Current issues organize each chapter. News stories about today’s major economic events tie each chapter together, from new chapter-opening vignettes to end-of-chapter problems and online practice. Each chapter includes a discussion of a critical issue of our time to demonstrate how economic theory can be applied to explore a particular debate or question.
- The gains from trade, globalization, and protectionism in Chapters 2 and 8 and an updated conversation with Jagdish Bhagwati in the first part closer
- How ethanol competes with food and drives its price up in Chapter 2
- Health care in Chapter 16
- Climate change in Chapter 17
- The carbon tax debate in Chapter 17
- Increasing inequality in the United States and decreasing inequality across the nations in Chapter 18
- Real-world examples and applications appear in the body of each chapter and in the end-ofchapter problems and applications
A selection of questions that appear daily in MyEconLab in Economics in the News are also available for assignment as homework, quizzes, or tests.
Highpoints of the Revision
In addition to being thoroughly updated and revised to include the topics and features just described, the microeconomics chapters feature the following seven notable changes:
- What Is Economics? (Chapter 1): I have reworked the explanation of the economic way of thinking around six key ideas, all illustrated with student relevant choices. The graphing appendix to this chapter has an increased focus on scatter diagrams and their interpretation and on understanding shifts of curves.
- Utility and Demand (Chapter 8): This chapter has a revised explanation of the marginal utility model of consumer choice that now begins with the budget line and consumption possibilities. It then returns to the budget line to explain and illustrate the utility-maximizing rule—equalize the marginal utility per dollar for all goods. The dramatic changes in the market for recorded music illustrate the theory in action.
- Possibilities, Preferences, and Choices (Chapter 9): Students find the analysis of the income effect and the substitution effect difficult and I have reworked this material to make the explanation clearer. I have omitted the work-leisure choice coverage of earlier editions and given the chapter a student-friendly application to choices about movies and DVDs.
- Reorganized and expanded coverage of externalities, public goods, and common resources (Chapters 16 and 17). These topics have been reorganized to achieve an issues focus rather than a technical focus. Chapter 16 is about public provision of both public goods and mixed goods with positive externalities; and Chapter 17 is about overproduction of goods with negative externalities and overuse of common resources.
- Public Goods and Public Choices (Chapter 16): This new chapter begins with an overview of public choice theory, a classification of goods and externalities, and an identification of the market failures that give rise to public choices. The chapter then goes on to explain the free-rider problem and the underprovision of public goods, the bureaucracy problem and overprovision, and the underprovision of mixed goods with external benefits, illustrated by education and health-care. The chapter explains how education and health care vouchers provide an effective way of achieving efficiency in the provision of these two vital services, a view reinforced in a box on Larry Kotlikoff ’s health-care plan and Caroline Hoxby’s part closer interview.
- Economics and the Environment (Chapter 17): This new chapter brings all the environmental damage issues together by combining material on negative externalities and common resources. Covering all this material in the same chapter (the previous editions split them between two chapters) enables their common solutions— property rights (Coase) or individual transferable quotas—to be explained and emphasized.
- Economic Inequality (Chapter 19): This chapter now includes a section on inequality in the world economy and compares U.S. inequality with that in nations at the two extremes of equality and inequality. The new section also looks at the trend in global inequality. The discussion of the sources of inequality now includes an explanation of the superstar contest idea. This idea is used to explain Emmanuel Saez’s remarkable data on the income share of the top one percent of Americans.