Principles of Microeconomics

Cover Page......Page 1
Inside Cover Page......Page 2
Title Page......Page 4
Copyright Page......Page 5
Dedication......Page 7
About the Authors......Page 8
A Fresh Perspective on Economics......Page 10
Broad. Useful. Intuitive.......Page 12
Build a Solid Foundation......Page 16
Teaching Modern Economics......Page 20
Applications That Keep It Real......Page 23
Tools That Prepare and Engage......Page 26
Practice the Process of Graphing......Page 33
Technology That Supports Learning......Page 35
Acknowledgments......Page 41
Organization of This Book......Page 52
Contents......Page 53
A Quick Review of Graphs......Page 72
PART I: Foundations of Economics......Page 80
Chapter 1 The Core Principles of Economics......Page 82
1.1 A Principled Approach to Economics......Page 85
1.2 The Cost-Benefit Principle......Page 88
1.3 The Opportunity Cost Principle......Page 100
1.4 The Marginal Principle......Page 116
1.5 The Interdependence Principle......Page 128
Tying It Together......Page 134
Chapter at a Glance......Page 137
End of Chapter......Page 138
Chapter 2 Demand: Thinking Like a Buyer......Page 144
2.1 Individual Demand: What You Want, at Each Price......Page 146
2.2 Your Decisions and Your Demand Curve......Page 153
2.3 Market Demand: What the Market Wants......Page 156
2.4 What Shifts Demand Curves?......Page 162
2.5 Shifts versus Movements Along Demand Curves......Page 173
Tying It Together......Page 176
Chapter at a Glance......Page 179
End of Chapter......Page 180
Chapter 3 Supply: Thinking Like a Manager......Page 187
3.1 Individual Supply: What You Sell, at Each Price......Page 190
3.2 Your Decisions and Your Individual Supply Curve......Page 198
3.3 Market Supply: What the Market Sells......Page 211
3.4 What Shifts Supply Curves?......Page 215
3.5 Shifts versus Movements Along Supply Curves......Page 223
Tying It Together......Page 226
Chapter at a Glance......Page 228
End of Chapter......Page 229
Chapter 4 Equilibrium......Page 235
4.1 Understanding Markets......Page 238
4.2 Equilibrium......Page 243
4.3 Predicting Market Changes......Page 252
Tying It Together......Page 280
Chapter at a Glance......Page 281
End of Chapter......Page 282
PART II: Analyzing Markets......Page 287
Chapter 5 Elasticity: Measuring Responsiveness......Page 289
5.1 Price Elasticity of Demand......Page 292
5.2 How Businesses Use Demand Elasticity......Page 293
5.3 Other Demand Elasticities......Page 294
5.4 Price Elasticity of Supply......Page 296
Tying It Together......Page 297
Chapter at a Glance......Page 298
End of Chapter......Page 299
Chapter 6 When Governments Intervene in Markets......Page 301
6.1 How Taxes and Subsidies Change Market Outcomes......Page 304
6.2 Price Regulations......Page 322
6.3 Quantity Regulations......Page 333
Tying It Together......Page 338
Chapter at a Glance......Page 340
End of Chapter......Page 341
Chapter 7 Welfare and Efficiency......Page 347
7.1 Evaluating Public Policies......Page 350
7.2 Measuring Economic Surplus......Page 355
7.3 Market Efficiency......Page 356
7.4 Market Failure and Deadweight Loss......Page 362
7.5 Beyond Economic Efficiency......Page 366
Tying It Together......Page 369
Chapter at a Glance......Page 371
End of Chapter......Page 372
Chapter 8 Gains from Trade......Page 379
8.1 Gains from Trade......Page 382
8.2 Comparative Advantage......Page 383
8.3 Prices Are Signals, Incentives, and Information......Page 387
8.4 How Managers Can Harness Market Forces......Page 393
Tying It Together......Page 398
Chapter at a Glance......Page 400
End of Chapter......Page 401
PART III: Applications and Policy Issues......Page 407
Chapter 9 International Trade......Page 409
9.1 Comparative Advantage Is the Foundation of International Trade......Page 412
9.2 How International Trade Shapes the Economy......Page 425
9.3 The Debate About International Trade......Page 440
9.4 International Trade Policy......Page 447
9.5 Effects of Globalization......Page 452
Tying It Together......Page 456
Chapter at a Glance......Page 459
End of Chapter......Page 460
Chapter 10 Externalities and Public Goods......Page 468
