Introduction to Economics with infotrac

by Lieberman, Marc; Hall, Robert

• ISBN13: 9780324117691
• ISBN10: 0324117698
• Edition: 2nd
• Format: Paperback
• Copyright: 2004-03-31
• Publisher: South-Western College Pub

Summary

This text is the first book explicitly designed for the one-term, principles-level course covering both micro and macroeconomics, and canalso be used for two-term or full-year courses where a very concise, focused treatment is desired. This is NOT a cursory "survey" text;rather, it carefully selects and fully explains all of the core topics essential to the principles course with a rigorous and analyticaltreatment of all introductory economic concepts. It presents economics as a unified subject in which the macroeconomics chapters buildon, and flow from, the key microeconomic principles established in the first half of the book.

Table of Contents

PART I: PRELIMINARIES
What Is Economics?	1	(22)
Economics, Scarcity, and Choice	1	(4)
Scarcity and Individual Choice	2	(1)
Scarcity and Social Choice	3	(1)
Scarcity and Economics	4	(1)
The World of Economics	5	(1)
Microeconomics and Macroeconomics	5	(1)
Positive and Normative Economics	5	(1)
Why Study Economics?	6	(1)
To Understand the World Better	7	(1)
To Gain Self-confidence	7	(1)
To Achieve Social Change	7	(1)
To Help Prepare for Other Careers	7	(1)
The Methods of Economics	7	(5)
The Art of Building Economic Models	9	(1)
Assumptions and Conclusions	9	(1)
Two Fundamental Assumptions	10	(2)
Math, Jargon, and Other Concerns	12	(1)
The Basic Principles of Economics	12	(2)
How to Study Economics	14	(2)
Appendix: Graphs and Other Useful Tools	16	(7)
Tables and Graphs	16	(2)
Linear Equations	18	(2)
How Straight Lines and Curves Shift	20	(2)
Solving Equations	22	(1)
Scarcity, Choice, and Economic Systems	23	(31)
The Concept of Opportunity Cost	23	(13)
Opportunity Cost for Individuals	24	(4)
Opportunity Cost and Society	28	(1)
The Principle of Opportunity Cost	28	(1)
Production Possibilities Frontiers	29	(2)
The Search for a Free Lunch	31	(5)
Economic Systems	36	(12)
Specialization and Exchange	37	(4)
Resource Allocation	41	(4)
Resource Ownership	45	(1)
Types of Economic Systems	46	(2)
Using the Theory: Are We Saving Lives Efficiently?	48	(6)
Supply and Demand	54	(46)
Markets	55	(4)
How Broadly Should We Define the Market?	55	(1)
Buyers and Sellers	56	(1)
Competition in Markets	57	(1)
Using Supply and Demand	58	(1)
Demand	59	(8)
The Law of Demand	60	(1)
The Demand Schedule and the Demand Curve	61	(1)
Shifts vs. Movements Along the Demand Curve	61	(2)
Factors That Shift the Demand Curve	63	(4)
Supply	67	(8)
The Law of Supply	68	(1)
The Supply Schedule and the Supply Curve	69	(1)
Shifts vs. Movements Along the Supply Curve	70	(1)
Factors That Shift the Supply Curve	71	(4)
Putting Supply and Demand Together	75	(3)
What Happens When Things Change?	78	(5)
Income Rises, Causing an Increase in Demand	78	(1)
An Ice Storm Causes a Decrease in Supply	79	(1)
Handheld PCs in 2003: Both Curves Shift	80	(3)
The Principle of Markets and Equilibrium	83	(1)
Government Intervention in Markets	83	(4)
Price Ceilings	83	(2)
Price Floors	85	(1)
The Principle of Policy Tradeoffs	86	(1)
Supply and Demand and Normative Economics	87	(1)
