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SENIOR CONTRIBUTING AUTHORS
DAVID SHAPIRO, PENNSYLVANIA STATE UNIVERSITY
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CHAPTER 1
CHAPTER 2
CHAPTER 3
CHAPTER 4
CHAPTER 5
CHAPTER 6
CHAPTER 7
CHAPTER 8
CHAPTER 9
CHAPTER 10
CHAPTER 11
CHAPTER 12
CHAPTER 13
CHAPTER 14
CHAPTER 15
CHAPTER 16
CHAPTER 17
CHAPTER 18
CHAPTER 19
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CHAPTER 5
CHAPTER 6
CHAPTER 7
CHAPTER 8
CHAPTER 9
CHAPTER 10
CHAPTER 11
CHAPTER 12
CHAPTER 13
CHAPTER 14
CHAPTER 15
CHAPTER 16
CHAPTER 17
CHAPTER 18
CHAPTER 19
CHAPTER 20
CHAPTER 21
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SENIOR CONTRIBUTING AUTHORS
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DANIEL MACDONALD, CALIFORNIA STATE UNIVERSITY, SAN BERNADINO
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CONTENTS
Preface
1
CHAPTER 1
Welcome to Economics!
Introduction
9
9
1.1 What Is Economics, and Why Is It Important?
10
1.2 Microeconomics and Macroeconomics
15
1.3 How Economists Use Theories and Models to Understand Economic Issues
16
1.4 How To Organize Economies: An Overview of Economic Systems
18
Key Terms
24
Key Concepts and Summary
24
Self-Check Questions
25
Review Questions
25 | {"source": "downloads\\business\\economics\\Microeconomics3e.pdf", "title": "Principles of Microeconomics 3e", "total_pages": 597, "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "producer": "Prince 14.2 (www.princexml.com)", "uploaded_via": "batch_uploader", "creationdate": "2022-12-07T14:15:44-06:00", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "moddate": "2022-12-07T14:23:05-06:00", "upload_timestamp": "2026-02-07T15:24:38.309401", "file_size_mb": 26.99, "creator": "PDFMiner", "file_name": "Microeconomics3e.pdf", "file_type": ".pdf", "batch_upload": true} |
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1.4 How To Organize Economies: An Overview of Economic Systems
18
Key Terms
24
Key Concepts and Summary
24
Self-Check Questions
25
Review Questions
25
Critical Thinking Questions
26
CHAPTER 2
Choice in a World of Scarcity
Introduction to Choice in a World of Scarcity
27
27
2.1 How Individuals Make Choices Based on Their Budget Constraint
28
2.2 The Production Possibilities Frontier and Social Choices
33
2.3 Confronting Objections to the Economic Approach
38
Key Terms
43
Key Concepts and Summary
43
Self-Check Questions
44
Review Questions
44
Critical Thinking Questions
45
Problems
45
CHAPTER 3
Demand and Supply
Introduction to Demand and Supply
47
47
3.1 Demand, Supply, and Equilibrium in Markets for Goods and Services
48
3.2 Shifts in Demand and Supply for Goods and Services
54
3.3 Changes in Equilibrium Price and Quantity: The Four-Step Process
64
3.4 Price Ceilings and Price Floors
3.5 Demand, Supply, and Efficiency
70
74
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3.3 Changes in Equilibrium Price and Quantity: The Four-Step Process
64
3.4 Price Ceilings and Price Floors
3.5 Demand, Supply, and Efficiency
70
74
Key Terms
78
Key Concepts and Summary
79
Self-Check Questions
80
Review Questions
81
Critical Thinking Questions
Problems
82
81
CHAPTER 4
Labor and Financial Markets
Introduction to Labor and Financial Markets
87
87
4.1 Demand and Supply at Work in Labor Markets
88
4.2 Demand and Supply in Financial Markets
96
4.3 The Market System as an Efficient Mechanism for Information
102
Key Terms
106
Key Concepts and Summary
106
Self-Check Questions
106
Review Questions
108
Critical Thinking Questions
108
Problems
109
CHAPTER 5
Elasticity
Introduction to Elasticity
111
111
5.1 Price Elasticity of Demand and Price Elasticity of Supply
112
5.2 Polar Cases of Elasticity and Constant Elasticity
117
5.3 Elasticity and Pricing
120
5.4 Elasticity in Areas Other Than Price
128
Key Terms
132 | {"total_pages": 597, "title": "Principles of Microeconomics 3e", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "uploaded_via": "batch_uploader", "file_type": ".pdf", "producer": "Prince 14.2 (www.princexml.com)", "moddate": "2022-12-07T14:23:05-06:00", "batch_upload": true, "creationdate": "2022-12-07T14:15:44-06:00", "creator": "PDFMiner", "file_size_mb": 26.99, "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "upload_timestamp": "2026-02-07T15:24:38.309401", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "file_name": "Microeconomics3e.pdf"} |
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117
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120
5.4 Elasticity in Areas Other Than Price
128
Key Terms
132
Key Concepts and Summary
132
Self-Check Questions
133
Review Questions
134
Critical Thinking Questions
135
Problems
135
CHAPTER 6
Consumer Choices
Introduction to Consumer Choices
6.1 Consumption Choices
138
137
137
6.2 How Changes in Income and Prices Affect Consumption Choices
145
6.3 Behavioral Economics: An Alternative Framework for Consumer Choice
151
Key Terms
154
Key Concepts and Summary
154
Self-Check Questions
155
Review Questions
155
Critical Thinking Questions
156
Problems
156
CHAPTER 7
Production, Costs, and Industry Structure
Introduction to Production, Costs, and Industry Structure
157
157
7.1 Explicit and Implicit Costs, and Accounting and Economic Profit
159
7.2 Production in the Short Run
161
7.3 Costs in the Short Run
165
7.4 Production in the Long Run
172 | {"total_pages": 597, "file_name": "Microeconomics3e.pdf", "producer": "Prince 14.2 (www.princexml.com)", "file_size_mb": 26.99, "batch_upload": true, "moddate": "2022-12-07T14:23:05-06:00", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "upload_timestamp": "2026-02-07T15:24:38.309401", "file_type": ".pdf", "creationdate": "2022-12-07T14:15:44-06:00", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "creator": "PDFMiner", "uploaded_via": "batch_uploader", "title": "Principles of Microeconomics 3e"} |
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7.1 Explicit and Implicit Costs, and Accounting and Economic Profit
159
7.2 Production in the Short Run
161
7.3 Costs in the Short Run
165
7.4 Production in the Long Run
172
7.5 Costs in the Long Run
174
Key Terms
Key Concepts and Summary
182
182
Self-Check Questions
184
Review Questions
185
Critical Thinking Questions
185
Problems
186
Access for free at openstax.org
CHAPTER 8
Perfect Competition
Introduction to Perfect Competition
187
187
8.1 Perfect Competition and Why It Matters
188
8.2 How Perfectly Competitive Firms Make Output Decisions
189
8.3 Entry and Exit Decisions in the Long Run
204
8.4 Efficiency in Perfectly Competitive Markets
206
Key Terms
209
Key Concepts and Summary
209
Self-Check Questions
210
Review Questions
211
Critical Thinking Questions
212
Problems
213
CHAPTER 9
Monopoly
Introduction to a Monopoly
9.1 How Monopolies Form: Barriers to Entry
215
215
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Review Questions
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Critical Thinking Questions
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Problems
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CHAPTER 9
Monopoly
Introduction to a Monopoly
9.1 How Monopolies Form: Barriers to Entry
215
215
217
9.2 How a Profit-Maximizing Monopoly Chooses Output and Price
221
Key Terms
232
Key Concepts and Summary
232
Self-Check Questions
233
Review Questions
233
Critical Thinking Questions
234
Problems
234
CHAPTER 10
Monopolistic Competition and Oligopoly
Introduction to Monopolistic Competition and Oligopoly
237
237
10.1 Monopolistic Competition
238
10.2 Oligopoly
246
Key Terms
253
Key Concepts and Summary
253
Self-Check Questions
254
Review Questions
255
Critical Thinking Questions
Problems
256
255
CHAPTER 11
Monopoly and Antitrust Policy
Introduction to Monopoly and Antitrust Policy
259
259
11.1 Corporate Mergers
260
11.2 Regulating Anticompetitive Behavior
266
11.3 Regulating Natural Monopolies
268
11.4 The Great Deregulation Experiment
271
Key Terms
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274
Self-Check Questions
275
Review Questions
276
Critical Thinking Questions
277
Problems
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CHAPTER 12
Environmental Protection and Negative Externalities
Introduction to Environmental Protection and Negative Externalities