10.1 Identifying Externalities......Page 471
10.2 The Externality Problem......Page 477
10.3 Solving Externality Problems......Page 480
10.4 Public Goods and the Tragedy of the Commons......Page 496
Tying It Together......Page 505
Chapter at a Glance......Page 507
End of Chapter......Page 508
Chapter 11 The Labor Market......Page 516
11.1 The Labor Market: Supply and Demand at Work......Page 519
11.2 Labor Demand: Thinking Like an Employer......Page 523
11.3 Labor Supply: How to Balance Work and Leisure......Page 526
11.4 Changing Economic Conditions and Labor Market Equilibrium......Page 543
Tying It Together......Page 555
Chapter at a Glance......Page 557
End of Chapter......Page 558
Chapter 12 Wages, Work and Management......Page 564
12.1 Labor Demand: What Employers Want......Page 567
12.2 Labor Supply: What Workers Want......Page 576
12.3 Institutional Factors That Explain Why Wages Vary......Page 580
12.4 How Discrimination Affects Wages......Page 587
12.5 Personnel Economics......Page 596
Tying It Together......Page 605
Chapter at a Glance......Page 606
End of Chapter......Page 607
Chapter 13 Inequality, Social Insurance, and Redistribution......Page 612
13.1 Measuring Inequality......Page 615
Chapter 13 Inequality, Social Insurance, and Redistribution......Page 624
Chapter 13 Inequality, Social Insurance, and Redistribution......Page 634
13.4 The Debate About Income Redistribution......Page 645
Tying It Together......Page 660
Chapter at a Glance......Page 662
End of Chapter......Page 663
PART IV: Market Structure and Business Strategy......Page 668
Chapter 14 Market Structure and Market Power......Page 670
14.1 Monopoly, Oligopoly, and Monopolistic Competition......Page 673
14.2 Setting Prices When You Have Market Power......Page 684
14.3 The Problem with Market Power......Page 696
14.4 Public Policy to Restrain Market Power......Page 704
Tying It Together......Page 712
Chapter at a Glance......Page 714
End of Chapter......Page 715
Chapter 15 Entry, Exit, and Long-Run Profitability......Page 722
15.1 Revenues, Costs, and Economic Profits......Page 725
15.2 Free Entry and Exit in the Long Run......Page 727
15.3 Barriers to Entry......Page 741
Tying It Together......Page 758
Chapter at a Glance......Page 759
End of Chapter......Page 760
Chapter 16 Business Strategy......Page 766
16.1 The Five Forces That Determine Business Profitability......Page 769
16.2 Non-Price Competition: Product Positioning......Page 777
16.3 Bargaining Power of Buyers and Sellers......Page 779
Tying It Together......Page 794
Chapter at a Glance......Page 798
End of Chapter......Page 799
Chapter 17 Sophisticated Pricing Strategies......Page 805
17.1 Price Discrimination......Page 808
17.2 Group Pricing......Page 819
17.3 The Hurdle Method......Page 829
Tying It Together......Page 840
Chapter at a Glance......Page 842
End of Chapter......Page 843
Chapter 18 Game Theory and Strategic Choices......Page 847
18.1 How to Think Strategically......Page 850
18.2 The Prisoner’s Dilemma and the Challenge of Cooperation......Page 856
18.3 Multiple Equilibria and the Problem of Coordination......Page 867
18.4 Advanced Strategy: First and Second Mover Advantages......Page 879
18.5 Advanced Strategy: Repeated Games and Punishments......Page 889
Tying It Together......Page 897
Tying It Together......Page 899
End of Chapter......Page 900
PART V: Advanced Decisions......Page 910
Chapter 19 Decisions Involving Uncertainty......Page 912
19.1 Risk Aversion......Page 915
19.2 Reducing Risk......Page 927
19.3 Behavioral Economics: How People Make Mistakes Around Uncertainty......Page 941
Tying It Together......Page 948
Chapter at a Glance......Page 950
End of chapter......Page 951
Chapter 20 Decisions Involving Private Information......Page 957
20.1 Adverse Selection When Sellers Know More Than Buyers......Page 960
20.2 Adverse Selection When Buyers Know More Than Sellers......Page 974
20.3 Moral Hazard: The Problem of Hidden Actions......Page 986
Tying It Together......Page 998
Chapter at a Glance......Page 1000
End of chapter......Page 1001
Dedication......Page 1006
Index......Page 1028