Principles of Economics 3e

by Steven A. Greenlaw, David Shapiro and Daniel MacDonald

Published by OpenStax

EconomicsCollege

Principles of Economics 3e covers the scope and sequence of most introductory economics courses. The third edition takes a balanced approach to the theory and application of economics concepts. The text uses conversational language and ample illustrations to explore economic theories, and provides a wide array of examples using both fictional and real-world scenarios. The third edition has been carefully and thoroughly updated to reflect current data and understanding, as well as to provide a deeper background in diverse contributors and their impacts on economic thought and analysis. For example, the third edition highlights the research and views of a broader group of economists. Brief references and deeply explored socio-political examples have been updated to showcase the critical – and sometimes unnoticed – ties between economic developments and topics relevant to students. A fuller list of changes made in Principles of Economics 3e are described in the preface and the transition guide to help instructors transition to the third edition. The second edition of Principles of Economics by OpenStax is available in web view here . OpenStax is retiring Principles of Microeconomics and Principles of Macroeconomics for AP 2e textbooks because they are outdated. We recommend that Advanced Placement instructors and students use the college-level textbooks.

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Attribution

Adapted from Principles of Economics 3e by Steven A. Greenlaw, David Shapiro, and Daniel MacDonald, published by OpenStax (Rice University) under CC BY-NC-SA 4.0 (https://creativecommons.org/licenses/by-nc-sa/4.0/). Access the original for free at https://openstax.org/details/books/principles-economics-3e. Changes: converted to CuraCourse lessons, with interactive practice added.

216 pages in 36 modules. Sign up to read and adopt them.

