenue | |
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| The Determinants of Demand Elasticity | |
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| Availability of Substitutes | |
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| The Importance of Being Unimportant | |
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| Further Exploration: London Newspapers and New York Restaurants Learn about Elasticity | |
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| The Time Dimension | |
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| Other Important Elasticities | |
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| Income Elasticity of Demand | |
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| Cross-Price Elasticity of Demand | |
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| Elasticity of Supply | |
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| Looking Ahead | |
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| Summary | |
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| Review Terms and Concepts | |
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| Problem Set | |
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| Point Elasticity (Optional) | |
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| Foundations of Microeconomics: Consumers and Firms | |
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| Household Behavior and Consumer Choice | |
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| Household Choice in Output Markets | |
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| The Determinants of Household Demand | |
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| The Budget Constraint | |
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| Further Exploration: Opportunity Costs-Then and Now | |
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| The Equation of the Budget Constraint | |
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| The Basis of Choice: Utility | |
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| Diminishing Marginal Utility | |
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| Allocating Income to Maximize Utility | |
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| The Utility-Maximizing Rule | |
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| Diminishing Marginal Utility and Downward-Sloping Demand | |
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| Income and Substitution Effects | |
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| The Income Effect | |
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| News Analysis: Marginal Utility and the Capacity to Consume | |
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| The Substitution Effect | |
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| Consumer Surplus | |
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| Household Choice in Input Markets | |
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| The Labor Supply Decision | |
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| The Price of Leisure | |
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| Income and Substitution Effects of a Wage Change | |
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| Saving and Borrowing: Present Versus Future Consumption | |
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| A Review: Households in Output and Input Markets | |
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| Summary | |
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| Review Terms and Concepts | |
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| Problem Set | |
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| Indifference Curves | |
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| The Production Process: The Behavior of Profit-Maximizing Firms | |
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| The Behavior of Profit-Maximizing Firms | |
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| Profits and Economic Costs | |
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| News Analysis: An Idea, a Firm, and Profits in 2005 | |
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| Short-Run versus Long-Run Decisions | |
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| The Bases of Decisions: Market Price of Outputs, Available Technology, and Input Prices | |
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| The Production Process | |
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| Production Functions: Total Product, Marginal Product, and Average Product | |
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| Production Functions with Two Variable Factors of Production | |
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| Choice of Technology | |
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| News Analysis: Increasing Substitution of Capital for Labor Raises Labor Productivity | |
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| Looking Ahead: Cost and Supply | |
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| Summary | |
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| Review Terms and Concepts | |
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| Problem Set | |
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| Isoquants and Iscosts | |
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| Short-Run Costs and Output Decisions | |
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| Costs in the Short Run | |
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| Fixed Costs | |
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| Variable Costs | |
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| Total Costs | |
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| Short-Run Costs: A Review | |
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| Output Decisions: Revenues, Costs, and Profit Maximization | |
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| Total Revenue (TR) and Marginal Revenue (MR) | |
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| Comparing Costs and Revenues to Maximize Profit | |
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| Further Exploration: Case Study in Marginal Analysis: An Ice Cream Parlor | |
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| The Short-Run Supply Curve | |
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| Looking Ahead | |
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| Summary | |
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| Review Terms and Concepts | |
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| Problem Set | |
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| Long-Run Costs and Output Decisions | |
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| Short-Run Conditions and Long-Run Directions | |
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| Maximizing Profits | |
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| Minimizing Losses | |
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| The Short-Run Industry Supply Curve | |
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| Long-Run Directions: A Review | |
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| Long-Run Costs: Economies and Diseconomies of Scale | |
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| Increasing Returns to Scale | |
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| Further Exploration: Why Small Farmers Have Trouble Competing: Economies of Scale in Agriculture | |
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| Constant Returns to Scale | |
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| News Analysis: Economies of Scale in Banking, 2005 | |
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| Decreasing Returns to Scale | |
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| Long-Run Adjustments to Short-Run Conditions | |
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| Short-Run Profits: Expansion to Equilibrium | |
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| Short-Run Losses: Contraction to Equilibrium | |
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| The Long-Run Adjustment Mechanism: Investment Flows Toward Profit Opportunities | |
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| Further Exploration The Long-Run Average Cost Curve: Flat or U-Shaped | |
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| Output Markets: A Final Word | |
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| Summary | |
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| Review Terms and Concepts | |
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| Problem Set | |
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| External Economies and Diseconomies and the Long-Run Industry Supply Curve | |
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| Input Demand: The Labor and Land Markets | |
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| Input Markets: Basic Concepts | |
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| Demand for Inputs: A Derived Demand | |
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| Inputs: Complementary and Substitutable | |
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| Diminishing Returns | |
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| Marginal Revenue Product | |
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| Labor Markets | |
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| A Firm Using Only One Variable Factor of Production: Labor | |
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| News Analysis: Baseball Salaries and Marginal Revenue Product in 2005 | |
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| A Firm Employing Two Variable Factors of Production in the Short and Long Run | |
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| Many Labor Markets | |
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| Land Markets | |
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| Rent and the Value of Output Produced on Land | |
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| The Firm's Profit-Maximization Condition in Input Markets | |
