Front Matter Introduction
ABOUT THE AUTHORS
PREFACE: TO THE INSTRUCTOR
What's New in the Third Edition?
What's in the Chapters?
Alternative Paths through the Book
Media and Supplements
Acknowledgements
Chapter Introduction
Big Idea One: Incentives Matter
Big Idea Two: Good Institutions Align Self-Interest with the Social Interest
Big Idea Three: Trade-offs Are Everywhere
Big Idea Four: Thinking on the Margin
Big Idea Five: The Power of Trade
Big Idea Six: The Importance of Wealth and Economic Growth
Big Idea Seven: Institutions Matter
Big Idea Eight: Economic Booms and Busts Cannot Be Avoided but Can Be Moderated
Big Idea Nine: Prices Rise When the Government Prints Too Much Money
Big Idea Ten: Central Banking Is a Hard Job
The Biggest Idea of All: Economics Is Fun
KEY CONCEPTS
CHAPTER REVIEW
Chapter Introduction
Trade and Preferences
Specialization, Productivity, and the Division of Knowledge
Comparative Advantage
Trade and Globalization
Takeaway
KEY CONCEPTS
CHAPTER REVIEW
Chapter Introduction
The Demand Curve for Oil
Consumer Surplus
What Shifts the Demand Curve?
The Supply Curve for Oil
Producer Surplus
What Shifts the Supply Curve?
Takeaway
KEY CONCEPTS
CHAPTER REVIEW
Chapter Introduction
Equilibrium and the Adjustment Process
A Free Market Maximizes Producer Plus Consumer Surplus (the Gains from Trade)
Does the Model Work? Evidence from the Laboratory
Shifting Demand and Supply Curves
Terminology: Demand Compared with Quantity Demanded and Supply Compared with Quantity Supplied
Understanding the Price of Oil
Takeaway
KEY CONCEPTS
CHAPTER REVIEW
Chapter Introduction
The Elasticity of Demand
Applications of Demand Elasticity
The Elasticity of Supply
Applications of Supply Elasticity
Using Elasticities for Quick Predictions (Optional)
Takeaway
KEY CONCEPTS
CHAPTER REVIEW
CHAPTER 5 APPENDIX 1 Other Types of Elasticities
The Cross-Price Elasticity of Demand
The Income Elasticity of Demand
CHAPTER 5 APPENDIX 2 Using Excel to Calculate Elasticities
Chapter Introduction
Commodity Taxes
Who Ultimately Pays the Tax Does Not Depend on Who Writes the Check
Who Ultimately Pays the Tax Depends on the Relative Elasticities of Supply and Demand
A Commodity Tax Raises Revenue and Creates a Deadweight Loss (Reduces the Gains from Trade)
Subsidies
Takeaway
CHAPTER REVIEW
Chapter Introduction
Markets Link the World
Markets Link to One Another
Solving the Great Economic Problem
A Price Is a Signal Wrapped Up in an Incentive
Speculation
Signal Watching
Prediction Markets
Takeaway
KEY CONCEPTS
CHAPTER REVIEW
Chapter Introduction
Price Ceilings
Rent Controls (Optional Section)
Arguments for Price Ceilings
Universal Price Controls
Price Floors
Takeaway
KEY CONCEPTS
CHAPTER REVIEW
Chapter Introduction
Analyzing Trade with Supply and Demand
The Costs of Protectionism
Arguments Against International Trade
Takeaway
KEY CONCEPTS
CHAPTER REVIEW
Chapter Introduction
External Costs, External Benefits, and Efficiency
Private Solutions to Externality Problems
Government Solutions to Externality Problems
Takeaway
KEY CONCEPTS
CHAPTER REVIEW
Chapter Introduction
What Price to Set?
What Quantity to Produce?
Profits and the Average Cost Curve
Entry, Exit, and Shutdown Decisions
Entry, Exit, and Industry Supply Curves
Takeaway
KEY CONCEPTS
CHAPTER REVIEW
CHAPTER 11 APPENDIX Using Excel to Graph Cost Curves
Chapter Introduction
Invisible Hand Property 1: The Minimization of Total Industry Costs of Production
Invisible Hand Property 2: The Balance of Industries
Creative Destruction
The Invisible Hand Works with Competitive Markets
Takeaway
KEY CONCEPTS
CHAPTER REVIEW
Chapter Introduction
Market Power
How a Firm Uses Market Power to Maximize Profit
The Costs of Monopoly: Deadweight Loss
The Costs of Monopoly: Corruption and Inefficiency
The Benefits of Monopoly: Incentives for Research and Development
Economies of Scale and the Regulation of Monopoly
Other Sources of Market Power
Takeaway
KEY CONCEPTS
CHAPTER REVIEW
Chapter Introduction
Price Discrimination
Price Discrimination Is Common
Is Price Discrimination Bad?
