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Economics: Private Markets and Public Choice, Seventh Edition

by Robert B. Ekelund,; Rand W. Ressler - University of Louisiana at Lafayette; Robert D. Tollison - Clemson University

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Copyright, iv
The Addison-Wesley Series in Economics, ii
New to this Edition, xxiv
Contents, xxv
Relevant Themes, xxvi
Pedagogy, xxvii
Supplements, xxviii
Myeconlab, xxix
Acknowledgments, xxxii
One. The Power of Economic Thinking, 1
1. Economics in Perspective, 2
What Economics Is, 2
Key Principles of Economic Thinking, 8
The Role of Theory in Economics, 13
The Role of Economics and Economists, 14
Summary, 18
Key Terms, 18
Questions for Review and Discussion, 18
Working with the Web, 19
Appendix: Working with Graphs, 21
The Purpose of Graphs, 21
How to Draw a Graph, 21
Slope of the Curve, 25
Summary, 27
Key Terms, 27
Questions for Review and Discussion, 27
2. Opportunity Cost, Specialization, and Trade, 29
Specialization and Trade: A Feature of All Societies, 29
Opportunity Cost and Production Possibilities: Individuals and Society must Choose, 30
Why the Production Possibilities Frontier Shifts, 33
Comparative Advantage, 36
Summary, 49
Key Terms, 50
Questions for Review and Discussion, 50
Problems, 51
Working with the Web, 52
3. Private Markets and Prices: Laws of Demand and Supply, 53
An Overview of the Price System, 53
The Law of Supply and Firm Supply, 65
Market Equilibrium Price and Output, 69
Simple Supply and Demand Analysis: Other Considerations, 76
Summary, 81
Key Terms, 82
Questions for Review and Discussion, 82
Problems, 83
Working with the Web, 84
4. Markets, Economic Welfare, and Politics, 85
Why are Private Competitive Markets Efficient and How Do They Maximize Welfare?, 85
Who Gets the Economic Welfare Produced by Markets?, 91
Economic Systems and Government, 91
The Three Economic Functions of Government, 93
Public Choice—the Relation Between Politics and Economic Efficiency, 99
Summary, 104
Key Terms, 105
Questions for Review and Discussion, 105
Working with the Web, 106
Two. The Architecture of Private Markets, 109
5. Elasticity, 110
The Concept of Elasticity, 111
Price Elasticity of Demand, 111
Determinants of Price Elasticity of Demand, 121
Other Applications of Elasticity of Demand, 125
Elasticity of Supply, 128
Summary, 132
Key Terms, 133
Questions for Review and Discussion, 133
Problems, 134
Working with the Web, 134
6. The Logic of Consumer Choice and Demand, 136
Utility and Marginal Utility, 136
Consumer Equilibrium: Diminishing Marginal Utility at Work, 140
From Diminishing Marginal Utility to the Law of Demand, 147
Some Pitfalls to Avoid, 150
Summary, 153
Key Terms, 153
Questions for Review and Discussion, 153
Problems, 154
Working with the Web, 155
Appendix: Indifference Curve Analysis, 156
Indifference Curves, 156
Characteristics of Indifference Curves, 157
The Budget Constraint, 159
Consumer Equilibrium With Indifference Curves, 161
Indifference Curves and the Law of Demand, 162
Substitution and Income Effects, 163
Summary, 165
Key Terms, 165
Questions for Review and Discussion, 165
Problems, 166
7. The Firm and Costs of Production, 167
The Nature of the Firm, 167
How Markets and Firms Coordinate Resources, 168
Costs in a Business Firm, 169
Economic Time, 173
Short-Run Costs: An Introduction, 174
Long-Run Costs, 183
Shifts in Cost Curves, 187
Costs and Supply Decisions, 188
Summary, 190
Key Terms, 191
Questions for Review and Discussion, 191
Problems, 192
Working with the Web, 193
8. Competitive Markets, 194
The Process of Competition, 195
Market Structure and the Firm, 195
Pure Competition, 196
The Purely Competitive Firm and Industry in the Short Run, 200
The Purely Competitive Firm and Industry in the Long Run, 210
Competition: The Real-World Case of Agriculture, 216
Pure Competition and Economic Efficiency, 218
Summary, 225
Key Terms, 226