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| Input Demand Curves | |
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| Shifts in Factor Demand Curves | |
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| Resource Allocation and the Mix of Output in Competitive Markets | |
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| The Distribution of Income | |
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| Looking Ahead | |
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| Summary | |
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| Review Terms and Concepts | |
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| Problem Set | |
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| Input Demand: The Capital Market and the Investment Decision | |
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| Capital, Investment, and Depreciation | |
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| Capital | |
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| Investment and Depreciation | |
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| The Capital Market | |
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| Capital Income: Interest and Profits | |
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| Financial Markets in Action | |
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| Capital Accumulation and Allocation | |
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| News Analysis: Putting Their Money Where the Future Is in 2005 | |
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| The Demand for New Capital and the Investment Decision | |
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| Forming Expectations | |
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| Comparing Costs and Expected Return | |
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| A Final Word on Capital | |
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| Summary | |
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| Review Terms and Concepts | |
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| Problem Set | |
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| Calculating Present Value | |
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| General Equilibrium and the Efficiency of Perfect Competition | |
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| General Equilibrium Analysis | |
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| An Early Technological Advance: The Electronic Calculator | |
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| News Analysis: The Dot-Com Bust and the Labor Market: 2003 | |
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| Market Adjustment to Changes in Demand | |
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| Formal Proof of a General Competitive Equilibrium | |
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| Allocative Efficiency and Competitive Equilibrium | |
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| Pareto Efficiency | |
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| The Efficiency of Perfect Competition | |
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| Perfect Competition versus Real Markets | |
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| The Sources of Market Failure | |
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| Imperfect Markets | |
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| Public Goods | |
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| Externalities | |
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| Imperfect Information | |
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| Evaluating the Market Mechanism | |
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| Summary | |
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| Review Terms and Concepts | |
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| Problem Set | |
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| Market Imperfections and the Role of Government | |
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| Monopoly and Antitrust Policy | |
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| Imperfect Competition and Market Power: Core Concepts | |
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| Defining Industry Boundaries | |
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| Barriers to Entry | |
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| Price: The Fourth Decision Variable | |
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| News Analysis: The Drug Wars in 2005 | |
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| Price and Output Decisions in Pure Monopoly Markets | |
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| Demand in Monopoly Markets | |
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| Perfect Competition and Monopoly Compared | |
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| Collusion and Monopoly Compared | |
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| The Social Costs of Monopoly | |
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| Inefficiency and Consumer Loss | |
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| Rent-Seeking Behavior | |
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| Price Discrimination | |
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| Examples of Price Discrimination | |
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| Remedies for Monopoly: Antitrust Policy | |
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| The Development of Antitrust Law: Historical Background | |
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| Landmark Antitrust Legislation | |
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| The Enforcement of Antitrust Law | |
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| Initiating Antitrust Actions | |
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| Sanctions and Remedies | |
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| News Analysis: Price-Fixing Cases in 2005 | |
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| A Natural Monopoly | |
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| Do Natural Monopolies Still Exist? | |
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| News Analysis: From a Natural Monopoly to Near-Perfect Competition | |
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| Imperfect Markets: A Review and A Look Ahead | |
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| Summary | |
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| Review Terms and Concepts | |
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| Problem Set | |
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| Monopolistic Competition and Oligopoly | |
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| Monopolistic Competition | |
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| Product Differentiation, Advertising, and Social Welfare | |
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| Price and Output Determination in Monopolistic Competition | |
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| Economic Efficiency and Resource Allocation | |
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| Oligopoly | |
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| Oligopoly Models | |
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| Further Exploration: Regulation of Mergers by the Department of Justice and the Federal Trade Commission | |
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| Game Theory | |
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| Repeated Games | |
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| A Game with Many Players: Collective Action Can Be Blocked by a Prisoners' Dilemma | |
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| Contestable Markets | |
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| Oligopoly and Economic Performance | |
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| Industrial Concentration and Technological Change | |
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| The Role of Government | |
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| Regulation of Mergers | |
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| News Analysis: Footwear Giant Adidas Buys Reebok in 2005 | |
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| A Proper Role? | |
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| Summary | |
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| Review Terms and Concepts | |
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| Problem Set | |
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| Externalities, Public Goods, Imperfect Information, and Social Choice | |
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| Externalities and Environmental Economics | |
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| Marginal Social Cost and Marginal-Cost Pricing | |
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| Private Choices and External Effects | |
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| Internalizing Externalities | |
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| News Analysis: Externalities Are All Around Us | |
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| Further Exploration: Global Warming: A Global Externality? | |
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| Public (Social) Goods | |
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| The Characteristics of Public Goods | |
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| Income Distribution As a Public Good? | |
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| Public Provision of Public Goods | |
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| Optimal Provision of Public Goods | |
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| Local Provision of Public Goods: Tiebout Hypothesis | |
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| Mixed Goods | |
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| Imperfect Information | |
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| Adverse Selection: Asymmetric Information | |
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| Moral Hazard | |
