Part I
The Price System

Chapter 1 Economics and the World Around You
Preview
1. The Definition of Economics
1.a. Scarcity
1.b. Opportunity Costs
1.b.1. The Opportunity Cost of Going to School
Recap
2. Specialization and Exchange
2.a. Trade
2.b. Comparative Advantage
2.c. Gains from Trade
Recap
3. International Trade
3.a. Trade Patterns
3.b. Barter and Money
Recap
Summary
Exercises
Internet Exercise

Appendix: Working with Graphs
1. Reading and Constructing Graphs
1.a. Constructing a Graph from a Table
1.a.1. Interpreting Graphs: Points Inside the Production Possibilities Curve
1.a.2. Interpreting Graphs: Points Outside the Production Possibilities Curve
1.b. Shifts of Curves
1.c. Application: Gains from Trade
Summary
Exercise

Chapter 2 Markets and the Market Process
Preview
1. Allocation Mechanisms
1.a. Efficiency
1.b. Alternatives to Market Allocation
1.b.1. Disagreement with the Market Outcome
1.c.2. Inefficiency
Recap
1. How Markets Function
2.a. The Market Process
Recap
3. Demand
3.a. The Law of Demand
3.b. The Demand Schedule
3.c. The Demand Curve
3.d. From Individual Demand Curves to a Market Curve
3.e. Changes in Demand and Changes in Quantity Demanded
3.f. International Effects
Recap
4. Supply
4.a. The Law of Supply
4.b. The Supply Schedule and Supply Curve
4.c. From Individual Supply Curves to the Market Supply
4.d. Changes in Supply and Changes in Quantity Supplied
4.e. International Effects
Recap
5. Equilibrium: Putting Demand and Supply Together
5.a. Determination of Equilibrium
5.b. Changes in the Equilibrium Price: Demand Shifts
5.c. Changes in Equilibrium Price: Supply Shifts
Recap
Summary
Exercises
Internet Exercise

Chapter 3 Applications of Demand and Supply
Preview
1. The Market for Fast Foods
Recap
2. The Labor Market
Recap
3. Market Intervention: Medical Care, Rent Controls, and Agricultural Price Support
3.a. The Market for Medical Care
3.a.1. Demand Increase
3.b. Price Ceilings: The Market for Rental Housing
3.c. Price Floors: The Market for Agricultural Products
Recap
Summary
Exercises
Internet Exercise

Part 2 Consumers, Firms, and Social Issues

Chapter 4 The Firm and the Consumer
Preview
1.Revenue
1.a. Total, Average, and Marginal Revenue
Recap
2. How Does a Firm Learn About Its Demand?
2.a. Example: Demand for Auto Safety
2.b. Example: Demand for Oranges
2.c. Example: Location
Recap
3. Knowing the Customer
3.a. The Price Elasticity of Demand
3.a.1. Price Elasticity and Shape of the Demand Curve
3.b. Price Elasticity and Revenue
3.b.1. Price Discrimination
3.c. Determinants of Price Elasticity
Recap
Summary
Exercises
Internet Exercise

Chapter 5 Costs and Profit Maximization
Preview
1. Costs
1.a. Total, Average, and Marginal Costs
1.b. Why are the Cost Curves U-Shaped?
Recap
2. Maximizing Profit
2.a. Economic Profit
2.a.1. Negative Economic Profit
2.a.2. Zero Economic Profit
2.a.3. Positive Economic Profit
2.a.4. Accountants and Economic Profit
Recap
3. The Profit Maximizing Rule: MR=MC
3.a. Graphical Derivation of the MR=MC Rule
3.b. What Have We Learned?
Recap
Summary
Exercises
Internet Exercise

Chapter 6 Competition
Preview
1. Profit Maximization and the Market Process Revisited
Recap
2. The Benefits of Competition
2.a. Consumer and Producer Surplus
2.b. Deadweight Loss: Inefficiency
Recap
3. Creating Barriers to Entry
3.a. Product Differentiation: Reputation and Brand Name
3.b. Guarantees
3.c. Unique Resources
Recap
4. Firm Size as a Barrier to Entry
4.a. Economies of Scale
4.b. Diseconomies of Scale
4.c. Large Firm Advantage and Extent of the Market
Recap
Summary
Exercises
Internet Exercise

Chapter 7 How Firms Behave
Preview
1. Price Strategies
1.a. Price Discrimination
1.b. Peak Load Pricing
1.c. Discount Coupons
1.d. Bundling
1.e. Rebates and Other Price Strategies
Recap
2.Interdependence
2.a. The Kinked Demand Curve
2.b. Dominant Strategy
2.c. Cooperation
2.c.1. Price Leadership
2.c.2. Collusion, Cartels, and Other Cooperative Mechanisms
2.c.3. Facilitating Practices
2.d. Summary: Business Behavior
Recap
3.Government and Firms
3.a. Antitrust Laws
3.b. Regulation
3.c. Why Does the Government Intervene?
Recap
Summary
Exercises
Internet Exercise