281
281
12.1 The Economics of Pollution
282
12.2 Command-and-Control Regulation
286
12.3 Market-Oriented Environmental Tools
287
12.4 The Benefits and Costs of U.S. Environmental Laws
290
12.5 International Environmental Issues
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12.6 The Tradeoff between Economic Output and Environmental Protection
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Key Concepts and Summary
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Self-Check Questions
298
Review Questions
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Critical Thinking Questions
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Problems
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Review Questions
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Critical Thinking Questions
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Problems
304
CHAPTER 13
Positive Externalities and Public Goods
Introduction to Positive Externalities and Public Goods
307
307
13.1 Investments in Innovation
308
13.2 How Governments Can Encourage Innovation
313
13.3 Public Goods
316
Key Terms
321
Key Concepts and Summary
321
Self-Check Questions
321
Review Questions
323
Critical Thinking Questions
323
Problems
324
CHAPTER 14
Labor Markets and Income
Introduction to Labor Markets and Income
325
325
14.1 The Theory of Labor Markets
326
14.2 Wages and Employment in an Imperfectly Competitive Labor Market
331
14.3 Market Power on the Supply Side of Labor Markets: Unions
335
342
14.4 Bilateral Monopoly
14.5 Employment Discrimination
343
14.6 Immigration
350
Key Terms
353
Key Concepts and Summary
353
Self-Check Questions
354
Review Questions
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14.4 Bilateral Monopoly
14.5 Employment Discrimination
343
14.6 Immigration
350
Key Terms
353
Key Concepts and Summary
353
Self-Check Questions
354
Review Questions
356
Critical Thinking Questions
357
CHAPTER 15
Poverty and Economic Inequality
Introduction to Poverty and Economic Inequality
359
359
15.1 Drawing the Poverty Line
360
15.2 The Poverty Trap
363
15.3 The Safety Net
366
15.4 Income Inequality: Measurement and Causes
370
Access for free at openstax.org
15.5 Government Policies to Reduce Income Inequality
376
Key Terms
381
Key Concepts and Summary
381
Self-Check Questions
382
Review Questions
383
Critical Thinking Questions
384
Problems
385
CHAPTER 16
Information, Risk, and Insurance
Introduction to Information, Risk, and Insurance
387
387
16.1 The Problem of Imperfect Information and Asymmetric Information
388
16.2 Insurance and Imperfect Information
394
Key Terms
403
Key Concepts and Summary
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388
16.2 Insurance and Imperfect Information
394
Key Terms
403
Key Concepts and Summary
403
Self-Check Questions
404
Review Questions
404
Critical Thinking Questions
405
Problems
405
CHAPTER 17
Financial Markets
Introduction to Financial Markets
407
407
17.1 How Businesses Raise Financial Capital
409
17.2 How Households Supply Financial Capital
413
17.3 How to Accumulate Personal Wealth
424
Key Terms
429
Key Concepts and Summary
430
Self-Check Questions
431
Review Questions
431
Critical Thinking Questions
432
Problems
432
CHAPTER 18
Public Economy
Introduction to Public Economy
435
435
18.1 Voter Participation and Costs of Elections
436
18.2 Special Interest Politics
438
18.3 Flaws in the Democratic System of Government
442
Key Terms
446
Key Concepts and Summary
446
Self-Check Questions
446
Review Questions
447
Critical Thinking Questions
447
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446
Key Concepts and Summary
446
Self-Check Questions
446
Review Questions
447
Critical Thinking Questions
447
Problems
448
CHAPTER 19
International Trade
Introduction to International Trade
449
449
19.1 Absolute and Comparative Advantage
450
19.2 What Happens When a Country Has an Absolute Advantage in All Goods
456
19.3 Intra-industry Trade between Similar Economies
461
19.4 The Benefits of Reducing Barriers to International Trade
464
Key Terms
466
Key Concepts and Summary
466
Self-Check Questions
466
Review Questions
467
Critical Thinking Questions
468
Problems
469
CHAPTER 20
Globalization and Protectionism 471
Introduction to Globalization and Protectionism
471
20.1 Protectionism: An Indirect Subsidy from Consumers to Producers
472
20.2 International Trade and Its Effects on Jobs, Wages, and Working Conditions
479
20.3 Arguments in Support of Restricting Imports
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479
20.3 Arguments in Support of Restricting Imports
482
20.4 How Governments Enact Trade Policy: Globally, Regionally, and Nationally
488
20.5 The Tradeoffs of Trade Policy
492
Key Terms
495
Key Concepts and Summary
495
Self-Check Questions
496
Review Questions
497
Critical Thinking Questions
498
Problems
499
Appendix A The Use of Mathematics in Principles of Economics
Appendix B Indifference Curves
Appendix C Present Discounted Value
519
533
501
Answer Key
References
537
567
Index
581
Access for free at openstax.org
Preface 1
Preface
Welcome to Principles of Microeconomics 3e(Third Edition), an OpenStax resource. This textbook was written
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About OpenStax | {"batch_upload": true, "uploaded_via": "batch_uploader", "creationdate": "2022-12-07T14:15:44-06:00", "title": "Principles of Microeconomics 3e", "producer": "Prince 14.2 (www.princexml.com)", "creator": "PDFMiner", "upload_timestamp": "2026-02-07T15:24:38.309401", "total_pages": 597, "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "file_size_mb": 26.99, "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "file_type": ".pdf", "file_name": "Microeconomics3e.pdf", "moddate": "2022-12-07T14:23:05-06:00", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a"} |
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Principles of Microeconomics 3eis licensed under a Creative Commons Attribution 4.0 International (CC BY)
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Because our books are openly licensed, you are free to use the entire book or select only the sections that are
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platform, and license within the caption. Because the art is openly licensed, anyone may reuse the art as long | {"creationdate": "2022-12-07T14:15:44-06:00", "upload_timestamp": "2026-02-07T15:24:38.309401", "uploaded_via": "batch_uploader", "file_size_mb": 26.99, "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "total_pages": 597, "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "title": "Principles of Microeconomics 3e", "creator": "PDFMiner", "file_type": ".pdf", "batch_upload": true, "producer": "Prince 14.2 (www.princexml.com)", "file_name": "Microeconomics3e.pdf", "moddate": "2022-12-07T14:23:05-06:00"} |
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About Principles of Microeconomics 3e
Principles of Microeconomics 3ealigns to the topics and objectives of most introductory microeconomics
courses. 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
2 Preface
background in diverse contributors and their impacts on economic thought and analysis.
Coverage and scope | {"creator": "PDFMiner", "batch_upload": true, "total_pages": 597, "file_name": "Microeconomics3e.pdf", "producer": "Prince 14.2 (www.princexml.com)", "uploaded_via": "batch_uploader", "file_size_mb": 26.99, "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "title": "Principles of Microeconomics 3e", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "creationdate": "2022-12-07T14:15:44-06:00", "upload_timestamp": "2026-02-07T15:24:38.309401", "file_type": ".pdf", "moddate": "2022-12-07T14:23:05-06:00"} |
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Coverage and scope
In response to faculty feedback and to ease transition to a new edition, Principles of Microeconomics 3e
retains the organization of the previous editions. The book covers the breadth of economics topics and also
provides the necessary depth to ensure the course is manageable for instructors and students alike. We strove
to balance theory and application, as well as the amount of calculation and mathematical examples.