Questions for Review and Discussion, 226
Problems, 226
Working with the Web, 227
9. Monopoly: The Firm as Industry, 229
What is a Monopoly?, 230
Monopoly Price and Output in the Short Run, 233
Pure Monopoly in the Long Run, 241
Price Discrimination, 242
The Case Against Monopoly, 245
The Case for Monopoly, 248
Summary, 254
Key Terms, 255
Questions for Review and Discussion, 255
Problems, 256
Working with the Web, 256
10. Imperfect Competition, 258
Real-World Markets Between Competition and Monopoly, 259
Monopolistic Competition, 261
Oligopoly, Games, and Cartels, 266
Cartels: When Firms “Get Together”, 273
From Competition to Monopoly: The Spectrum Revisited, 277
Summary, 281
Key Terms, 281
Questions for Review and Discussion, 281
Problems, 282
Working with the Web, 282
Three. Input Markets and Income Distribution, 287
11. Competitive Labor Markets and Unions, 288
Factor Markets: An Overview, 289
Marginal Productivity Theory, 291
The Demand for Labor, 294
The Supply of Labor, 298
Determinants of Income, 300
Marginal Productivity Theory and Income Distribution, 302
Labor Unions, 303
Union Activities, 307
Conclusion: Labor Goals, 314
Summary, 316
Key Terms, 317
Questions for Review and Discussion, 317
Problems, 318
Working with the Web, 319
12. Entrepreneurship and the Organization of Production, 320
Entrepreneurship, 320
The Role of Capital, 323
The Concept of Economic Rent, 335
Land Rents, 335
Profits and the Allocation of Resources, 338
Summary, 341
Key Terms, 342
Questions for Review and Discussion, 342
Problems, 342
Working with the Web, 343
13. Income Distribution, Poverty, and Health Care, 344
The Individual and Income Distribution, 345
How is Income Inequality Measured?, 349
Interpretation of Money Distribution Data, 349
Income Distribution in the United States, 352
Characteristics of Income Distribution: Poverty and Discrimination, 356
Health Care: an Ongoing Problem, 362
The Justice of Income Distribution, 366
Summary, 368
Key Terms, 369
Questions for Review and Discussion, 369
Problems, 370
Working with the Web, 370
Four. Applied Microeconomics and Public Choice, 374
14. Antitrust, Regulation, and Public Policy, 376
Measuring Industrial Concentration, 377
Public Policy: Antitrust, 379
Public Policy: Regulation, 385
The Movement to Deregulation, 395
Conclusion, 397
Summary, 402
Key Terms, 403
Questions for Review and Discussion, 403
Problems, 404
Working with the Web, 404
15. Environmental Economics, 406
Natural Resources, 407
The Economics of Common Property, 411
Externality Theory, 415
Public Goods Theory, 423
A Role for Government, 427
Summary, 430
Key Terms, 430
Questions for Review and Discussion, 431
Problems, 431
Working with the Web, 432
16. Public Choice, 434
Self-Interest and Politics, 435
Public Choice Analysis of Majority Voting, 436
Public Choice Analysis of Politics, 437
Constitutional Political Economy, 447
Summary, 452
Key Terms, 453
Questions for Review and Discussion, 453
Problem, 453
Working with the Web, 454
Five. The Fundamentals of Macroeconomics, 458
17. Contemporary Macroeconomics, 460
The Goals of Macroeconomics, 461
Stability, Growth, and Business Cycles, 470
The Costs of Business Cycles, 472
Aggregate Demand, Aggregate Supply, and Macroeconomic Policy, 473
Macroeconomic Issues: Can Goals Be Met in a World of Politics?, 475
Modern Macroeconomics: A Mixed Approach, 479
Summary, 481
Key Terms, 481
Questions for Review and Discussion, 481
Working with the Web, 482
18. Measuring the Macroeconomy, 484
Aggregate Accounting and the Concept of GDP, 484
National Income Accounting, 486
The Measurement of Price Changes, 495
Summary, 501
Key Terms, 501
Questions for Review and Discussion, 501
Problems, 502
Working with the Web, 502
19. Classical Macroeconomic Theory, 504
Classical Theory, 505
Classical Theory and Policy: The Meaning of a Self-Adjusting Economy, 518
Summary, 524
Key Terms, 525
Questions for Review and Discussion, 525
