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• Title Page
• Copyright Page
• About the Authors
• Brief Contents
• Contents
• Preface
• Part I Introduction to Economics
• 1 The Scope and Method of Economics
• Why Study Economics?
• To Learn a Way of Thinking
• Economics in Practice Rainfall and Schooling in India
• Economics in Practice Majoring in Economics Makes You Less Vulnerable to a Recession!
• To Understand Society
• To Be an Informed Citizen
• The Scope of Economics
• Microeconomics and Macroeconomics
• Economics in Practice How Italian Is a Ferrari?
• The Diverse Fields of Economics
• The Method of Economics
• Theories and Models
• Economics in Practice Does Your Part-Time Job Affect Your Academic Performance?
• Economic Policy
• An Invitation
• Economic Skills and Economics as a Career
• Summary
• Review Terms and Concepts
• Problems
• Appendix: How to Read and Understand Graphs
• 2 The Economic Problem: Scarcity and Choice
• Scarcity, Choice, and Opportunity Cost
• Scarcity and Choice in a One-person Economy
• Scarcity and Choice in an Economy of Two or More
• Economics in Practice Frozen Foods and Opportunity Costs
• The Production Possibility Frontier
• The Economic Problem
• Economics in Practice Changing Consumption Patterns in China
• Economic Systems and the Role of Government
• Command Economies
• Laissez-Faire Economies: The Free Market
• Mixed Systems, Markets, and Governments
• Looking Ahead
• Summary
• Review Terms and Concepts
• Problems
• 3 Demand, Supply, and Market Equilibrium
• Firms and Households: the Basic Decision-making Units
• Input Markets and Output Markets: the Circular Flow
• Demand in Product/output Markets
• Changes in Quantity Demanded Versus Changes in Demand
• Price and Quantity Demanded: the Law of Demand
• Other Determinants of Household Demand
• Economics in Practice Have You Bought This Textbook?
• Economics in Practice People Drink Tea on Rainy Days
• Shift of Demand Versus Movement Along a Demand Curve
• From Household Demand to Market Demand
• Supply in Product/output Markets
• Price and Quantity Supplied: the Law of Supply
• Other Determinants of Supply
• Shift of Supply Versus Movement Along a Supply Curve
• From Individual Supply to Market Supply
• Market Equilibrium
• Excess Demand
• Excess Supply
• Market Equilibrium with Equations
• Changes in Equilibrium
• Economics in Practice Quinoa
• Demand and Supply in Product Markets: A Review
• Economics in Practice “Shrinkflation” During Festive Seasons
• Looking Ahead: Markets and the Allocationof Resources
• Summary
• Review Terms and Concepts
• Problems
• 4 Demand and Supply Applications
• The Price System: Rationing and Allocating Resources
• Price Rationing
• Constraints on the Market and Alternative Rationing Mechanisms
• Economics in Practice Why Do I Have to Pay More for My Food? the Truth Behind the Flood Crises
• Prices and the Allocation of Resources
• Price Floor
• Supply and Demand Analysis: Tariffs (tax)
• Economics in Practice The Price Mechanism at Work for Shakespeare
• Supply and Demand and Market Efficiency
• Consumer Surplus
• Producer Surplus
• Competitive Markets Maximize the Sum of Producer and Consumer Surplus
• Potential Causes of Deadweight Loss from Underand Overproduction
• Looking Ahead
• Summary
• Review Terms and Concepts
• Problems
• 5 Elasticity
• Price Elasticity of Demand
• Slope and Elasticity
• Types of Elasticity
• Calculating Elasticities
• Calculating Percentage Changes
• Elasticity Is a Ratio of Percentages
• The Midpoint Formula
• Elasticity Changes Along a Straight-line Demand Curve
• Elasticity and Total Revenue
• The Determinants of Demand Elasticity
• Availability of Substitutes
• The Importance of Being Unimportant
• Luxuries Versus Necessities
• Economics in Practice Elasticities at a Delicatessen in the Short Run and Long Run
• The Time Dimension
• Other Important Elasticities
• Income Elasticity of Demand
• Cross-price Elasticity of Demand
• Elasticity of Supply
• Economics in Practice Brexit and EU Student Enrolment in the United Kingdom
• What Happens When We Raise Taxes: Using Elasticity
• Looking Ahead
• Summary
• Review Terms and Concepts
• Problems
• Part II The Market System