Preface1 page
1. Preface
1Welcome to Economics!6 pages
1. Introduction
2. 1.1What Is Economics, and Why Is It Important?
3. 1.2Microeconomics and Macroeconomics
4. 1.3How Economists Use Theories and Models to Understand Economic Issues
5. 1.4How To Organize Economies: An Overview of Economic Systems
6. Practice
2Choice in a World of Scarcity5 pages
1. Introduction to Choice in a World of Scarcity
2. 2.1How Individuals Make Choices Based on Their Budget Constraint
3. 2.2The Production Possibilities Frontier and Social Choices
4. 2.3Confronting Objections to the Economic Approach
5. Practice
3Demand and Supply7 pages
1. Introduction to Demand and Supply
2. 3.1Demand, Supply, and Equilibrium in Markets for Goods and Services
3. 3.2Shifts in Demand and Supply for Goods and Services
4. 3.3Changes in Equilibrium Price and Quantity: The Four-Step Process
5. 3.4Price Ceilings and Price Floors
6. 3.5Demand, Supply, and Efficiency
7. Practice
4Labor and Financial Markets5 pages
1. Introduction to Labor and Financial Markets
2. 4.1Demand and Supply at Work in Labor Markets
3. 4.2Demand and Supply in Financial Markets
4. 4.3The Market System as an Efficient Mechanism for Information
5. Practice
5Elasticity6 pages
1. Introduction to Elasticity
2. 5.1Price Elasticity of Demand and Price Elasticity of Supply
3. 5.2Polar Cases of Elasticity and Constant Elasticity
4. 5.3Elasticity and Pricing
5. 5.4Elasticity in Areas Other Than Price
6. Practice
6Consumer Choices5 pages
1. Introduction to Consumer Choices
2. 6.1Consumption Choices
3. 6.2How Changes in Income and Prices Affect Consumption Choices
4. 6.3Behavioral Economics: An Alternative Framework for Consumer Choice
5. Practice
7Production, Costs, and Industry Structure7 pages
1. Introduction to Production, Costs, and Industry Structure
2. 7.1Explicit and Implicit Costs, and Accounting and Economic Profit
3. 7.2Production in the Short Run
4. 7.3Costs in the Short Run
5. 7.4Production in the Long Run
6. 7.5Costs in the Long Run
7. Practice
8Perfect Competition6 pages
1. Introduction to Perfect Competition
2. 8.1Perfect Competition and Why It Matters
3. 8.2How Perfectly Competitive Firms Make Output Decisions
4. 8.3Entry and Exit Decisions in the Long Run
5. 8.4Efficiency in Perfectly Competitive Markets
6. Practice
9Monopoly4 pages
1. Introduction to a Monopoly
2. 9.1How Monopolies Form: Barriers to Entry
3. 9.2How a Profit-Maximizing Monopoly Chooses Output and Price
4. Practice
10Monopolistic Competition and Oligopoly4 pages
1. Introduction to Monopolistic Competition and Oligopoly
2. 10.1Monopolistic Competition
3. 10.2Oligopoly
4. Practice
11Monopoly and Antitrust Policy6 pages
1. Introduction to Monopoly and Antitrust Policy
2. 11.1Corporate Mergers
3. 11.2Regulating Anticompetitive Behavior
4. 11.3Regulating Natural Monopolies
5. 11.4The Great Deregulation Experiment
6. Practice
12Environmental Protection and Negative Externalities8 pages
1. Introduction to Environmental Protection and Negative Externalities
2. 12.1The Economics of Pollution
3. 12.2Command-and-Control Regulation
4. 12.3Market-Oriented Environmental Tools
5. 12.4The Benefits and Costs of U.S. Environmental Laws
6. 12.5International Environmental Issues
7. 12.6The Tradeoff between Economic Output and Environmental Protection
8. Practice
13Positive Externalities and Public Goods5 pages
1. Introduction to Positive Externalities and Public Goods
2. 13.1Investments in Innovation
3. 13.2How Governments Can Encourage Innovation
4. 13.3Public Goods
5. Practice
14Labor Markets and Income8 pages
1. Introduction to Labor Markets and Income
2. 14.1The Theory of Labor Markets
3. 14.2Wages and Employment in an Imperfectly Competitive Labor Market
4. 14.3Market Power on the Supply Side of Labor Markets: Unions
5. 14.4Bilateral Monopoly
6. 14.5Employment Discrimination
7. 14.6Immigration
8. Practice
15Poverty and Economic Inequality7 pages
1. Introduction to Poverty and Economic Inequality
2. 15.1Drawing the Poverty Line
3. 15.2The Poverty Trap
4. 15.3The Safety Net
5. 15.4Income Inequality: Measurement and Causes
6. 15.5Government Policies to Reduce Income Inequality
7. Practice
16Information, Risk, and Insurance4 pages
1. Introduction to Information, Risk, and Insurance
2. 16.1The Problem of Imperfect Information and Asymmetric Information
3. 16.2Insurance and Imperfect Information
4. Practice
17Financial Markets5 pages
1. Introduction to Financial Markets
2. 17.1How Businesses Raise Financial Capital
3. 17.2How Households Supply Financial Capital
4. 17.3How to Accumulate Personal Wealth
5. Practice
18Public Economy5 pages
1. Introduction to Public Economy
2. 18.1Voter Participation and Costs of Elections
3. 18.2Special Interest Politics
4. 18.3Flaws in the Democratic System of Government
5. Practice
19The Macroeconomic Perspective7 pages
1. Introduction to the Macroeconomic Perspective
2. 19.1Measuring the Size of the Economy: Gross Domestic Product
3. 19.2Adjusting Nominal Values to Real Values
4. 19.3Tracking Real GDP over Time
5. 19.4Comparing GDP among Countries
6. 19.5How Well GDP Measures the Well-Being of Society
7. Practice
20Economic Growth6 pages
1. Introduction to Economic Growth