Working with the Web, 526
20. Keynesian Macroeconomics, 528
Keynes and the Classical Economists, 529
The Income–Expenditures Model, 530
Private Income–Expenditures Equilibrium, 541
Fluctuations in the Private Sector, 543
Contractionary and Expansionary Gaps, 546
Government Spending and Taxation, 546
International Trade and the Global Economy, 549
Countercyclical Fiscal Policies, 550
Summary, 559
Key Terms, 560
Questions for Review and Discussion, 560
Problems, 561
Working with the Web, 561
21. Aggregate Demand and Aggregate Supply, 563
Price Changes and Aggregate Demand, 564
Aggregate Demand, 568
Aggregate Supply, 572
The Equilibrium Level of Prices and Production, 576
Summary, 584
Key Terms, 584
Questions for Review and Discussion, 585
Problems, 585
Working with the Web, 586
22. Fiscal Policy and the Supply Side: Using the Tools, 587
Policies Designed to Shift Aggregate Demand, 588
Aggregate Supply Policies, 595
Demand and Supply Interaction: Problems and Prospects, 601
Summary, 605
Key Terms, 605
Questions for Review and Discussion, 605
Problem, 606
Working with the Web, 606
23. Taxes, Deficits, and the Debt, 608
Fiscal Policy in Practice, 609
Public Finance, 613
Federal Taxation, Tax Reform, and Fiscal Policy, 618
Deficits, Debts, and Fiscal Policy, 621
Summary, 630
Key Terms, 630
Questions for Review and Discussion, 630
Problems, 631
Working with the Web, 631
Six. Money, 636
24. Money, Banking, and the Federal Reserve, 638
Functions of Money, 639
The Official Definition of Money, 642
Money and the Banking System, 645
How Banks Create Money, 651
How the Federal Reserve Controls Money Creation, 655
Methods of Federal Reserve Control, 655
Monetary Control: Reserves, the Monetary Base, and the Money Supply, 661
Summary, 666
Key Terms, 667
Questions for Review and Discussion, 667
Problem, 668
Working with the Web, 668
25. Money and Inflation, 670
The Demand for Money, 671
The Quantity Theory of Money, 673
Speculative Money Demand and Prices: Keynes’s Perspective, 677
Modern Monetarism and Inflation, 680
Theories of Inflation, 691
Cures for Inflation, 693
Summary, 697
Key Terms, 698
Questions for Review and Discussion, 698
Problems, 698
Working with the Web, 699
Seven. Macroeconomic Policy and Economic Growth, 704
26. Macroeconomic Theory and Policy, 706
Policy Alternatives, 707
New Keynesian Theory and Policy, 708
New Classical Economics: Monetarist Theory and Policy, 713
New Classical Economics: Rational Expectations, 718
New Keynesian Criticisms of New Classical Economics, 720
The Major Policy Positions: A Summary, 721
Summary, 726
Key Terms, 727
Questions for Review and Discussion, 727
Problem, 727
Working with the Web, 728
27. Global Economic Growth and Development, 730
The Meaning of Economic Growth, 731
Growth and Modern Macroeconomic Theory, 738
Recent U.S. Economic Growth and Productivity, 742
Economic Growth and Economic Development, 745
Looking Ahead: Explaining Economic Growth and Development, 751
Summary, 755
Key Terms, 755
Questions for Review and Discussion, 755
Problem, 756
Working with the Web, 756
Eight. International Trade and the Global Economy, 761
28. International Trade, 762
The Importance of International Trade, 763
The Effects of Artificial Trade Barriers, 771
The Case for Protection, 775
U.S. Tariff Policy, 779
Summary, 785
Key Terms, 786
Questions for Review and Discussion, 786
Problems, 787
Working with the Web, 787
29. International Finance, 789
The Foreign Exchange Market, 790
Flexible Exchange Rates, 793
Fixed Exchange Rates, 799
Macroeconomic Policy, Exchange Rates, and Trade Balance, 802
The Balance of Payments, 805
The Evolution of International Monetary Institutions, 808
Summary, 813
Key Terms, 814
Questions for Review and Discussion, 814
Problem, 815
Working with the Web, 815
Glossary, 818
Credits, 833
Selected U.S. Macroeconomic Data 1959–2005, FrontCover
Index, I-1-1

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