Using the Theory: College Administrators Make a Costly Mistake	87	(7)
Appendix: Elasticity of Demand	94	(6)
PART II: MICROECONOMIC DECISION MAKERS
Consumer Choice	100	(38)
The Budget Constraint	101	(4)
Changes in the Budget Line	103	(2)
Preferences	105	(2)
Rationality	105	(1)
More Is Better	106	(1)
The Two Approaches to Consumer Choices	107	(1)
Consumer Decisions: The Marginal Utility Approach	107	(9)
Utility and Marginal Utility	107	(2)
Combining the Budget Constraint and Preferences	109	(4)
What Happens When Things Change?	113	(3)
The Individual's Demand Curve	116	(1)
Income and Substitution Effects	116	(3)
The Substitution Effects	116	(1)
The Income Effect	117	(1)
Combining Substitution and Income Effects	117	(2)
Consumers in Markets	119	(1)
Consumer Theory in Perspective	120	(3)
Extensions of the Model	121	(1)
Challenges to the Model	121	(2)
Using the Theory: Improving Education	123	(7)
Appendix: The Indifference Curve Approach	130	(8)
An Indifference Curve	130	(2)
The Indifference Map	132	(1)
Consumer Decision Making	133	(2)
What Happens When Things Change?	135	(2)
The Individual's Demand Curve	137	(1)
Production and Cost	138	(34)
The Nature of the Firm	139	(2)
Types of Business Firms	140	(1)
Thinking About Production	141	(1)
The Short Run and the Long Run	142	(1)
Production in the Short Run	142	(3)
Marginal Returns to Labor	144	(1)
Thinking About Costs	145	(3)
The Irrelevance of Sunk Costs	146	(1)
Explicit Versus Implicit Costs	147	(1)
Costs in the Short Run	148	(7)
Measuring Short-Run Costs	148	(3)
Explaining the Shape of the Marginal Cost Curve	151	(2)
The Relationship Between Average and Marginal Costs	153	(2)
Production and Cost in the Long Run	155	(8)
The Relationship Between Long-Run and Short-Run Costs	157	(3)
Explaining the Shape of the LRATC Curve	160	(3)
Using the Theory: Long-Run Costs, Market Structure, and Mergers	163	(9)
LRATC and the Size of Firms	164	(2)
The Urge to Merge	166	(6)
How Firms Make Decisions: Profit Maximization	172	(24)
The Goal of Profit Maximization	173	(1)
Understanding Profit	174	(2)
Two Definitions of Profit	174	(2)
Why Are There Profits?	176	(1)
The Firm's Constraints	176	(3)
The Demand Constraint	177	(1)
The Cost Constraint	178	(1)
The Profit-Maximizing Output Level	179	(8)
The Total Revenue and Total Cost Approach	179	(1)
The Marginal Revenue and Marginal Cost Approach	180	(2)
Profit Maximization Using Graphs	182	(3)
What About Average Costs?	185	(2)
The Marginal Approach to Profit	187	(1)
Dealing with Losses	187	(3)
The Short Run and the Shutdown Rule	187	(3)
The Long Run: The Exit Decision	190	(1)
Using the Theory: Getting It Wrong and Getting It Right	190	(6)
Getting It Wrong: The Failure of Franklin National Bank	190	(2)
Getting It Right: The Success of Continental Airlines	192	(4)
PART III: MARKETS, PRICES, AND RESOURCE ALLOCATION
Perfect Competition	196	(35)
What Is Perfect Competition?	197	(3)
The Three Requirements of Perfect Competition	198	(1)
Is Perfect Competition Realistic?	199	(1)
The Perfectly Competitive Firm	200	(9)
Goals and Constraints of the Competitive Firm	201	(1)
Cost and Revenue Data for a Competitive Firm	202	(2)
Finding the Profit-Maximizing Output Level	204	(1)
Measuring Total Profit	205	(2)
The Firm's Short-Run Supply Curve	207	(2)
Competitive Markets in the Short Run	209	(4)