• 6 Household Behavior and Consumer Choice
• Household Choice in Output Markets
• The Determinants of Household Demand
• The Budget Constraint
• The Equation of the Budget Constraint
• The Basis of Choice: Utility
• Diminishing Marginal Utility
• Allocating Income to Maximize Utility
• The Utility-maximizing Rule
• Economics in Practice Sugar Tax in Chile
• Diminishing Marginal Utility and Downward-sloping Demand
• Income and Substitution Effects
• The Income Effect
• The Substitution Effect
• Household Choice in Input Markets
• The Labor Supply Decision
• Economics in Practice Substitution and Market Baskets
• The Price of Leisure
• Income and Substitution Effects of a Wage Change
• Economics in Practice Part-time Employment for Students
• Saving and Borrowing: Present Versus Future Consumption
• A Review: Households in Output and Input Markets
• Summary
• Review Terms and Concepts
• Problems
• Appendix: Indifference Curves
• 7 The Production Process: The Behavior of Profit-Maximizing Firms
• The Behavior of Profit-maximizing Firms
• Profits and Economic Costs
• Short-run Versus Long-run Decisions
• The Bases of Decisions: Market Price of Outputs, Available Technology, and Input Prices
• The Production Process
• Production Functions: Total Product, Marginal Product, and Average Product
• Production Functions with Two Variable Factors of Production
• Economics in Practice Gains from Modern Management
• Choice of Technology
• Economics in Practice How Soon Should Preventive Maintenance Be Employed?
• Looking Ahead: Cost and Supply
• Summary
• Review Terms and Concepts
• Problems
• Appendix: Isoquants and Isocosts
• 8 Short-Run Costs and Output Decisions
• Costs in the Short Run
• Fixed Costs
• Variable Costs
• Economics in Practice How Much Do Phantom Tickets Cost Their Producers?
• Total Costs
• Short-run Costs: a Review
• Output Decisions: Revenues, Costs, and Profit Maximization
• Perfect Competition
• Total Revenue and Marginal Revenue
• Comparing Costs and Revenues to Maximize Profit
• The Short-run Supply Curve
• Looking Ahead
• Summary
• Review Terms and Concepts
• Problems
• 9 Long-Run Costs and Output Decisions
• Short-run Conditions and Long-run Directions
• Maximizing Profits
• Minimizing Losses
• The Short-run Industry Supply Curve
• Long-run Directions: a Review
• Long-run Costs: Economies and Diseconomies of Scale
• Increasing Returns to Scale
• Economics in Practice Economies of Scale in Mobile Services
• Constant Returns to Scale
• Diseconomies of Scale
• Economics in Practice Diseconomies of Scale in Secondary School Education
• U-shaped Long-run Average Costs
• Economics in Practice The Long-run Average Cost Curve: Flat or U-shaped?
• Long-run Adjustments to Short-run Conditions
• Short-run Profits: Moves in and Out of Equilibrium
• The Long-run Adjustment Mechanism: Investment Flows Toward Profit Opportunities
• Output Markets: a Final Word
• Economics in Practice Why Is Food So Expensive at an Airport?
• Summary
• Review Terms and Concepts
• Problems
• Appendix: External Economies and Diseconomies
• 10 Input Demand: The Labor and Land Markets
• Input Markets: Basic Concepts
• Demand for Inputs: A Derived Demand
• Marginal Revenue Product
• Economics in Practice MBA or Not for the Greek Youth?
• Economics in Practice How Much Is Flexibility Worth?
• Labor Supply
• Labor Markets
• The Firm’s Labor Market Decision
• Economics in Practice What Does Your Favorite La Liga Player Make?
• Many Labor Markets
• Land Markets
• Rent and the Value of Output Produced on Land
• Economics in Practice Land Valuation
• Input Demand Curves
• Shifts in Factor Demand Curves
• Profit-maximizing Condition in Input Markets
• Looking Ahead
• Summary
• Review Terms and Concepts
• Problems
• 11 Input Demand: The Capital Market and the Investment Decision
• Capital and Investment
• Capital
• The Demand for New Capital and the Investment Decision
• Forming Expectations
• Comparing Costs and Expected Returns
• The Capital Market
• Economics in Practice Saudi Arabia’s Vision 2030
• Capital Income: Interest and Profits
• Financial Markets in Action
• Economics in Practice The Stock Market
• Economics in Practice Do Children Learn or Inherit Investing Strategies from Their Parents?