2. 20.1The Relatively Recent Arrival of Economic Growth
3. 20.2Labor Productivity and Economic Growth
4. 20.3Components of Economic Growth
5. 20.4Economic Convergence
6. Practice
21Unemployment6 pages
1. Introduction to Unemployment
2. 21.1How Economists Define and Compute Unemployment Rate
3. 21.2Patterns of Unemployment
4. 21.3What Causes Changes in Unemployment over the Short Run
5. 21.4What Causes Changes in Unemployment over the Long Run
6. Practice
22Inflation7 pages
1. Introduction to Inflation
2. 22.1Tracking Inflation
3. 22.2How to Measure Changes in the Cost of Living
4. 22.3How the U.S. and Other Countries Experience Inflation
5. 22.4The Confusion Over Inflation
6. 22.5Indexing and Its Limitations
7. Practice
23The International Trade and Capital Flows8 pages
1. Introduction to the International Trade and Capital Flows
2. 23.1Measuring Trade Balances
3. 23.2Trade Balances in Historical and International Context
4. 23.3Trade Balances and Flows of Financial Capital
5. 23.4The National Saving and Investment Identity
6. 23.5The Pros and Cons of Trade Deficits and Surpluses
7. 23.6The Difference between Level of Trade and the Trade Balance
8. Practice
24The Aggregate Demand/Aggregate Supply Model8 pages
1. Introduction to the Aggregate Supply–Aggregate Demand Model
2. 24.1Macroeconomic Perspectives on Demand and Supply
3. 24.2Building a Model of Aggregate Demand and Aggregate Supply
4. 24.3Shifts in Aggregate Supply
5. 24.4Shifts in Aggregate Demand
6. 24.5How the AD/AS Model Incorporates Growth, Unemployment, and Inflation
7. 24.6Keynes’ Law and Say’s Law in the AD/AS Model
8. Practice
25The Keynesian Perspective6 pages
1. Introduction to the Keynesian Perspective
2. 25.1Aggregate Demand in Keynesian Analysis
3. 25.2The Building Blocks of Keynesian Analysis
4. 25.3The Phillips Curve
5. 25.4The Keynesian Perspective on Market Forces
6. Practice
26The Neoclassical Perspective5 pages
1. Introduction to the Neoclassical Perspective
2. 26.1The Building Blocks of Neoclassical Analysis
3. 26.2The Policy Implications of the Neoclassical Perspective
4. 26.3Balancing Keynesian and Neoclassical Models
5. Practice
27Money and Banking6 pages
1. Introduction to Money and Banking
2. 27.1Defining Money by Its Functions
3. 27.2Measuring Money: Currency, M1, and M2
4. 27.3The Role of Banks
5. 27.4How Banks Create Money
6. Practice
28Monetary Policy and Bank Regulation7 pages
1. Introduction to Monetary Policy and Bank Regulation
2. 28.1The Federal Reserve Banking System and Central Banks
3. 28.2Bank Regulation
4. 28.3How a Central Bank Executes Monetary Policy
5. 28.4Monetary Policy and Economic Outcomes
6. 28.5Pitfalls for Monetary Policy
7. Practice
29Exchange Rates and International Capital Flows6 pages
1. Introduction to Exchange Rates and International Capital Flows
2. 29.1How the Foreign Exchange Market Works
3. 29.2Demand and Supply Shifts in Foreign Exchange Markets
4. 29.3Macroeconomic Effects of Exchange Rates
5. 29.4Exchange Rate Policies
6. Practice
30Government Budgets and Fiscal Policy9 pages
1. Introduction to Government Budgets and Fiscal Policy
2. 30.1Government Spending
3. 30.2Taxation
4. 30.3Federal Deficits and the National Debt
5. 30.4Using Fiscal Policy to Fight Recession, Unemployment, and Inflation
6. 30.5Automatic Stabilizers
7. 30.6Practical Problems with Discretionary Fiscal Policy
8. 30.7The Question of a Balanced Budget
9. Practice
31The Impacts of Government Borrowing6 pages
1. Introduction to the Impacts of Government Borrowing
2. 31.1How Government Borrowing Affects Investment and the Trade Balance
3. 31.2Fiscal Policy and the Trade Balance
4. 31.3How Government Borrowing Affects Private Saving
5. 31.4Fiscal Policy, Investment, and Economic Growth
6. Practice
32Macroeconomic Policy Around the World7 pages
1. Introduction to Macroeconomic Policy around the World
2. 32.1The Diversity of Countries and Economies across the World
3. 32.2Improving Countries’ Standards of Living
4. 32.3Causes of Unemployment around the World
5. 32.4Causes of Inflation in Various Countries and Regions
6. 32.5Balance of Trade Concerns
7. Practice
33International Trade6 pages
1. Introduction to International Trade
2. 33.1Absolute and Comparative Advantage
3. 33.2What Happens When a Country Has an Absolute Advantage in All Goods
4. 33.3Intra-Industry Trade between Similar Economies
5. 33.4The Benefits of Reducing Barriers to International Trade
6. Practice
34Globalization and Protectionism7 pages
1. Introduction to Globalization and Protectionism
2. 34.1Protectionism: An Indirect Subsidy from Consumers to Producers
3. 34.2International Trade and Its Effects on Jobs, Wages, and Working Conditions
4. 34.3Arguments in Support of Restricting Imports
5. 34.4How Governments Enact Trade Policy: Globally, Regionally, and Nationally
6. 34.5The Tradeoffs of Trade Policy
7. Practice
Appendices5 pages
1. AThe Use of Mathematics in Principles of Economics
2. BIndifference Curves
3. CPresent Discounted Value
4. DThe Expenditure-Output Model
5. EHow Open Market Operations Affect Balance Sheets in a Limited Reserves Environment

Principles of Economics 3e

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