Tying and Bundling
Takeaway
KEY CONCEPTS
CHAPTER REVIEW
CHAPTER 14 APPENDIX Solving Price Discrimination Problems with Excel (Advanced Section)
Chapter Introduction
Cartels
The Prisoner's Dilemma
Oligopolies
When Are Cartels and Oligopolies Most Successful?
Government Policy toward Cartels and Oligopolies
Business Strategy and Changing the Game
Takeaway
KEY CONCEPTS
CHAPTER REVIEW
CHAPTER 15 APPENDIX Nash Equilibrium
CHAPTER 15 APPENDIX QUESTIONS
Chapter Introduction
Network Goods Are Usually Sold by Monopolies or Oligopolies
The "Best" Product May Not Always Win
Competition Is "For the Market" Instead of "In the Market"
Antitrust and Network Goods
Music Is a Network Good
Takeaway
KEY CONCEPTS
CHAPTER REVIEW
Chapter Introduction
Sources of Product Differentiation
The Monopolistic Competition Model
The Economics of Advertising
Takeaway
KEY CONCEPTS
CHAPTER REVIEW
Chapter Introduction
The Demand for Labor and the Marginal Product of Labor
Supply of Labor
Labor Market Issues
How Bad Is Labor Market Discrimination, or Can Lakisha Catch a Break?
Takeaway
KEY CONCEPTS
CHAPTER REVIEW
Chapter Introduction
Four Types of Goods
Private Goods and Public Goods
Club Goods
Common Resources and the Tragedy of the Commons
Takeaway
KEY CONCEPTS
CHAPTER REVIEW
CHAPTER 19 APPENDIX The Tragedy of the Commons: How Fast?
Chapter Introduction
Voters and the Incentive to Be Ignorant
Special Interests and the Incentive to Be Informed
A Formula for Political Success: Diffuse Costs, Concentrate Benefits
Voter Myopia and Political Business Cycles
Two Cheers for Democracy
Takeaway
KEY CONCEPTS
CHAPTER REVIEW
Chapter Introduction
The Case for Exporting Pollution and Importing Kidneys
Exploitation
Meddlesome Preferences
Fair and Equal Treatment
Cultural Goods and Paternalism
Poverty, Inequality, and the Distribution of Income
Who Counts? Immigration
Economic Ethics
Takeaway
KEY CONCEPTS
CHAPTER REVIEW
Chapter Introduction
Lesson One: You Get What You Pay For
Lesson Two: Tie Pay to Performance to Reduce Risk
Lesson Three: Money Isn't Everything
Lesson Four: Nudges Can Work
Takeaway
KEY CONCEPTS
CHAPTER REVIEW
Chapter Introduction
Passive vs. Active Investing
Why Is It Hard to Beat the Market?
How to Really Pick Stocks, Seriously
Other Benefits and Costs of Stock Markets
Takeaway
KEY CONCEPTS
CHAPTER REVIEW
Chapter Introduction
Moral Hazard
Adverse Selection
Signaling as a Response to Asymmetric Information
Takeaway
KEY CONCEPTS
CHAPTER REVIEW
Chapter Introduction
How to Compare Apples and Oranges
The Demand Curve
The Budget Constraint
Preferences and Indifference Curves
Optimization and Consumer Choices
The Income and Substitution Effects
Applications of Income and Substitution Effects
Takeaway
KEY CONCEPTS
CHAPTER REVIEW
Chapter Introduction
What Is GDP?
Growth Rates
Nominal vs. Real GDP
Cyclical and Short-Run Changes in GDP
The Many Ways of Splitting GDP
Problems with GDP as a Measure of Output and Welfare
Takeaway
KEY CONCEPTS
CHAPTER REVIEW
Chapter Introduction
Key Facts about the Wealth of Nations and Economic Growth
Understanding the Wealth of Nations
Incentives and Institutions
Takeaway
KEY CONCEPTS
CHAPTER REVIEW
CHAPTER 27 APPENDIX The Magic of Compound Growth Using a Spreadsheet
CHAPTER 27 APPENDIX QUESTIONS
Chapter Introduction
The Solow Model and Catching-Up Growth
The Investment Rate and Conditional Convergence
New Ideas and Cutting-Edge Growth
The Economics of Ideas
The Future of Economic Growth
Takeaway
KEY CONCEPTS
CHAPTER REVIEW
CHAPTER 28 APPENDIX Excellent Growth
CHAPTER 28 EXCEL APPENDIX QUESTION
Chapter Introduction
The Supply of Savings
The Demand to Borrow
Equilibrium in the Market for Loanable Funds
The Role of Intermediaries: Banks, Bonds, and Stock Markets
What Happens When Intermediation Fails?