The book is organized into five main parts:
• What is Economics? The first two chapters introduce students to the study of economics with a focus on
making choices in a world of scarce resources.
• Supply and Demand, Chapters 3 and 4, introduces and explains the first analytical model in
economics–supply, demand, and equilibrium–before showing applications in the markets for labor and
finance. | {"producer": "Prince 14.2 (www.princexml.com)", "upload_timestamp": "2026-02-07T15:24:38.309401", "file_name": "Microeconomics3e.pdf", "batch_upload": true, "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "moddate": "2022-12-07T14:23:05-06:00", "title": "Principles of Microeconomics 3e", "uploaded_via": "batch_uploader", "total_pages": 597, "file_size_mb": 26.99, "creator": "PDFMiner", "file_type": ".pdf", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "creationdate": "2022-12-07T14:15:44-06:00", "source": "downloads\\business\\economics\\Microeconomics3e.pdf"} |
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finance.
• The Fundamentals of Microeconomic Theory, Chapters 5 through 10, begins the microeconomics
portion of the text, presenting the theories of consumer behavior, production and costs, and the different
models of market structure, including some simple game theory.
• Microeconomic Policy Issues, Chapters 11 through 18, covers the range of topics in applied micro,
framed around the concepts of public goods and positive and negative externalities. Students explore
competition and antitrust policies, environmental problems, poverty, income inequality, and other labor
market issues. The text also covers information, risk and financial markets, and public economy.
•
International Economics, Chapters 19 and 20, introduces the international dimensions of economics,
including international trade and protectionism.
Changes to the third edition | {"file_name": "Microeconomics3e.pdf", "file_size_mb": 26.99, "title": "Principles of Microeconomics 3e", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "upload_timestamp": "2026-02-07T15:24:38.309401", "moddate": "2022-12-07T14:23:05-06:00", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "producer": "Prince 14.2 (www.princexml.com)", "batch_upload": true, "uploaded_via": "batch_uploader", "creator": "PDFMiner", "total_pages": 597, "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "creationdate": "2022-12-07T14:15:44-06:00", "file_type": ".pdf"} |
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International Economics, Chapters 19 and 20, introduces the international dimensions of economics,
including international trade and protectionism.
Changes to the third edition
The revision process incorporated extensive feedback from faculty who have used the book in their courses.
They advised that the third edition changes focus on currency updates, integration of newer perspectives and
more diverse contributors, and relevance to students’ lives and careers.
Current data and analysis: The authors have updated dozens of explanations, graphs, and tables containing
financial, demographic, employment, and related economic data. The corresponding discussions provide
context and interpretations of the data, including descriptions of change over time, cause-and-effect
relationships, and balanced analysis of policies and opinions.
Diverse perspectives and contributors: The third edition highlights the research and views of a broader | {"file_name": "Microeconomics3e.pdf", "title": "Principles of Microeconomics 3e", "uploaded_via": "batch_uploader", "total_pages": 597, "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "creator": "PDFMiner", "file_size_mb": 26.99, "batch_upload": true, "moddate": "2022-12-07T14:23:05-06:00", "file_type": ".pdf", "producer": "Prince 14.2 (www.princexml.com)", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "creationdate": "2022-12-07T14:15:44-06:00", "upload_timestamp": "2026-02-07T15:24:38.309401"} |
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Diverse perspectives and contributors: The third edition highlights the research and views of a broader
group of economists. These include people from across the spectrum of economic thought, with a particular
focus on those who take what are often considered non-traditional views of economic policy and government
action. Examples include:
• Chapter 1: Esther Duflo, Abhijit Banerjee, and Michael Kremer regarding experimental analysis in
development economics.
• Chapter 4: Walter Williams and Thomas Sowell regarding the downsides of minimum wages.
• Chapter 13: Carlota Perez regarding employment shifts resulting from innovation; Mariana Mazzucato
regarding government involvement in innovation; Elinor Ostrom and the “non-tragedy of the commons.”
• Chapter 14: William A. Darity Jr. on employment discrimination and market forces; Phyllis Ann Wallace
and the EEOC. | {"source": "downloads\\business\\economics\\Microeconomics3e.pdf", "upload_timestamp": "2026-02-07T15:24:38.309401", "producer": "Prince 14.2 (www.princexml.com)", "batch_upload": true, "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "moddate": "2022-12-07T14:23:05-06:00", "total_pages": 597, "file_type": ".pdf", "creationdate": "2022-12-07T14:15:44-06:00", "file_size_mb": 26.99, "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "title": "Principles of Microeconomics 3e", "file_name": "Microeconomics3e.pdf", "uploaded_via": "batch_uploader", "creator": "PDFMiner"} |
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and the EEOC.
Relevance and engagement: In order to show the importance and application of economics in students’ lives
and careers, the third edition directly addresses and expands topics likely to connect to various industries,
issues, groups, and events. 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. Examples include education spending, the value of college degrees, discrimination, environmental
Access for free at openstax.org
Preface 3
policies, immigration policies, entrepreneurship and innovation, healthcare and insurance, and general
financial literacy. Finally, the COVID-19 pandemic is referenced frequently to demonstrate its deep and
evolving impacts on financial data, employment, and other aspects of the economy. | {"file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "file_name": "Microeconomics3e.pdf", "creationdate": "2022-12-07T14:15:44-06:00", "total_pages": 597, "file_type": ".pdf", "upload_timestamp": "2026-02-07T15:24:38.309401", "moddate": "2022-12-07T14:23:05-06:00", "title": "Principles of Microeconomics 3e", "creator": "PDFMiner", "producer": "Prince 14.2 (www.princexml.com)", "batch_upload": true, "uploaded_via": "batch_uploader", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "file_size_mb": 26.99} |
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evolving impacts on financial data, employment, and other aspects of the economy.
FRED Data and Graphs: As in previous editions, the authors have included and referenced data from the
Federal Reserve Economic Data (FRED). In some cases, interactive FRED graphs are embedded directly in the
web view of the book; students may magnify and focus on specific time periods, analyze individual data points,
and otherwise manipulate the graphs from within the OpenStax reading experience. In others cases (and in
the PDF), links to the direct source of the FRED data are provided, and students are encouraged to explore the
information and the overall FRED resources more thoroughly. Note that other data sources, such as the Bureau
of Labor Statistics, U.S. Census Bureau, and World Bank, usually include links in the captions or credits; | {"upload_timestamp": "2026-02-07T15:24:38.309401", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "uploaded_via": "batch_uploader", "title": "Principles of Microeconomics 3e", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "file_size_mb": 26.99, "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "producer": "Prince 14.2 (www.princexml.com)", "batch_upload": true, "file_type": ".pdf", "creator": "PDFMiner", "total_pages": 597, "moddate": "2022-12-07T14:23:05-06:00", "file_name": "Microeconomics3e.pdf", "creationdate": "2022-12-07T14:15:44-06:00"} |
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instructors and students can also explore those sites for more detailed investigations of the topics at hand.
Updated art
Principles of Microeconomics 3eincludes updated and redesigned art to clarify concepts and provide
opportunities for graphical interpretation. Many graphs are shown with accompanying data tables and
explanations of the drivers and consequences of change.