The (Short-Run) Market Supply Curve	209	(1)
Short-Run Equilibrium	210	(3)
Competitive Markets in the Long Run	213	(6)
Profit and Loss and the Long Run	213	(1)
Long-Run Equilibrium	214	(3)
The Notion of Zero Profit in Perfect Competition	217	(1)
Perfect Competition and Plant Size	217	(1)
A Summary of the Competitive Firm in the Long Run	218	(1)
What Happens When Things Change?	219	(5)
A Change in Demand	219	(4)
Market Signals and the Economy	223	(1)
Using the Theory: Changes in Technology	224	(7)
Monopoly and Imperfect Competition	231	(49)
Monopoly?	232	(15)
What Is a Monopoly	232	(1)
Why Monopolies Exist	233	(5)
Monopoly Goals and Constraints	238	(1)
Monopoly Price or Output Decision	238	(3)
Profit and Loss	241	(2)
The Shutdown Decision	243	(1)
Monopoly in the Long Run	243	(1)
Comparing Monopoly to Perfect Competition	244	(2)
The Future of Monopoly	246	(1)
Monopolistic Competition	247	(5)
Monopolistic Competition in the Short Run	249	(1)
Monopolistic Competition in the Long Run	250	(1)
Nonprice Competition	251	(1)
Oligopoly	252	(11)
Why Oligopolies Exist	253	(1)
Oligopoly Behavior	254	(4)
Cooperative Behavior in Oligopoly	258	(2)
The Future of Oligopoly	260	(3)
Using the Theory: Advertising in Monopolistic Competition and Oligopoly	263	(5)
Advertising and Market Equilibrium Under Monopolistic Competition	263	(1)
Advertising and Collusion In Oligopoly	263	(5)
The Four Market Structures: A Postscript	268	(7)
Appendix: Price Discrimination	275	(5)
The Labor Market and Wage Rates	280	(29)
Labor Markets in Perspective	281	(3)
Defining a Labor Market	282	(1)
Competitive Labor Markets	282	(2)
Competitive Labor Markets and the Equilibrium Wage	284	(2)
Why Do Wages Differ?	286	(12)
An Imaginary World	287	(2)
Compensating Differentials	289	(2)
Differences in Ability	291	(3)
Barriers to Entry	294	(4)
Discrimination and Wages	298	(5)
Employer Prejudice	298	(1)
Employee and Customer Prejudice	299	(1)
Statistical Discrimination	300	(1)
Dealing with Discrimination	300	(1)
Discrimination and Wage Differentials	301	(2)
Using the Theory: The Minimum Wage	303	(6)
Economic Efficiency and the Role of Government	309	(40)
The Meaning of Efficiency	310	(1)
Pareto Improvements	311	(2)
Side Payments and Pareto Improvements	312	(1)
Markets and Economic Efficiency	313	(5)
Reinterpreting the Demand Curve	313	(1)
Reinterpreting the Supply Curve	314	(1)
The Efficient Quantity of a Good	315	(2)
Perfect Competition and Efficiency	317	(1)
The Efficiency Role of Government	318	(1)
The Institutional Infrastructure of a Market Economy	318	(6)
The Legal System	319	(4)
Regulation	323	(1)
Law and Regulation in Perspective	323	(1)
Market Failures	324	(1)
Monopoly and Monopoly Power	325	(5)
Antitrust Law as a Remedy	326	(1)
The Special Case of Natural Monopoly	327	(1)
Regulation of Natural Monopoly	328	(2)
Externalities	330	(8)
The Private Solution to a Negative Externality	330	(2)
Market Externalities and Government Solutions	332	(6)
Public Goods	338	(4)
Mixed Goods	340	(2)
Efficiency and Government in Perspective	342	(2)
Using the Theory: Traffic as a Market Failure	344	(5)
PART IV: MACROECONOMICS: BASIC CONCEPTS
Introduction to Macroeconomics	349	(13)
Macroeconomic Goals	349	(7)
Economic Growth	350	(2)
High Employment (or Low Employment)	352	(3)