The Financial Crisis of 2007-2008: Leverage, Securitization, and Shadow Banking
Takeaway
KEY CONCEPTS
CHAPTER REVIEW
CHAPTER 29 APPENDIX Bond Pricing and Arbitrage
Bond Pricing with a Spreadsheet
Chapter Introduction
Defining Unemployment
Frictional Unemployment
Structural Unemployment
Cyclical Unemployment
Labor Force Participation
Takeaway
KEY CONCEPTS
CHAPTER REVIEW
Chapter Introduction
Defining and Measuring Inflation
The Quantity Theory of Money
The Costs of Inflation
Takeaway
KEY CONCEPTS
CHAPTER REVIEW
CHAPTER 31 APPENDIX Get Real! An Excellent Adventure
Chapter Introduction
The Aggregate Demand Curve
The Long-Run Aggregate Supply Curve
Real Shocks
Aggregate Demand Shocks and the Short-Run Aggregate Supply Curve
Shocks to the Components of Aggregate Demand
Understanding the Great Depression: Aggregate Demand Shocks and Real Shocks
Takeaway
KEY CONCEPTS
CHAPTER REVIEW
Chapter Introduction
Intertemporal Substitution
Uncertainty and Irreversible Investments
Labor Adjustment Costs
Time Bunching
Collateral Damage
Takeaway
KEY CONCEPTS
CHAPTER REVIEW
CHAPTER 33 APPENDIX Business Fluctuations and the Solow Model
Chapter Introduction
What Is the Federal Reserve System?
The U.S. Money Supplies
Fractional Reserve Banking, the Reserve Ratio, and the Money Multiplier
How the Fed Controls the Money Supply
The Federal Reserve and Systemic Risk
Revisiting Aggregate Demand and Monetary Policy
Who Controls the Fed?
Takeaway
KEY CONCEPTS
CHAPTER REVIEW
CHAPTER 34 APPENDIX The Money Multiplier Process in Detail
Chapter Introduction
Monetary Policy: The Best Case
The Negative Real Shock Dilemma
When the Fed Does Too Much
Takeaway
KEY CONCEPTS
CHAPTER REVIEW
Chapter Introduction
Tax Revenues
Spending
Is Government Spending Wasted?
The National Debt, Interest on the National Debt, and Deficits
Will the U.S. Government Go Bankrupt?
Revenues and Spending Undercount the Role of Government in the Economy
Takeaway
KEY CONCEPTS
CHAPTER REVIEW
Chapter Introduction
Fiscal Policy: The Best Case
The Limits to Fiscal Policy
When Fiscal Policy Might Make Matters Worse
So When Is Fiscal Policy a Good Idea?
Takeaway
KEY CONCEPTS
CHAPTER REVIEW
Chapter Introduction
The U.S. Trade Deficit and Your Trade Deficit
The Balance of Payments
What Are Exchange Rates?
How Monetary and Fiscal Policy Affect Exchange Rates and How Exchange Rates Affect Aggregate Demand
Fixed vs. Floating Exchange Rates
What Are the IMF and the World Bank?
Takeaway
KEY CONCEPTS
CHAPTER REVIEW
Chapter Introduction
Graphs Express Ideas
Data Graphs
Graphing Three Variables
Cause and Effect
Appendix A Questions
Chapter Introduction
Check Yourself Solutions for Chapter 2 through Chapter 4
Check Yourself Solutions for Chapter 5 through Chapter 8
Check Yourself Solutions for Chapter 9 through Chapter 12
Check Yourself Solutions for Chapter 13 through Chapter 16
Check Yourself Solutions for Chapter 17 through Chapter 20
Check Yourself Solutions for Chapter 22 through Chapter 25
Check Yourself Solutions for Chapter 26 through Chapter 28
Check Yourself Solutions for Chapter 29 through Chapter 31
Check Yourself Solutions for Chapter 32 through Chapter 35
Check Yourself Solutions for Chapter 36 through Chapter 38