4 Preface
Pedagogical foundation
The narrative explanations and analysis presented in Principles of Microeconomics 3ehave been carefully
crafted to provide a solid basis in economic concepts, flexibly approach skills and assess understanding, and
deepen students’ engagement with the course materials. You will also find features that promote economic
inquiry and explorations, including:
• Bring It Home: These explorations include a brief case study, specific to each chapter, which connects the | {"file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "file_size_mb": 26.99, "file_type": ".pdf", "producer": "Prince 14.2 (www.princexml.com)", "upload_timestamp": "2026-02-07T15:24:38.309401", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "moddate": "2022-12-07T14:23:05-06:00", "title": "Principles of Microeconomics 3e", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "file_name": "Microeconomics3e.pdf", "creator": "PDFMiner", "batch_upload": true, "uploaded_via": "batch_uploader", "creationdate": "2022-12-07T14:15:44-06:00", "total_pages": 597} |
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• Bring It Home: These explorations include a brief case study, specific to each chapter, which connects the
chapter’s main topic to the real world. It is broken up into two parts: the first at the beginning of the
chapter (in the Intro module) and the second at chapter’s end, when students have learned what’s
necessary to understand the case and “bring home” the chapter’s core concepts.
• Work It Out: These worked examples progress through an analytical or computational problem, and guide
students step-by-step to find out how its solution is derived.
• Clear It Up: These boxes are deeper explanations of something in the main body of the text. Each CIU
starts with a question. The rest of the feature explains the answer.
Questions for each level of learning
Principles of Microeconomics 3eoffers flexibility in practice and assessment, and provides a range of | {"file_type": ".pdf", "creationdate": "2022-12-07T14:15:44-06:00", "moddate": "2022-12-07T14:23:05-06:00", "batch_upload": true, "file_size_mb": 26.99, "upload_timestamp": "2026-02-07T15:24:38.309401", "file_name": "Microeconomics3e.pdf", "producer": "Prince 14.2 (www.princexml.com)", "creator": "PDFMiner", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "uploaded_via": "batch_uploader", "total_pages": 597, "title": "Principles of Microeconomics 3e"} |
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Principles of Microeconomics 3eoffers flexibility in practice and assessment, and provides a range of
opportunities to check understanding and encourage deeper thinking and application.
• Self-Checks are analytical self-assessment questions that appear at the end of each module. They “click to
reveal” an answer in the web view so students can check their understanding before moving on to the next
module. Self-Check questions are not simple look-up questions. They push the student to think beyond
what is said in the text. Self-Check questions are designed for formative (rather than summative)
Access for free at openstax.org
Preface 5
assessment. The questions and answers are explained so that students feel like they are being walked
through the problem.
• Review Question are simple recall questions from the chapter and are in open-response format (not
multiple choice or true/false). The answers can be looked up in the text. | {"batch_upload": true, "creator": "PDFMiner", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "total_pages": 597, "moddate": "2022-12-07T14:23:05-06:00", "file_type": ".pdf", "producer": "Prince 14.2 (www.princexml.com)", "file_size_mb": 26.99, "file_name": "Microeconomics3e.pdf", "title": "Principles of Microeconomics 3e", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "creationdate": "2022-12-07T14:15:44-06:00", "uploaded_via": "batch_uploader", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "upload_timestamp": "2026-02-07T15:24:38.309401"} |
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• Review Question are simple recall questions from the chapter and are in open-response format (not
multiple choice or true/false). The answers can be looked up in the text.
• Critical Thinking Questions are higher-level, conceptual questions ask students to demonstrate their
understanding by applying what they have learned in different contexts.
• Problems are exercises give students additional practice working with the analytic and computational
concepts in the module.
About the Authors
Senior contributing authors
David Shapiro, Pennsylvania State University
David Shapiro is Professor Emeritus of Economics, Demography, and Women’s, Gender, and Sexuality Studies
at the Pennsylvania State University. He received a BA in Economics and Political Science from the University
of Michigan, and an MA as well as a PhD in Economics from Princeton University. He began his academic | {"creator": "PDFMiner", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "uploaded_via": "batch_uploader", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "title": "Principles of Microeconomics 3e", "file_type": ".pdf", "total_pages": 597, "creationdate": "2022-12-07T14:15:44-06:00", "file_name": "Microeconomics3e.pdf", "moddate": "2022-12-07T14:23:05-06:00", "file_size_mb": 26.99, "producer": "Prince 14.2 (www.princexml.com)", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "batch_upload": true, "upload_timestamp": "2026-02-07T15:24:38.309401"} |
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0.030426541343331337,
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... | of Michigan, and an MA as well as a PhD in Economics from Princeton University. He began his academic
career at Ohio State University in 1971, and moved to Penn State in 1980. His early research focused on
women and youth in the United States labor market. Following a 1978-79 stint as a Fulbright professor at the
University of Kinshasa in the Democratic Republic of the Congo, his research shifted focus to fertility in
Kinshasa and more broadly, in sub-Saharan Africa. He has also received the top prize for teaching at both Ohio
State and Penn State.
Daniel MacDonald, California State University, San Bernardino
Professor Daniel MacDonald is the Chair of the Economics Department at California State University, San
Bernardino. He earned his BA in mathematics and economics from Seton Hall University in 2007 and his
economics PhD from the University of Massachusetts Amherst in 2013. Macdonald conducts economic | {"uploaded_via": "batch_uploader", "creationdate": "2022-12-07T14:15:44-06:00", "file_size_mb": 26.99, "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "title": "Principles of Microeconomics 3e", "producer": "Prince 14.2 (www.princexml.com)", "creator": "PDFMiner", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "batch_upload": true, "upload_timestamp": "2026-02-07T15:24:38.309401", "moddate": "2022-12-07T14:23:05-06:00", "file_type": ".pdf", "total_pages": 597, "file_name": "Microeconomics3e.pdf"} |
7045ce29-ef4d-4aff-910b-9c1d81a4f7f6 | [
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-0.002168789505958557... | Bernardino. He earned his BA in mathematics and economics from Seton Hall University in 2007 and his
economics PhD from the University of Massachusetts Amherst in 2013. Macdonald conducts economic
research in labor economics, public policy (housing), and the economic history of the U.S. Consulting. He is
also the author of the weekly Inland Empire Economic Update newsletter
(https://dpmacdonald.substack.com/), which he started in 2021.
Steven A. Greenlaw, Professor Emeritus at University of Mary Washington
Steven Greenlaw taught principles of economics for 39 years. In 1999, he received the Grellet C. Simpson
Award for Excellence in Undergraduate Teaching at the University of Mary Washington. He is the author of
Doing Economics: A Guide to Doing and Understanding Economic Research, as well as a variety of articles on
economics pedagogy and instructional technology, published in the Journal of Economic Education, the | {"upload_timestamp": "2026-02-07T15:24:38.309401", "creator": "PDFMiner", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "total_pages": 597, "uploaded_via": "batch_uploader", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "file_type": ".pdf", "producer": "Prince 14.2 (www.princexml.com)", "file_size_mb": 26.99, "creationdate": "2022-12-07T14:15:44-06:00", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "moddate": "2022-12-07T14:23:05-06:00", "batch_upload": true, "file_name": "Microeconomics3e.pdf", "title": "Principles of Microeconomics 3e"} |
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International Review of Economic Education, and other outlets. He wrote the module on Quantitative Writing
for Starting Point: Teaching and Learning Economics, the web portal on best practices in teaching economics.
Steven Greenlaw lives in Alexandria, Virginia with his wife Kathy. Since retiring from full-time teaching, he has
been doing faculty development work and other writing projects.