Stable Prices	355	(1)
The Macroeconomic Approach	356	(2)
Aggregation in Macroeconomics	357	(1)
Macroeconomic Controversies	358	(4)
Production, Income, and Employment	362	(34)
Production and Gross Domestic Product	363	(16)
GDP: A Definition	363	(3)
The Expenditure Approach to GDP	366	(6)
Other Approaches to GDP	372	(3)
Measuring GDP: A Summary	375	(1)
Real Versus Nominal GDP	375	(1)
The Importance of Real Values: A Basic Principle	375	(1)
How GDP Is Used	376	(1)
Problems with GDP	377	(2)
Employment and Unemployments	379	(10)
Types of Unemployment	379	(3)
The Costs of Unemployment	382	(3)
How Unemployment Is Measured	385	(1)
Problems in Measuring Unemployment	386	(3)
Using the Theory: GDP After September 11	389	(7)
The Direct Impact on GDP	389	(1)
Indirect Impacts on GDP	389	(7)
The Monetary System, Prices, and Inflation	396	(26)
The Monetary System	397	(2)
History of the Dollar	397	(1)
Why Paper Currency Is Accepted as a Means of Payment	398	(1)
Measuring the Price Level and Inflation	399	(6)
Index Numbers	399	(1)
The Consumer Price Index	400	(1)
How the CPI Has Behaved	401	(1)
From Price Index to Inflation Rate	401	(1)
How the CPI Is Used	401	(1)
Real Variables and Adjustment for Inflation	402	(2)
Inflation and the Measurement of Real GDP	404	(1)
The Costs of Inflation	405	(5)
The Inflation Myth	405	(1)
The Redistributive Cost of Inflation	406	(3)
The Resource Cost of Inflation	409	(1)
Is the CPI Accurate?	410	(3)
Sources of Bias in the CPI	411	(2)
Using the Theory: The Use and Misuse of an Imperfect	413	(7)
Indexing	414	(1)
Long-Run Comparisons	415	(1)
The Bigger, Conceptual Problem	416	(1)
What the CPI Does Well	416	(4)
Appendix: Calculating the Consumer Price Index	420	(2)
PART V: THE BEHAVIOR OF THE MACROECONOMY
Economic Growth and Rising Living Standards	422	(38)
The Importance of Growth	423	(2)
What Makes Economies Grow?	425	(3)
Economic Growth and Living Standards	427	(1)
Growth in the Employment Population Ratio (EPR)	428	(4)
How to Increase Employment and the EPR	431	(1)
Growth in Productivity	432	(14)
Growth in the Capital Stock	433	(1)
Investment and the Capital Stock	433	(1)
The Loanable Funds Market	434	(5)
How to Increase Investment	439	(5)
Human Capital and Economic Growth	444	(1)
Technological Change	445	(1)
Growth Policies: A Summary	446	(2)
The Costs of Economic Growth	448	(4)
Budgetary Costs	448	(1)
Consumption Costs	449	(2)
Opportunity Costs of Workers' Time	451	(1)
Sacrifice of Other Social Goals	451	(1)
Using the Theory: Economic Growth in the Less-Developed Countries	452	(8)
Economic Fluctuations	460	(31)
Spending and Economic Fluctuations	462	(1)
Consumption Spending	463	(6)
The Consumption Function	464	(3)
Shifts in the Consumption Function	467	(2)
Getting to Total Spending	469	(3)
Investment Spending	469	(1)
Government Purchases	470	(1)
Net Exports	470	(1)
Summing up: Total Spending	471	(1)
Total Spending and Equilibrium GDP	472	(1)
What Happens When Things Change?	473	(9)
A Change in Investment Spending	473	(2)
The Spending Multiplier	475	(2)
The Multiplier in Reverse	477	(1)
Other Spending Shocks	478	(1)
Changes in Net Taxes	478	(1)
Spending Shocks in Recent History	479	(1)
Automatic Stabilizers	480	(2)
Countercyclical Fiscal Policy	482	(2)
Using the Theory: The Recession of 2001	484	(6)