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| Market Solutions | |
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| Government Solutions | |
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| Social Choice | |
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| The Voting Paradox | |
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| Government Inefficiency: Theory of Public Choice | |
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| Rent-Seeking Revisited | |
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| Government and the Market | |
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| Summary | |
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| Review Terms and Concepts | |
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| Problem Set | |
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| Income Distribution and Poverty | |
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| The Utility Possibilities Frontier | |
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| The Sources of Household Income | |
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| Wages and Salaries | |
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| Income from Property | |
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| Income from the Government: Transfer Payments | |
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| The Distribution of Income | |
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| Income Inequality in the United States | |
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| Poverty | |
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| The Distribution of Wealth | |
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| News Analysis: Hunger in the United States in 2003 | |
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| The Redistribution Debate | |
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| Arguments against Redistribution | |
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| Arguments in Favor of Redistribution | |
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| Redistribution Programs and Policies | |
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| Financing Redistribution Programs: Taxes | |
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| Expenditure Programs | |
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| News Analysis: The Lack of Health Care Insurance | |
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| How Effective Are Antipoverty Programs? | |
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| Government or the Market? A Review | |
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| Summary | |
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| Review Terms and Concepts | |
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| Problem Set | |
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| Public Finance: The Economics of Taxation | |
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| The Economics of Taxation | |
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| Taxes: Basic Concepts | |
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| Tax Equity | |
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| What is the "Best" Tax Base? | |
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| The Gift and Estate Tax | |
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| Tax Incidence: Who Pays? | |
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| The Incidence of Payroll Taxes | |
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| The Incidence of Corporate Profits Taxes | |
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| The Overall Incidence of Taxes in the United States: Empirical Evidence | |
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| Excess Burdens and the Principle of Neutrality | |
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| How Do Excess Burdens Arise? | |
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| The Principle of Second Best | |
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| News Analysis: President Bush's Advisory Panel on Federal Tax Reform | |
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| Measuring Excess Burdens | |
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| Excess Burdens and the Degree of Distortion | |
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| Summary | |
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| Review Terms and Concepts | |
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| Problem Set | |
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| The World Economy | |
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| International Trade, Comparative Advantage, and Protectionism | |
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| Trade Surpluses and Deficits | |
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| The Economic Basis for Trade: Comparative Advantage | |
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| Absolute Advantage versus Comparative Advantage | |
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| Terms of Trade | |
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| Exchange Rates | |
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| The Sources of Comparative Advantage | |
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| The Heckscher-Ohlin Theorem | |
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| Other Explanations for Observed Trade Flows | |
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| Trade Barriers: Tariffs, Export Subsidies, and Quotas | |
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| News Analysis: New Trade Agreement with Central America and the Dominican Republic-2005 | |
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| Free Trade or Protection? | |
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| The Case for Free Trade | |
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| The Case for Protection | |
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| Further Exploration: A Petition | |
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| An Economic Consensus | |
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| Summary | |
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| Review Terms and Concepts | |
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| Problem Set | |
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| Globalization | |
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| The Global Circular Flow | |
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| A Brief History of Economic Globalization | |
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| The Benefits and Costs of Globalization | |
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| The Free-Trade Debate Revisited | |
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| Trade, Growth, and Poverty | |
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| The Globalization of Labor Markets: The Economics of Immigration and Outsourcing | |
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| Capital Mobility | |
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| News Analysis: Outsourcing Is Not Just Customer Service Reps in India | |
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| Public Policy and Globalization | |
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| Global Externalities and Public Goods | |
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| Nongovernmental Organizations and International Economics: The Washington Consensus | |
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| Globalization, Capitalism, and Democracy | |
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| A Final Word | |
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| Summary | |
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| Review Terms and Concepts | |
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| Problem Set | |
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| Economic Growth in Developing and Transitional Economies | |
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| Life in the Developing Nations: Population and Poverty | |
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| Economic Development: Sources and Strategies | |
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| The Sources of Economic Development | |
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| Strategies for Economic Development | |
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| News Analysis: Trade and Development in Africa-2003 | |
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| Growth versus Development: The Policy Cycle | |
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| Issues in Economic Development | |
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| Population Growth | |
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| Developing-Country Debt Burdens | |
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| Economies in Transition | |
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| Political Systems and Economic Systems: Socialism, Capitalism, and Communism | |
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| Central Planning versus The Market | |
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| The End of the Soviet Union | |
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| The Transition to a Market Economy | |
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| Six Basic Requirements for Successful Transition | |
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| News Analysis: Russia's Economy in 2005 | |
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| Summary | |
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| Review Terms and Concepts | |
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| Problem Set | |
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| Glossary | |
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| Solutions to Even-Numbered Problems | |
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| Index | |
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| Photo Credits | |