Contributing authors
Eric Dodge, Hanover College
Cynthia Gamez, University of Texas at El Paso
Andres Jauregui, Columbus State University
Diane Keenan, Cerritos College
Amyaz Moledina, The College of Wooster
Craig Richardson, Winston-Salem State University
Ralph Sonenshine, American University
Reviewers
Bryan Aguiar, Northwest Arkansas Community College
6 Preface
Basil Al Hashimi, Mesa Community College
Jennifer Ball, Washburn University
Emil Berendt, Mount St. Mary's University | {"upload_timestamp": "2026-02-07T15:24:38.309401", "uploaded_via": "batch_uploader", "file_size_mb": 26.99, "batch_upload": true, "creator": "PDFMiner", "producer": "Prince 14.2 (www.princexml.com)", "total_pages": 597, "file_type": ".pdf", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "file_name": "Microeconomics3e.pdf", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "title": "Principles of Microeconomics 3e", "creationdate": "2022-12-07T14:15:44-06:00", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "moddate": "2022-12-07T14:23:05-06:00"} |
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Bryan Aguiar, Northwest Arkansas Community College
6 Preface
Basil Al Hashimi, Mesa Community College
Jennifer Ball, Washburn University
Emil Berendt, Mount St. Mary's University
Zena Buser, Adams State University
Douglas Campbell, The University of Memphis
Sanjukta Chaudhuri, University of Wisconsin-Eau Claire
Xueyu Cheng, Alabama State University
Robert Cunningham, Alma College
Rosa Lea Danielson, College of DuPage
Steven Deloach, Elon University
Debbie Evercloud, University of Colorado Denver
Sal Figueras, Hudson County Community College
Reza Ghorashi, Stockton University
Robert Gillette, University of Kentucky
George Jones, University of Wisconsin-Rock County
Charles Kroncke, College of Mount St. Joseph
Teresa Laughlin, Palomar Community College
Carlos Liard-Muriente, Central Connecticut State University
Heather Luea, Kansas State University
Charles Meyrick, Housatonic Community College
William Mosher, Nashua Community College | {"creationdate": "2022-12-07T14:15:44-06:00", "total_pages": 597, "creator": "PDFMiner", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "batch_upload": true, "file_size_mb": 26.99, "producer": "Prince 14.2 (www.princexml.com)", "title": "Principles of Microeconomics 3e", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "file_name": "Microeconomics3e.pdf", "upload_timestamp": "2026-02-07T15:24:38.309401", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "file_type": ".pdf", "moddate": "2022-12-07T14:23:05-06:00", "uploaded_via": "batch_uploader"} |
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Heather Luea, Kansas State University
Charles Meyrick, Housatonic Community College
William Mosher, Nashua Community College
Michael Netta, Hudson County Community College
Nick Noble, Miami University
Joe Nowakowski, Muskingum University
Shawn Osell, University of Wisconsin, Superior
Mark Owens, Middle Tennessee State University
Sonia Pereira, Barnard College
Brian Peterson, Central College
Jennifer Platania, Elon University
Robert Rycroft, University of Mary Washington
Adrienne Sachse, Florida State College at Jacksonville
Hans Schumann, Texas A&M University
Gina Shamshak, Goucher College
Chris Warburton, John Jay College of Criminal Justice, CUNY
Mark Witte, Northwestern University
Chiou-nan Yeh, Alabama State University
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Access for free at openstax.org
Preface 7
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We realize that students benefit when academic integrity ground rules are established early in the course. To
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8 Preface
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Access for free at openstax.org
Welcome to Economics!
1
FIGURE 1.1 Do You Use Facebook? Economics is greatly impacted by how well information travels through
society. Today, social media giants Twitter, Facebook, and Instagram are major forces on the information super
highway. (Credit: modification of "Social Media Mixed Icons - Banner" by Blogtrepreneur/Flickr, CC BY 2.0)
CHAPTER OBJECTIVES
In this chapter, you will learn about:
• What Is Economics, and Why Is It Important?
• Microeconomics and Macroeconomics
• How Economists Use Theories and Models to Understand Economic Issues
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• How Economists Use Theories and Models to Understand Economic Issues
• How Economies Can Be Organized: An Overview of Economic Systems
Introduction
BRING IT HOME
Information Overload in the Information Age
To post or not to post? Every day we are faced with a myriad of decisions, from what to have for breakfast, to which
show to stream, to the more complex—“Should I double major and add possibly another semester of study to my
education?” Our response to these choices depends on the information we have available at any given moment.
Economists call this “imperfect” because we rarely have all the data we need to make perfect decisions. Despite the
lack of perfect information, we still make hundreds of decisions a day.
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which movies we see, which products we buy, and more. Whether they read the reviews or just check the ratings, it's
unlikely for Americans to make many significant decisions without these information streams.
As you will see in this course, what happens in economics is affected by how well and how fast information
disseminates through a society, such as how quickly information travels through Facebook. “Economists love
nothing better than when deep and liquid markets operate under conditions of perfect information,” says Jessica
Irvine, National Economics Editor for News Corp Australia.
This leads us to the topic of this chapter, an introduction to the world of making decisions, processing information,
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10 1 • Welcome to Economics!
and understanding behavior in markets —the world of economics. Each chapter in this book will start with a
discussion about current (or sometimes past) events and revisit it at chapter’s end—to “bring home” the concepts in
play.
What is economics and why should you spend your time learning it? After all, there are other disciplines you
could be studying, and other ways you could be spending your time. As the Bring it Home feature just
mentioned, making choices is at the heart of what economists study, and your decision to take this course is as
much as economic decision as anything else.
Economics is probably not what you think. It is not primarily about money or finance. It is not primarily about
business. It is not mathematics. What is it then? It is both a subject area and a way of viewing the world. | {"title": "Principles of Microeconomics 3e", "uploaded_via": "batch_uploader", "file_name": "Microeconomics3e.pdf", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "file_type": ".pdf", "total_pages": 597, "creator": "PDFMiner", "creationdate": "2022-12-07T14:15:44-06:00", "batch_upload": true, "upload_timestamp": "2026-02-07T15:24:38.309401", "file_size_mb": 26.99, "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "producer": "Prince 14.2 (www.princexml.com)", "moddate": "2022-12-07T14:23:05-06:00"} |
b4640cb7-a33e-4a03-b233-d52b8e81e9e8 | [
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0.06485393643379211,
-0.014026409946382046,
-0.01786043494939804,
-0.02938050962984562,
0.0220... | business. It is not mathematics. What is it then? It is both a subject area and a way of viewing the world.
1.1 What Is Economics, and Why Is It Important?
LEARNING OBJECTIVES
By the end of this section, you will be able to:
• Discuss the importance of studying economics
• Explain the relationship between production and division of labor
• Evaluate the significance of scarcity
Economics is the study of how humans make decisions in the face of scarcity. These can be individual
decisions, family decisions, business decisions or societal decisions. If you look around carefully, you will see
that scarcity is a fact of life. Scarcity means that human wants for goods, services and resources exceed what
is available. Resources, such as labor, tools, land, and raw materials are necessary to produce the goods and
services we want but they exist in limited supply. Of course, the ultimate scarce resource is time- everyone, | {"creator": "PDFMiner", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "total_pages": 597, "batch_upload": true, "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "uploaded_via": "batch_uploader", "producer": "Prince 14.2 (www.princexml.com)", "upload_timestamp": "2026-02-07T15:24:38.309401", "moddate": "2022-12-07T14:23:05-06:00", "file_size_mb": 26.99, "title": "Principles of Microeconomics 3e", "creationdate": "2022-12-07T14:15:44-06:00", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "file_type": ".pdf", "file_name": "Microeconomics3e.pdf"} |
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0.... | services we want but they exist in limited supply. Of course, the ultimate scarce resource is time- everyone,
rich or poor, has just 24 expendable hours in the day to earn income to acquire goods and services, for leisure
time, or for sleep. At any point in time, there is only a finite amount of resources available.
Think about it this way: In 2015 the labor force in the United States contained over 158 million workers,
according to the U.S. Bureau of Labor Statistics. The total land area was 3,794,101 square miles. While these
are certainly large numbers, they are not infinite. Because these resources are limited, so are the numbers of
goods and services we produce with them. Combine this with the fact that human wants seem to be virtually
infinite, and you can see why scarcity is a problem.