Appendix: The Special Case of the Tax Multiplier	490	(1)
The Banking System, the Federal Reserve, and Monetary Policy	491	(38)
What Is Counted as Money?	492	(2)
The Components of the Money Supply	492	(2)
The Banking System	494	(2)
Financial Intermediaries	494	(1)
Commercial Banks	495	(1)
Bank Reserves and the Required Reserve Ratio	495	(1)
The Federal Reserve System	496	(3)
The Structure of the Fed	497	(1)
The Federal Open Market Committee	498	(1)
The Functions of the Federal Reserve	499	(1)
The Fed and the Money Supply	499	(7)
How the Fed Increases the Money Supply	500	(2)
How the Fed Decreases the Money Supply	502	(1)
Some Important Provisos about the Demand Deposit Multiplier	503	(1)
Other Tools for Controlling the Money Supply	504	(2)
The Money Market	506	(7)
The Demand for Money	506	(2)
The Supply of Money	508	(1)
Equilibrium in the Money Market	509	(4)
What Happens when Things Change?	513	(7)
How the Fed Changes the Interest Rate	513	(1)
How Interest Rate Changes Affect the Economy	514	(3)
Shifts in the Money Demand Curve	517	(3)
Federal Reserve Policy in Practice	520	(3)
The Fed's Response to Changes in Money Demand	520	(2)
The Fed's Response to Spending Shocks	522	(1)
Using the Theory: The Fed and the Recession of 2001	523	(6)
Aggregate Demand and Aggregate Supply	529	(34)
The Aggregate Demand Curve	530	(5)
The Price Level and the Money Market	530	(1)
The Price Level and Net Exports	531	(1)
Deriving the Aggregate Demand (AD) Curve	531	(1)
Movements along the AD Curve	531	(1)
Shifts of the AD Curve	532	(2)
Shifts versus Movements along the AD Curve: A Summary	534	(1)
The Aggregate Supply Curve	535	(8)
Costs and Prices	536	(1)
Prices and Costs in the Short Run	537	(2)
Deriving the Aggregate Supply Curve	539	(1)
Movements along the AS Curve	540	(1)
Shifts of the AS Curve	540	(3)
AD and AS Together: Short-Run Equilibrium	543	(1)
What Happens when Things Change?	544	(10)
Demand Shocks in the Short Run	544	(3)
Demand Shocks: Adjusting to the Long Run	547	(3)
The Long-Run Aggregate Supply Curve	550	(2)
Some Important Provisos about the Adjustment Process	552	(1)
Supply Shocks	552	(2)
Using the Theory: The Story of Two Recessions and Jobless Expansions	554	(9)
The Recession of 1990--91	554	(1)
The Recession of 2001	555	(2)
Jobless Expansions	557	(6)
PART VI: INTERNATIONAL TRADE
Comparative Advantage and the Gains from International Trade	563
The Logic of Free Trade	564	(6)
The Theory of Comparative Advantage	565	(1)
Opportunity Cost and Comparative Advantage	566	(1)
Specialization and World Production	567	(1)
How Each Nation Gains from International Trade	568	(1)
The Terms of Trade	569	(1)
How Potential Gains Turn into Actual Gains	570	(5)
Some Important Provisos	573	(2)
The Sources of Comparative Advantage	575	(2)
Why Some People Object to Free Trade	577	(5)
The Impact of Trade in the Exporting Country	578	(1)
The Impact of Trade in the Importing Country	579	(1)
Attitudes and Influence on Trade Policy	579	(3)
How Free Trade Is Restricted	582	(2)
Tariffs	582	(1)
Quotas	583	(1)
Protectionism	584	(5)
Myths About International Trade	584	(2)
Sophisticated Arguments for Protection	586	(1)
Protectionism in the United States	587	(2)
Using the Theory: The U.S. Sugar Quota	589
Glossary	1	(1)
Index	1