Chapter 8 Social Issues
Preview
1. The Environment
1.a. The Market for Natural Resources
1.b. Environmental Problems
1.b.1. Externalities
1.b.2. Private Property Rights
1.c. Solutions to Environmental Problems
1.d. Global Problems
Recap
2. Illicit Drugs
2.a. The Market
2.b. War on Drugs
2.c. Free Drugs
2.d. Designer Drugs
Recap
3. Discrimination
3.a. The Market
3.b. Statistical Discrimination
Recap
4. Minimum Wages
Recap
5.Income Inequality and Poverty
5.a. Poverty
Recap
Summary
Exercises
Internet Exercise

Part 3 The National and Global Economies

Chapter 9 Overview of the National and International Economies
Preview
1. Households
1.a. Number of Households and Household Income
1.b. Household Spending
Recap
2. Business Firms
2.a. Forms of Business Organizations
2.b. Business Statistics
2.c. Firms Around the World
2.d. Business Spending
Recap
3. The International Sector
3.a. Types of Countries
3.a.1. The Industrial Countries
3.a.2. The Developing Countries
3.b. The International Sector Spending
Recap
4. Overview of the United States Government
4.a. Government Policy
4.b. Government Spending
Recap
5. Linking the Sectors
5.a. The Private Sector
5.b. The Public Sector
Recap
Summary
Exercises
Internet Exercise

Chapter 10 Macroeconomic Measures
Preview
1. Measures of Output and Income
1.a. Gross Domestic Product
1.a.1. GDP as output
1.a.2. GDP as Expenditures
1.a.3. GDP as Income
1.b.1. Gross National Product
1.b.2. Net National Product
1.b.3. National Income
1.b.4. Personal Income
1.b.5. Disposable Personal Income
Recap
2. Nominal and Real Measures
2.b. Prices Indexes
2.b.1. Base Year
2.b.2. Types of Price Indexes
Recap
3. Flows of Income and Expenditures
Recap
4. The Foreign Exchange Market
4.a. Exchange Rates
4.b. Exchange Rate Changes and International Trade
Recap
5. The Balance of Payments
5.b. Balance of Payments Accounts
5.c. The Current Account and the Capitol Account
Recap
Summary
Exercises
Internet Exercise

Chapter 11 Unemployment, Inflation, and Business Cycles
Preview
1. Business Cycles
1.a. Definitions
1.b. Historical Record
1.c. Indicators
Recap
2. Unemployment
2.b. Interpreting the Unemployment Rate
2.c. Types of Unemployment
2.d. Costs of Unemployment
2.e. The Record of Unemployment
Recap
3. Inflation
3.a. Absolute Versus Relative Price Changes
3.b. Effects of Inflation
3.c. Types of Inflation
3.d. The Inflationary Record
Recap
Summary
Exercises
Internet Exercise

Chapter 12 Macroeconomic Equilibrium: Aggregate Demand and Supply
Preview
1. Aggregate Demand, Aggregate Supply, and Business Cycles
1.a. Aggregate Demand and Business Cycles
1.b. Aggregate Supply and Business Cycles
1.c. A Look Ahead
Recap
2. Factors That Influence Aggregate Demand
2.a. Consumption
2.b. Investment
2.c. Government Spending
2.d. Net Exports
2.e. Aggregate Expenditures
Recap
3. The Aggregate Demand Curve
3.a. Changes in Aggregate Quantity Demanded: Price-Level Effects
3.a.1. The Wealth Effect
3.a.2. The Interest Rate Effect
3.a.3. The International Trade Effect
3.a.4. The Sum of the Price-Level Effects
3.b. Changes in Aggregate Demand: Nonprice Determinants
3.b.1. Expectations
3.c.2. Foreign Income and Price Levels
Recap
4. Aggregate Supply
4.a. Changes in Aggregate Quantity Supplied: Price-Level Effects
4.b. Short-Run Versus Long-Run Aggregate Supply
4.b.1. Short-Run Aggregate Supply Curve
4.b.2. Long-Run Aggregate Supply Curve
4.c. Changes in Aggregate Supply: Nonprice Determinants
4.c.1. Resource Prices
4.c.2. Technology
4.c.3. Expectations
4.c.4. Economic Growth: Long-Run Aggregate Supply Shifts
Recap
5. Aggregate Demand and Supply Equilibrium
5.a. Short-Run Equilibrium
5.b. Long-Run Equilibrium
Recap
Summary
Exercises