Introduction to FRED
Data is very important in economics because it describes and measures the issues and problems that | {"producer": "Prince 14.2 (www.princexml.com)", "title": "Principles of Microeconomics 3e", "creationdate": "2022-12-07T14:15:44-06:00", "upload_timestamp": "2026-02-07T15:24:38.309401", "creator": "PDFMiner", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "file_name": "Microeconomics3e.pdf", "file_size_mb": 26.99, "batch_upload": true, "uploaded_via": "batch_uploader", "moddate": "2022-12-07T14:23:05-06:00", "file_type": ".pdf", "total_pages": 597} |
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0.03382795676589012,
0.017005572095513344,
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-0.0638... | infinite, and you can see why scarcity is a problem.
Introduction to FRED
Data is very important in economics because it describes and measures the issues and problems that
economics seek to understand. A variety of government agencies publish economic and social data. For this
course, we will generally use data from the St. Louis Federal Reserve Bank's FRED database. FRED is very user
friendly. It allows you to display data in tables or charts, and you can easily download it into spreadsheet form
if you want to use the data for other purposes. The FRED website (https://openstax.org/l/FRED/) includes data
on nearly 400,000 domestic and international variables over time, in the following broad categories:
• Money, Banking & Finance
• Population, Employment, & Labor Markets (including Income Distribution)
• National Accounts (Gross Domestic Product & its components), Flow of Funds, and International Accounts
• Production & Business Activity (including Business Cycles) | {"source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "title": "Principles of Microeconomics 3e", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "uploaded_via": "batch_uploader", "total_pages": 597, "upload_timestamp": "2026-02-07T15:24:38.309401", "moddate": "2022-12-07T14:23:05-06:00", "file_name": "Microeconomics3e.pdf", "batch_upload": true, "file_size_mb": 26.99, "file_type": ".pdf", "creator": "PDFMiner", "creationdate": "2022-12-07T14:15:44-06:00", "producer": "Prince 14.2 (www.princexml.com)"} |
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-0.040943123400211334,
0.03419392928481102,
-0.06139383092522621,
-0.032887283712625504,
-0.0211... | • National Accounts (Gross Domestic Product & its components), Flow of Funds, and International Accounts
• Production & Business Activity (including Business Cycles)
• Prices & Inflation (including the Consumer Price Index, the Producer Price Index, and the Employment
Cost Index)
•
International Data from other nations
• U.S. Regional Data
• Academic Data (including Penn World Tables & NBER Macrohistory database)
For more information about how to use FRED, see the variety of videos (https://openstax.org/l/FRED_intro) on
Access for free at openstax.org
YouTube starting with this introduction.
1.1 • What Is Economics, and Why Is It Important? 11
FIGURE 1.2 Scarcity of Resources People experiencing homelessness are a stark reminder that scarcity of
resources is real. (Credit: "Pittsburgh Homeless" by "daveyinn"/Flickr Creative Commons, CC BY 2.0)
If you still do not believe that scarcity is a problem, consider the following: Does everyone require food to eat? | {"producer": "Prince 14.2 (www.princexml.com)", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "total_pages": 597, "uploaded_via": "batch_uploader", "file_type": ".pdf", "moddate": "2022-12-07T14:23:05-06:00", "upload_timestamp": "2026-02-07T15:24:38.309401", "batch_upload": true, "creator": "PDFMiner", "file_size_mb": 26.99, "creationdate": "2022-12-07T14:15:44-06:00", "file_name": "Microeconomics3e.pdf", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "title": "Principles of Microeconomics 3e", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a"} |
eec4efb4-70b2-40b3-a580-a1cd879af661 | [
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0.027105387300252914,
0.08010786771774292,
-0.04804225265979767,
0.049898020923137665,
-0.023001... | If you still do not believe that scarcity is a problem, consider the following: Does everyone require food to eat?
Does everyone need a decent place to live? Does everyone have access to healthcare? In every country in the
world, there are people who are hungry, homeless (for example, those who call park benches their beds, as
Figure 1.2 shows), and in need of healthcare, just to focus on a few critical goods and services. Why is this the
case? It is because of scarcity. Let’s delve into the concept of scarcity a little deeper, because it is crucial to
understanding economics.
The Problem of Scarcity
Think about all the things you consume: food, shelter, clothing, transportation, healthcare, and entertainment.
How do you acquire those items? You do not produce them yourself. You buy them. How do you afford the
things you buy? You work for pay. If you do not, someone else does on your behalf. Yet most of us never have | {"creator": "PDFMiner", "upload_timestamp": "2026-02-07T15:24:38.309401", "file_size_mb": 26.99, "producer": "Prince 14.2 (www.princexml.com)", "total_pages": 597, "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "file_type": ".pdf", "creationdate": "2022-12-07T14:15:44-06:00", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "uploaded_via": "batch_uploader", "title": "Principles of Microeconomics 3e", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "file_name": "Microeconomics3e.pdf", "moddate": "2022-12-07T14:23:05-06:00", "batch_upload": true} |
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0.0569809228181839,
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0.02423324... | things you buy? You work for pay. If you do not, someone else does on your behalf. Yet most of us never have
enough income to buy all the things we want. This is because of scarcity. So how do we solve it?
LINK IT UP
Visit this website (http://openstax.org/l/drought) to read about how the United States is dealing with scarcity in
resources.
Every society, at every level, must make choices about how to use its resources. Families must decide whether
to spend their money on a new car or a fancy vacation. Towns must choose whether to put more of the budget
into police and fire protection or into the school system. Nations must decide whether to devote more funds to
national defense or to protecting the environment. In most cases, there just isn’t enough money in the budget
to do everything. How do we use our limited resources the best way possible, that is, to obtain the most goods | {"file_name": "Microeconomics3e.pdf", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "creator": "PDFMiner", "creationdate": "2022-12-07T14:15:44-06:00", "total_pages": 597, "file_size_mb": 26.99, "batch_upload": true, "uploaded_via": "batch_uploader", "upload_timestamp": "2026-02-07T15:24:38.309401", "moddate": "2022-12-07T14:23:05-06:00", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "file_type": ".pdf", "producer": "Prince 14.2 (www.princexml.com)", "title": "Principles of Microeconomics 3e"} |
5ddebfc8-5147-4fa0-b9c7-aa12fe754790 | [
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0.06532938033342361,
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0.034161526709795,
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-0.00... | to do everything. How do we use our limited resources the best way possible, that is, to obtain the most goods
and services we can? There are a couple of options. First, we could each produce everything we each consume.
Alternatively, we could each produce some of what we want to consume, and “trade” for the rest of what we
want. Let’s explore these options. Why do we not each just produce all of the things we consume? Think back to
pioneer days, when individuals knew how to do so much more than we do today, from building their homes, to
growing their crops, to hunting for food, to repairing their equipment. Most of us do not know how to do all—or
any—of those things, but it is not because we could not learn. Rather, we do not have to. The reason why is
something called the division and specialization of labor, a production innovation first put forth by Adam
Smith (Figure 1.3) in his book, The Wealth of Nations.
12 1 • Welcome to Economics! | {"moddate": "2022-12-07T14:23:05-06:00", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "creator": "PDFMiner", "upload_timestamp": "2026-02-07T15:24:38.309401", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "file_name": "Microeconomics3e.pdf", "batch_upload": true, "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "producer": "Prince 14.2 (www.princexml.com)", "creationdate": "2022-12-07T14:15:44-06:00", "file_type": ".pdf", "uploaded_via": "batch_uploader", "total_pages": 597, "file_size_mb": 26.99, "title": "Principles of Microeconomics 3e"} |
66a33712-6d51-40e1-a7ca-ee69e40de84e | [
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0.01... | something called the division and specialization of labor, a production innovation first put forth by Adam
Smith (Figure 1.3) in his book, The Wealth of Nations.
12 1 • Welcome to Economics!
