“Stories are good for us, whether we hear them, read them, write them, or simply imagine them. But stories that we read are particularly good for us. In fact I believe they are essential.”

Frank Smith, Reading: FAQ

More than a decade ago, when we began writing the first edition of this textbook, we had many small ideas: particular aspects of economics that we believed weren’t covered the right way in existing textbooks. But we also had one big idea: the belief that an economics textbook could and should be built around narratives, that it should never lose sight of the fact that economics is, in the end, a set of stories about what people do.

Many of the stories economists tell take the form of models—for whatever else they are, economic models are stories about how the world works. But we believed that students’ understanding of and appreciation for models would be greatly enhanced if they were presented, as much as possible, in the context of stories about the real world, stories that both illustrate economic concepts and touch on the concerns we all face as individuals living in a world shaped by economic forces.

Those stories have been integrated into every edition, including this one, which contains more stories than our earlier editions. Once again, you’ll find them in the chapter opening stories, in boxed features like Economics in Action, For Inquiring Minds, and Global Comparisons, but now in our new Business Cases as well.

As in the previous edition, we’ve made extensive changes and updates in coverage to reflect current events—events that have come thick and fast in a turbulent, troubled world economy, which is affecting the lives and prospects of students everywhere. Currency is very important to us.

We have also expanded our coverage of business issues, both because business experience is a key source of economic lessons and because most students will eventually find themselves working in the business world. We are especially pleased with how the new Business Cases have turned out and how they augment the overall number and richness of our stories.

As you’ll see, there’s a great deal of new material, and there are some significant changes (and, we hope, improvements) in pedagogy. But we’ve tried to keep the spirit the same. This is a book about economics as the study of what people do and how they interact, a study very much informed by real-world experience.

When we were approached about the possibility of adapting the latest edition of Paul and Robin’s wonderful book for the Canadian market we were incredibly excited. The U.S. edition of the text, which started out as a top-tier product, has only improved with each new edition.

We believe the narratives approach adopted by Paul and Robin is an excellent way to expose students to the beauty of economics and its power to explain and understand the world we all live in.

Many of the narratives contained in the chapter opening stories, Economics in Action, For Inquiring Minds, Global Comparisons, and Business Cases have been altered, sometimes significantly, so as to infuse them with content relevant to Canadians. Of course Canadians, living in an open economy that is quite dependent on trade, are used to thinking about global economic issues and linkages. With that in mind a few of the narratives have not changed much from what appeared in the third U.S. edition. Throughout we have taken great care whenever altering the text so as to maintain the quality of the underlying narratives.

Chapter 7 was revised to deal specifically with the major types of taxes collected by different levels of government in Canada. Chapter 18, which provides a discussion of the welfare state, was almost entirely rewritten so as to properly cover the material from a Canadian perspective. The chapter also covers our health care system, comparing it to other systems around the world. Of course the coverage of many other concepts and theories have been given a Canadian treatment as well.

We are extremely pleased to be able to do our part to bring these narratives to a Canadian audience. If, after reading this text, some students decide that economics is really interesting and go on to take additional economics courses, we would be happy. But most importantly, we hope that all students feel this text greatly enhances and assists their study of economics.

Although the second U.S. edition was a resounding success, further establishing Microeconomics as one of the best-selling microeconomics textbooks in the United States, we learn with each new edition that there is always room for improvement. So, for the second Canadian edition, we undertook each revision with four goals in mind:

We hope that the following revisions lead to a more successful teaching experience for you.

Now, more than ever, students entering the business community need a strong understanding of economic principles and their applications to business decisions. To meet this demand, every chapter now concludes with a real-world Business Case, showing how the economic issues discussed in the chapter play out in the world of entrepreneurs and bottom lines.

The cases range from the story of the trading firm Li & Fung, which is in the business of making money from comparative advantage, to a look at how smartphones are making the retail market for electronics much more competitive, to an examination of how lean production techniques at Boeing and Toyota have impacted comparative advantage in the airline and auto industries. The cases provide insight into business decision making in both Canadian and international companies and at recognizable firms like Air Canada, Amazon, and Priceline. Lesser-known firms are also used to illustrate economic concepts behind the supply costs of labour during seasonal work (Kiva Systems and the debate on human versus robotic order fulfillment), the role of incentives in the preservation of endangered species (Mauricedale Game Ranch), and the willingness of consumers to pay a premium for fair trade clothing (Knights Apparel’s Alta Gracia factory in the Dominican Republic).