• Capital Accumulation and Allocation
• A Final Word on Capital
• Summary
• Review Terms and Concepts
• Problems
• Appendix: Calculating Present Value
• 12 General Equilibrium and the Efficiency of Perfect Competition
• Market Adjustment to Changes in Demand
• Allocative Efficiency and Competitive Equilibrium
• Pareto Efficiency
• Economics in Practice Cutting Rice Cultivation and Water Rationing in Egypt
• The Efficiency of Perfect Competition
• Perfect Competition Versus Real Markets
• The Sources of Market Failure
• Imperfect Competition
• Public Goods
• Externalities
• Imperfect Information
• Evaluating the Market Mechanism
• Summary
• Review Terms and Concepts
• Problems
• Part III Market Imperfections and the Role of Government
• 13 Monopoly and Antitrust Policy
• Imperfect Competition and Market Power: Core Concepts
• Forms of Imperfect Competition and Market Boundaries
• Price and Output Decisions in Pure Monopoly Markets
• Demand in Monopoly Markets
• Economics in Practice Figuring Out the Right Price
• Perfect Competition and Monopoly Compared
• Monopoly in the Long Run: Barriers to Entry
• Economics in Practice Is Being a Monopolist Always Good?
• The Social Costs of Monopoly
• Inefficiency and Consumer Loss
• Rent-seeking Behavior
• Price Discrimination
• Examples of Price Discrimination
• Economics in Practice Price Discrimination at Work: the Uffizi Gallery
• Remedies for Monopoly: Antitrust Policy
• Major Antitrust Legislation
• Economics in Practice What Tesla Does with Near-monopoly Power
• Imperfect Markets: A Review and a Look Ahead
• Summary
• Review Terms and Concepts
• Problems
• 14 Oligopoly
• Market Structure in an Oligopoly
• Economics in Practice Patents in the Smartphone Industry
• Oligopoly Models
• The Collusion Model
• The Price-leadership Model
• Economics in Practice The Philippines’ Rice Cartel
• The Cournot Model
• Economics in Practice The Economics of Treating Cancer
• Game Theory
• Repeated Games
• Economics in Practice Confusing Prices
• A Game with Many Players: Collective Action Can Be Blocked by a Prisoner’s Dilemma
• Oligopoly and Economic Performance
• Industrial Concentration and Technological Change
• The Role of Government
• Regulation of Mergers
• Economics in Practice Brazil’s Pulp Giant
• A Proper Role for Government?
• Summar
• Review Terms and Concepts
• Problems
• 15 Monopolistic Competition
• Industry Characteristics
• Product Differentiation and Advertising
• How Many Varieties?
• How Do Firms Differentiate Products?
• Economics in Practice Rational Excess Variety or Diversification Bias?
• Economics in Practice Even Your Hair Needs Coaching
• Advertising
• Economics in Practice Oprah Winfrey’s Celebrity Endorsements Sell Books!