FIGURE 1.3 Adam Smith Adam Smith introduced the idea of dividing labor into discrete tasks. (Credit: "Adam
Smith" by Cadell and Davies (1811), John Horsburgh (1828), or R.C. Bell (1872)/Wikimedia Commons, Public
Domain)
The Division of and Specialization of Labor
The formal study of economics began when Adam Smith (1723–1790) published his famous book The Wealth
of Nationsin 1776. Many authors had written on economics in the centuries before Smith, but he was the first
to address the subject in a comprehensive way. In the first chapter, Smith introduces the concept of division of
labor, which means that the way one produces a good or service is divided into a number of tasks that
different workers perform, instead of all the tasks being done by the same person. | {"source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "moddate": "2022-12-07T14:23:05-06:00", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "file_size_mb": 26.99, "producer": "Prince 14.2 (www.princexml.com)", "total_pages": 597, "file_type": ".pdf", "creator": "PDFMiner", "batch_upload": true, "uploaded_via": "batch_uploader", "upload_timestamp": "2026-02-07T15:24:38.309401", "title": "Principles of Microeconomics 3e", "creationdate": "2022-12-07T14:15:44-06:00", "file_name": "Microeconomics3e.pdf"} |
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0.018942009657621384,
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0.045... | labor, which means that the way one produces a good or service is divided into a number of tasks that
different workers perform, instead of all the tasks being done by the same person.
To illustrate division of labor, Smith counted how many tasks went into making a pin: drawing out a piece of
wire, cutting it to the right length, straightening it, putting a head on one end and a point on the other, and
packaging pins for sale, to name just a few. Smith counted 18 distinct tasks that different people
performed—all for a pin, believe it or not!
Modern businesses divide tasks as well. Even a relatively simple business like a restaurant divides the task of
serving meals into a range of jobs like top chef, sous chefs, less-skilled kitchen help, servers to wait on the
tables, a greeter at the door, janitors to clean up, and a business manager to handle paychecks and bills—not to | {"title": "Principles of Microeconomics 3e", "upload_timestamp": "2026-02-07T15:24:38.309401", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "batch_upload": true, "total_pages": 597, "file_name": "Microeconomics3e.pdf", "uploaded_via": "batch_uploader", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "file_type": ".pdf", "creationdate": "2022-12-07T14:15:44-06:00", "moddate": "2022-12-07T14:23:05-06:00", "producer": "Prince 14.2 (www.princexml.com)", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "creator": "PDFMiner", "file_size_mb": 26.99} |
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0.04071515053510666,
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0... | tables, a greeter at the door, janitors to clean up, and a business manager to handle paychecks and bills—not to
mention the economic connections a restaurant has with suppliers of food, furniture, kitchen equipment, and
the building where it is located. A complex business like a large manufacturing factory, such as the shoe
factory (Figure 1.4), or a hospital can have hundreds of job classifications.
FIGURE 1.4 Division of Labor Workers on an assembly line are an example of the divisions of labor. (Credit: "Red
Wing Shoe Factory Tour" by Nina Hale/Flickr Creative Commons, CC BY 2.0)
Access for free at openstax.org
1.1 • What Is Economics, and Why Is It Important? 13
Why the Division of Labor Increases Production
When we divide and subdivide the tasks involved with producing a good or service, workers and businesses
can produce a greater quantity of output. In his observations of pin factories, Smith noticed that one worker | {"upload_timestamp": "2026-02-07T15:24:38.309401", "uploaded_via": "batch_uploader", "file_type": ".pdf", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "moddate": "2022-12-07T14:23:05-06:00", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "file_name": "Microeconomics3e.pdf", "creator": "PDFMiner", "batch_upload": true, "total_pages": 597, "producer": "Prince 14.2 (www.princexml.com)", "title": "Principles of Microeconomics 3e", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "creationdate": "2022-12-07T14:15:44-06:00", "file_size_mb": 26.99} |
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0.018950479105114937,
-0.033421002328395844,
0.10264644026756287,
0.03023259900510311,
-0.... | can produce a greater quantity of output. In his observations of pin factories, Smith noticed that one worker
alone might make 20 pins in a day, but that a small business of 10 workers (some of whom would need to
complete two or three of the 18 tasks involved with pin-making), could make 48,000 pins in a day. How can a
group of workers, each specializing in certain tasks, produce so much more than the same number of workers
who try to produce the entire good or service by themselves? Smith offered three reasons.
First, specialization in a particular small job allows workers to focus on the parts of the production process
where they have an advantage. (In later chapters, we will develop this idea by discussing comparative
advantage.) People have different skills, talents, and interests, so they will be better at some jobs than at others.
The particular advantages may be based on educational choices, which are in turn shaped by interests and | {"file_size_mb": 26.99, "producer": "Prince 14.2 (www.princexml.com)", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "upload_timestamp": "2026-02-07T15:24:38.309401", "file_type": ".pdf", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "moddate": "2022-12-07T14:23:05-06:00", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "creationdate": "2022-12-07T14:15:44-06:00", "file_name": "Microeconomics3e.pdf", "creator": "PDFMiner", "total_pages": 597, "uploaded_via": "batch_uploader", "title": "Principles of Microeconomics 3e", "batch_upload": true} |
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0.0010999130317941308,
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0.06882785260677338,
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0.000... | The particular advantages may be based on educational choices, which are in turn shaped by interests and
talents. Only those with medical degrees qualify to become doctors, for instance. For some goods, geography
affects specialization. For example, it is easier to be a wheat farmer in North Dakota than in Florida, but easier
to run a tourist hotel in Florida than in North Dakota. If you live in or near a big city, it is easier to attract
enough customers to operate a successful dry cleaning business or movie theater than if you live in a sparsely
populated rural area. Whatever the reason, if people specialize in the production of what they do best, they will
be more effective than if they produce a combination of things, some of which they are good at and some of
which they are not.
Second, workers who specialize in certain tasks often learn to produce more quickly and with higher quality. | {"source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "title": "Principles of Microeconomics 3e", "producer": "Prince 14.2 (www.princexml.com)", "total_pages": 597, "creationdate": "2022-12-07T14:15:44-06:00", "file_type": ".pdf", "file_name": "Microeconomics3e.pdf", "moddate": "2022-12-07T14:23:05-06:00", "upload_timestamp": "2026-02-07T15:24:38.309401", "uploaded_via": "batch_uploader", "batch_upload": true, "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "file_size_mb": 26.99, "creator": "PDFMiner", "source": "downloads\\business\\economics\\Microeconomics3e.pdf"} |
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... | which they are not.
Second, workers who specialize in certain tasks often learn to produce more quickly and with higher quality.
This pattern holds true for many workers, including assembly line laborers who build cars, stylists who cut
hair, and doctors who perform heart surgery. In fact, specialized workers often know their jobs well enough to
suggest innovative ways to do their work faster and better.
A similar pattern often operates within businesses. In many cases, a business that focuses on one or a few
products (sometimes called its “core competency”) is more successful than firms that try to make a wide range
of products.
Third, specialization allows businesses to take advantage of economies of scale, which means that for many
goods, as the level of production increases, the average cost of producing each individual unit declines. For
example, if a factory produces only 100 cars per year, each car will be quite expensive to make on average. | {"source": "downloads\\business\\economics\\Microeconomics3e.pdf", "producer": "Prince 14.2 (www.princexml.com)", "file_type": ".pdf", "creationdate": "2022-12-07T14:15:44-06:00", "upload_timestamp": "2026-02-07T15:24:38.309401", "total_pages": 597, "creator": "PDFMiner", "batch_upload": true, "uploaded_via": "batch_uploader", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "title": "Principles of Microeconomics 3e", "file_name": "Microeconomics3e.pdf", "moddate": "2022-12-07T14:23:05-06:00", "file_size_mb": 26.99, "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf"} |
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0.... | example, if a factory produces only 100 cars per year, each car will be quite expensive to make on average.
However, if a factory produces 50,000 cars each year, then it can set up an assembly line with huge machines
and workers performing specialized tasks, and the average cost of production per car will be lower. The
ultimate result of workers who can focus on their preferences and talents, learn to do their specialized jobs
better, and work in larger organizations is that society as a whole can produce and consume far more than if
each person tried to produce all of their own goods and services. The division and specialization of labor has
been a force against the problem of scarcity.