Each case is followed by critical thinking questions that prompt students to apply the economics they learned in the chapter to the real-life business situations.

We have added a completely new section on behavioural economics to Chapter 9, “Decision Making by Individuals and Firms,” because more and more principles instructors are including this groundbreaking perspective on “irrational” decision making in their courses. Originating in the research of Amos Tversky and Nobel laureate Daniel Kahneman, and further developed by a new generation of economists, this exciting subdiscipline probes multiple fallacies of the human mind.

Our coverage in the second Canadian edition includes such topics as how fairness intercedes in decision making, the effect of decisions made under risk and uncertainty, misperceptions of opportunity costs, and the dangers of overconfidence. We firmly believe that by learning how people make persistently irrational choices, students gain a deeper understanding of what constitutes rational economic decision making.

The second Canadian edition is updated to remain the most current textbook on the market in its data, examples, and the opening stories—a currency that drives student interest in each chapter.

Economics in Action: A Richer Story to Be Told Students and instructors alike have always championed Microeconomics for its applications of economic principles, especially our Economics in Action feature. In the second Canadian edition, we have revised or replaced a significant number of Economics in Action applications in every single chapter. We believe this provides the richness of content that drives student and instructor interest. All Economics in Action features are listed on the inside cover.

Opening Stories We have always taken great care to ensure that each chapter’s opening story illustrates the key concepts of that chapter in a compelling and accessible way. To continue to do so, almost every story in the second Canadian edition was updated and nearly half were replaced in an effort to bridge the gap between economic concepts and student interest in the world around them. New openers include the story of the Bombardier CSeries jets and their genesis in the wind tunnels that the Wright brothers built at Kitty Hawk; the story behind the 2013 scandal of price fixing in the chocolate industry; and the story of Maria, who in 2009 lost her job after 24 years and decided to return to school to become a social worker, as it reflects the decisions some mid-life workers must make in a depressed economy.

Coverage of Public Policy The new edition continues to offer a significant examination of real-world policy that helps students see how the nation engages in public policy. We’ve included up-to-date coverage of both the sustainability of Canadian health care and the recent U.S. health care reform in Chapter 18, “The Economics of the Welfare State,” plus much more.

Streamlined Chapters Because less is often more, we’ve streamlined the exposition in a number of places where our desire for thoroughness got a little ahead of our pedagogy. The chapters on oligopoly and externalities, in particular, are now shorter and smoother in this edition.

A More Visual Exposition The research tells us that students read more online, in shorter bursts, and respond better to visual representations of information than ever before. In the second Canadian edition, we’ve worked hard to present information in the format that best teaches students.

We’ve shortened our paragraphs for easier reading and included numbered and bulleted lists whenever content would allow. You will find helpful new summary tables in this edition. And, most helpful, are the new visual displays in the book, including the dynamic representations of the factors that shift demand and the factors that shift supply, among others.

Our basic approach to textbook writing remains unchanged:

We realize that some of our chapters will be considered optional. Below is a list of what we view as core chapters and those that could be considered optional. We’ve annotated the list of chapters to indicate what they cover should you wish to consider incorporating them into your course.

Worth Publishers is pleased to offer an enhanced and completely revised supplements and media package to accompany this textbook. The package has been crafted to help instructors teach their principles course and to give students the tools to develop their skills in economics.

Instructor’s Resource Manual with Solutions Manual The Instructor’s Resource Manual, is a resource meant to provide materials and tips to enhance the classroom experience. The Instructor’s Resource Manual provides the following:

Computerized Printed Test Bank Coordinator and Consultant: Doris Bennett, Jacksonville State University. The Test Bank is available in CD-ROM format for both Windows and Macintosh users. With this program, instructors can easily create and print tests and write and edit questions. Tests can be printed in a wide range of formats. The software’s unique synthesis of flexible word-processing and database features creates a program that is extremely intuitive and capable. Totalling over 4500 questions, the Test Bank offers multiple-choice, true/false, and short-answer questions designed for comprehensive coverage of the text concepts. Questions have been checked for continuity with the text content, overall usability, and accuracy.