• Price and Output Determination in Monopolistic Competition
• Product Differentiation and Demand Elasticity
• Price/output Determination in the Short Run
• Price/output Determination in the Long Run
• Economic Efficiency and Resource Allocation
• Summary
• Review Terms and Concepts
• Problems
• 16 Externalities, Public Goods, and Common Resources
• Externalities and Environmental Economics
• Marginal Social Cost and Marginal Cost Pricing
• Economics in Practice Adjusting to the Environmental Effects of Globalization
• Costs and Benefits of Pollution
• Internalizing Externalities
• Economics in Practice The Cost of Emissions
• Economics in Practice Emissions and Electricity Prices
• Public (social) Goods
• The Characteristics of Public Goods
• Public Provision of Public Goods
• Optimal Provision of Public Goods
• Local Provision of Public Goods: Tiebout Hypothesis
• Common Resources
• Summary
• Review Terms and Concepts
• Problems
• 17 Uncertainty and Asymmetric Information
• Decision Making Under Uncertainty: the Tools
• Expected Value
• Expected Utility
• Attitudes Toward Risk
• Asymmetric Information
• Adverse Selection
• Economics in Practice Adverse Selection in the Healthcare Market
• Market Signaling
• Economics in Practice The Health Care Mandate
• Economics in Practice How to Read Advertisements
• Moral Hazard
• Incentives
• Economics in Practice Independent Reviews and Wanderlust
• Labor Market Incentives
• Summary
• Review Terms and Concepts
• Problems
• 18 Income Distribution and Poverty
• The Sources of Household Income
• Wages and Salaries
• Income from Property
• Income from the Government: Transfer Payments
• The Distribution of Market Income
• Income Inequality in the United States
• Causes of Inequality in Market Income
• Inequality in Wage Income
• Economics in Practice Inclusive Growth in South Africa
• Economics in Practice Social Identity and Tech Jobs
• Inequality in Property Income
• Economics in Practice The Egyptian Revolution of Dignity
• Arguments for and Against Reducing Market-income Inequality
• Arguments Against Redistribution
• Arguments in Favor of Redistribution
• Redistribution of Income Through Taxes and Transfers
• The Tax System
• The Transfer System
• Redistribution Effects of Taxes and Transfers in 2013
• Change in U.s. Inequality over Time: 1979–2013
• Poverty
• The Minimum Wage
• The Distribution of Wealth
• Income Inequality in Other Countries
• Government or the Market? A Review
• Summary
• Review Terms and Concepts
• Problems
• 19 Public Finance: the Economics of Taxation
• The Basics of Taxation
• Taxes: Basic Concepts
• Economics in Practice Residential Property Taxes in Singapore
• Tax Incidence: Who Pays?
• The Incidence of Payroll Taxes
• The Incidence of Corporate Profits Taxes
• Economics in Practice Economists Argue About the Incidence of the Corporate Profits Tax
• The Overall Incidence of Taxes in the United States: Empirical Evidence
• Excess Burdens and the Principle of Neutrality
• Measuring Excess Burdens
• Excess Burdens and the Degree of Distortion
• The Principle of Second Best
• Optimal Taxation
• Tax Equity
• What Is the “best” Tax Base?
• Social Choice
• The Voting Paradox
• Government Inefficiency: Theory of Public Choice
• Rent-seeking Revisited
• Summary
• Review Terms and Concepts
• Problems
• Part IV The World Economy
• 20 International Trade, Comparative Advantage, and Protectionism
• Trade Surpluses and Deficits
• The Economic Basis for Trade: Comparative Advantage
• Absolute Advantage Versus Comparative Advantage
• Terms of Trade
• Exchange Rates
• The Sources of Comparative Advantage
• The Heckscher-ohlin Theorem
• Other Explanations for Observed Trade Flows
• Trade Barriers: Tariffs, Export Subsidies, and Quotas
• Economics in Practice Globalization Improves Firm Productivity
• U.s. Trade Policies, Gatt, and the Wto
• Economics in Practice What Happens When We Lift a Quota?
• Free Trade or Protection?
• The Case for Free Trade
• The Case for Protection
• Economics in Practice Reshaping the Global Trade Order
• An Economic Consensus
• Summary
• Review Terms and Concepts
• Problems
• 21 Economic Growth in Developing Economies
• Life in the Developing Nations: Population and Poverty
• Economics in Practice What Can We Learn from the Height of Children?
• Economic Development: Sources and Strategies
• The Sources of Economic Development
• Economics in Practice Corruption
• Strategies for Economic Development
• Economics in Practice Who You Marry May Depend on the Rain
• Two Examples of Development: China and India
• Economics in Practice Boosting Agricultural Income Through Digital Finance
• Development Interventions
• Random and Natural Experiments: Some New Techniques in Economic Development
• Education Ideas
• Health Improvements
• Summary
• Review Terms and Concepts
• Problems
• Part V Methodology
• 22 Critical Thinking About Research
• Selection Bias
• Causality
• Correlation Versus Causation
• Random Experiments
• Regression Discontinuity
• Economics in Practice Moving to Opportunity
• Economics in Practice Control Groups and Experimental Economics
• Difference-in-differences
• Economics in Practice Using Difference-in-differences to Study the Efficacy of Medical Insurance in
• Statistical Significance
• Regression Analysis
• Summary
• Review Terms and Concepts
• Problems
• Glossary
• Index
• Photo Credits