Chapter 13 Fiscal Policy
Preview
1. Fiscal Policy and Aggregate Demand
1.a. Shifting the Aggregate Demand Curve
1.b. Multiplier Effects
1.c. Government Spending Financed by Tax Returns
1.d. Government Spending Financed by Borrowing
1.e. Crowding Out
Recap
2. Fiscal Policy in the United States
2.a. The Budget Process
2.b. The Historical Record
2.c. Deficits and the National Debt
2.c.1. Deficits, Interest Rates, and Investment
2.c.2. Deficits and International Trade
2.c.3. Interest Payments on the National Debt
2.d. Automatic Stabilizers
Recap
2. Fiscal Policy
3.a. Government Spending
3.b. Taxation
Recap
Summary
Exercises
Internet Exercise

Chapter 14 Money and Banking
Preview
1. What is Money?
1.a. Functions of Money
1.a.1. Medium of Exchange
1.a.2. Unit of Account
1.a.3. Store of Value
1.a.4. Standard of Deferred Payment
1.b. The U.S. Money Supply
1.b.1. M1 Money Supply
1.b.2. M2 Money Supply
1.b.3. M3 Money Supply
1.c. Global Money
1.c.1. International Reserve Currencies
1.c.2. Composite Currencies
Recap
2. Banking
2.a. Financial Intermediaries
2.b. U.S. Banking
2.b.1. Current Structure
2.b.2. Bank Failures
2.c. International Banking
2.c.1. Eurocurrency Market
2.c.2. International Banking Facilities
Recap
3. Banks and the Money Supply
3.a. Deposits and Loans
3.b. Deposit Expansion Multiplier
Recap
Summary
Exercises
Internet Exercise

Chapter 15 Monetary Policy
Preview
1. The Federal Reserve System
1.a. Structure of the Fed
1.a.1. Board of Governors
1.a.2. District Banks
1.a.3. The Federal Open Market Committee
1.b. Functions of the Fed
1.b.1. Banking Services and Supervision
1.b.2. Controlling the Money Supply
Recap
2. Implementing Monetary Policy
2.a. Policy Goals
2.a.1. Intermediate Targets
2.b. Operating Procedures
2.b.1. Tools of Monetary Policy
2.b.2. FOMC Directives
2.c. Foreign Exchange Market Intervention
2.c.1. Mechanics of Intervention
2.c.2. Effects of Intervention
Recap
3. Monetary Policy and Equilibrium Income
3.a. Money Demand
3.a.1. The Money Demand Function
3.a.2. The Money Supply Function
3.a.3. Equilibrium in the Money Market
3.b. Money and Equilibrium Income
Recap
Summary
Exercises
Internet Exercise

Chapter 16 Macroeconomic Policy, Business Cycles, and Growth
Preview
1.The Phillips Curve
1.a. An Inflation-Unemployment Tradeoff?
1.b. Short-Run Versus Long-Run Tradeoffs
1.b.1. In the Short Run
1.b.2. In the Long Run
Recap
2.The Role of Expectations
2.a. Expected Versus Unexpected Inflation
2.a.1. Wage Expectations and Unemployment
2.a.2. Inventory Fluctuations and Unemployment
2.a.3. Wage Contracts and Unemployment
2.b. Forming Expectations
2.b.1. Adaptive Expectations
2.b.2. Rational Expectations
Recap
3. Sources of Business Cycles
3.a. The Political Business Cycle
3.b. Real Business Cycles
Recap
4. The Link Between Monetary and Fiscal Policies
Recap
5. Economic Growth
5.a. The Determinants of Growth
5.a.1. Labor
5.a.2. Capital
5.a.3. Land
5.a.4. Technology
5.b. Productivity
5.b.1. Productivity and Economic Growth
Recap
Summary
Exercises
Internet Exercise

Chapter 17 Issues in International Trade and Finance
Preview
1. An Overview of World Trade
1.a. Comparative Advantage
1.b. Sources of Comparative Advantage
1.b.1. Productivity Differences
1.b.2. Factor Abundance
1.b.3. Other Theories of Comparative Advantage
Recap
2. International Trade Restrictions
2.a. Arguments for Protection
2.a.1. Creation of Domestic Jobs
2.a.2. Creation of a "Level Playing Field"
2.a.3. Government Revenue Creation
2.a.4. National Defense
2.a.5. Infant Industries
2.a.6. Strategic Trade Policy
2.b. Tools of Policy
2.b.1. Tariffs
2.b.2. Quotas
2.b.3 Other Barriers to Trade
Recap
3.Exchange Rate Systems and Practices
Recap
Summary
Exercises
Internet Exercise