The Test Bank features include the following:

Lecture PowerPoint Presentation The enhanced PowerPoint presentation slides are designed to assist you with lecture preparation and presentations. The slides are organized by topic and contain graphs, data tables, and bulleted lists of key concepts suitable for lecture presentation. Key figures from the text are replicated and animated to demonstrate how they build. The slides have been designed to allow for easy editing of graphs and text. These slides can be customized to suit your individual needs by adding your own data, questions, and lecture notes.

CoursePacks Plug our content into your course management system. Whatever you teach, or whether you use Blackboard, WebCT, Desire2Learn, Angel, Sakai, or Moodle to manage your course, we have free content and support available. Registered instructors can download cartridges with no hassle, no strings attached. Content includes our most popular free resources and book-specific content. For more information, go to http://worthpublishers.com/catalog/Other/Coursepack.

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Our deep appreciation and heartfelt thanks to the following reviewers, class-testers, and contributors whose input helped us shape this third U.S. edition.

We are indebted to the following reviewers for their suggestions and advice on improving the second Canadian edition.

We owe a huge debt of gratitude to Paul Krugman and Robin Wells who, with the assistance of many of the people named above, have created a wonderful text that is both a pleasure to read and a great tool for learning. We also benefitted from the extensive work undertaken by Anthony Myatt for the first Canadian edition.

We would like to thank all the fine people at Worth Publishers. In particular we are indebted to Chris Spavins who was the Worth sales representative that first recommended us for this project. Charles Linsmeier, publisher, skillfully guided the project along, providing us lots of freedom, but carefully nudging us or others whenever he sensed an improvement could be reached. Julia Jevmenova, field manager in the Canadian market, has provided plenty of support and marketing advice. We would also like to thank Tracey Kuehn, Barbara Seixas, Sharon Balbos, Craig Bleyer, and, of course, Elizabeth Widdicombe for making this project possible.

We have also benefitted greatly from all the hard work of the fantastic team at First Folio. Brad Smith patiently edited the drafts and acted as a sounding board for new ideas and refinements. Kim Hutchinson ensured the formatting and illustrating remained clear and concise. Arleane Ralph efficiently copy-edited and proofread the entire manuscript. Julie Kretchman acted as the project manager and helped make sure everyone had what they needed to stay on schedule.

We can honestly say that until you work on a project like this you truly don’t understand the impact of the vast array of experts and professionals who are assembled to bring such an undertaking to completion. We are indebted to them all. Their assistance has not only made this text possible, it has made it much better.

Lastly, we would like to thank our families for all the love, support, and understanding they have provided us over the years. We hope that this book can help them, and the next generation of students, understand why we think economics is so cool.

Iris Au   Jack Parkinson

We must also thank the many people at Worth Publishers for their contributions. Elizabeth Widdicombe, president of Freeman and Worth, and Catherine Woods, senior vice president, played an important role in planning for this revision. We have Liz to thank for the idea that became the Business Case in each chapter. Charles Linsmeier, publisher, ably oversaw the revision and contributed throughout. A special thanks to Craig Bleyer, our original publisher at Worth and now national sales director, who put so much of his effort into making each edition a success. His keen instincts showed again in the revision plan for this edition.

Once again, we have had an incredible production and design team on the third U.S. edition, people whose hard work, creativity, and dedication paid off as we developed the second Canadian edition. Once again, you have outdone yourselves. Thank you all: Tracey Kuehn, Lisa Kinne, and Anthony Calcara for producing this book; Babs Reingold and Lyndall Culbertson for their beautiful interior design which is the basis for this second Canadian edition; Barbara Seixas, who worked her magic yet again despite the vagaries of the project schedule; Cecilia Varas and Elyse Rieder for photo research; Stacey Alexander for coordinating all the production of the supplemental materials.

Many thanks to Marie McHale for devising and coordinating the impressive collection of media and supplements that accompany our book. Thanks to the incredible team of supplements writers and coordinators who worked with Marie on the supplements and media package; we are forever grateful for your tireless efforts.

And most of all, special thanks to Sharon Balbos, executive development editor on each of our editions. Much of the success of this book is owed to Sharon’s dedication and professionalism. As always, she kept her cool through rough spots. Sharon, we’re not sure we deserved an editor as good as you, but we’re sure that everyone involved as well as our adopters and their students have been made better off by your presence.

Paul Krugman   Robin Wells