Trade and Markets
Specialization only makes sense, though, if workers can use the pay they receive for doing their jobs to
purchase the other goods and services that they need. In short, specialization requires trade. | {"uploaded_via": "batch_uploader", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "creator": "PDFMiner", "moddate": "2022-12-07T14:23:05-06:00", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "producer": "Prince 14.2 (www.princexml.com)", "upload_timestamp": "2026-02-07T15:24:38.309401", "file_name": "Microeconomics3e.pdf", "title": "Principles of Microeconomics 3e", "file_type": ".pdf", "creationdate": "2022-12-07T14:15:44-06:00", "file_size_mb": 26.99, "batch_upload": true, "total_pages": 597} |
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0.006551144644618034,
0.03924049437046051,
-0.021612847223877907,
-0.04... | purchase the other goods and services that they need. In short, specialization requires trade.
You do not have to know anything about electronics or sound systems to play music—you just buy an iPod or
MP3 player, download the music, and listen. You do not have to know anything about artificial fibers or the
construction of sewing machines if you need a jacket—you just buy the jacket and wear it. You do not need to
know anything about internal combustion engines to operate a car—you just get in and drive. Instead of trying
to acquire all the knowledge and skills involved in producing all of the goods and services that you wish to
consume, the market allows you to learn a specialized set of skills and then use the pay you receive to buy the
goods and services you need or want. This is how our modern society has evolved into a strong economy.
14 1 • Welcome to Economics!
Why Study Economics? | {"batch_upload": true, "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "file_name": "Microeconomics3e.pdf", "title": "Principles of Microeconomics 3e", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "upload_timestamp": "2026-02-07T15:24:38.309401", "creationdate": "2022-12-07T14:15:44-06:00", "file_type": ".pdf", "total_pages": 597, "file_size_mb": 26.99, "moddate": "2022-12-07T14:23:05-06:00", "uploaded_via": "batch_uploader", "producer": "Prince 14.2 (www.princexml.com)", "creator": "PDFMiner", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a"} |
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-0.0... | goods and services you need or want. This is how our modern society has evolved into a strong economy.
14 1 • Welcome to Economics!
Why Study Economics?
FIGURE 1.5 Esther Duflo, Abhijit Banerjee, and Michael Kremer Esther Duflo, Abhijit Banerjee (both from
Massachusetts Institute of Technology), and Michael Kremer (University of Chicago) were awarded the Nobel Prize
for groundbreaking work in which they established experimental methods to understand poverty and outcomes of
initiatives to address it. (Credit: modification of work by U.S. Embassy Sweden/Wikimedia Commons, CC BY 2.0;
Financial Times/Wikimedia Commons, CC BY 2.0; U.S. Embassy Sweden/Flickr Creative Commons, CC BY 2.0)
Now that you have an overview on what economics studies, let’s quickly discuss why you are right to study it.
Economics is not primarily a collection of facts to memorize, although there are plenty of important concepts | {"title": "Principles of Microeconomics 3e", "producer": "Prince 14.2 (www.princexml.com)", "moddate": "2022-12-07T14:23:05-06:00", "uploaded_via": "batch_uploader", "total_pages": 597, "batch_upload": true, "file_type": ".pdf", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "file_name": "Microeconomics3e.pdf", "creationdate": "2022-12-07T14:15:44-06:00", "file_size_mb": 26.99, "creator": "PDFMiner", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "upload_timestamp": "2026-02-07T15:24:38.309401", "source": "downloads\\business\\economics\\Microeconomics3e.pdf"} |
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0.08146169781684875,
0.0533209964632988,
0.030537262558937073,
-0.06316299736499786,
-0.0852181... | Economics is not primarily a collection of facts to memorize, although there are plenty of important concepts
to learn. Instead, think of economics as a collection of questions to answer or puzzles to work. Most
importantly, economics provides the tools to solve those puzzles.
Consider the complex and critical issue of education barriers on national and regional levels, which affect
millions of people and result in widespread poverty and inequality. Governments, aid organizations, and
wealthy individuals spend billions of dollars each year trying to address these issues. Nations announce the
revitalization of their education programs; tech companies donate devices and infrastructure, and celebrities
and charities build schools and sponsor students. Yet the problems remain, sometimes almost as pronounced
as they were before the intervention. Why is that the case? In 2019, three economists—Esther Duflo, Abhijit | {"upload_timestamp": "2026-02-07T15:24:38.309401", "moddate": "2022-12-07T14:23:05-06:00", "batch_upload": true, "total_pages": 597, "uploaded_via": "batch_uploader", "file_type": ".pdf", "creator": "PDFMiner", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "title": "Principles of Microeconomics 3e", "creationdate": "2022-12-07T14:15:44-06:00", "file_size_mb": 26.99, "file_name": "Microeconomics3e.pdf", "producer": "Prince 14.2 (www.princexml.com)", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "source": "downloads\\business\\economics\\Microeconomics3e.pdf"} |
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-0.035643745213747025,
0.07815196365118027,
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-0.0691... | as they were before the intervention. Why is that the case? In 2019, three economists—Esther Duflo, Abhijit
Banerjee, and Michael Kremer—were awarded the Nobel Prize for their work to answer those questions. They
worked diligently to break the widespread problems into smaller pieces, and experimented with small
interventions to test success. The award citation credited their work with giving the world better tools and
information to address poverty and improve education. Esther Duflo, who is the youngest person and second
woman to win the Nobel Prize in Economics, said, "We believed that like the war on cancer, the war on poverty
was not going to be won in one major battle, but in a series of small triumphs. . . . This work and the culture of
learning that it fostered in governments has led to real improvement in the lives of hundreds of millions of
poor people.”
As you can see, economics affects far more than business. For example: | {"creator": "PDFMiner", "batch_upload": true, "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "file_size_mb": 26.99, "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "file_type": ".pdf", "title": "Principles of Microeconomics 3e", "file_name": "Microeconomics3e.pdf", "producer": "Prince 14.2 (www.princexml.com)", "uploaded_via": "batch_uploader", "upload_timestamp": "2026-02-07T15:24:38.309401", "total_pages": 597, "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "creationdate": "2022-12-07T14:15:44-06:00", "moddate": "2022-12-07T14:23:05-06:00"} |
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0.09633641690015793,
-0.07440927624702454,
-0.084133... | learning that it fostered in governments has led to real improvement in the lives of hundreds of millions of
poor people.”
As you can see, economics affects far more than business. For example:
• Virtually every major problem facing the world today, from global warming, to world poverty, to the
conflicts in Syria, Afghanistan, and Somalia, has an economic dimension. If you are going to be part of
solving those problems, you need to be able to understand them. Economics is crucial.
•
It is hard to overstate the importance of economics to good citizenship. You need to be able to vote
intelligently on budgets, regulations, and laws in general. When the U.S. government came close to a
standstill at the end of 2012 due to the “fiscal cliff,” what were the issues? Did you know?
• A basic understanding of economics makes you a well-rounded thinker. When you read articles about
economic issues, you will understand and be able to evaluate the writer’s argument. When you hear | {"creationdate": "2022-12-07T14:15:44-06:00", "title": "Principles of Microeconomics 3e", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "total_pages": 597, "moddate": "2022-12-07T14:23:05-06:00", "file_size_mb": 26.99, "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "batch_upload": true, "file_name": "Microeconomics3e.pdf", "producer": "Prince 14.2 (www.princexml.com)", "creator": "PDFMiner", "file_type": ".pdf", "upload_timestamp": "2026-02-07T15:24:38.309401", "uploaded_via": "batch_uploader"} |
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-0.077... | • A basic understanding of economics makes you a well-rounded thinker. When you read articles about
economic issues, you will understand and be able to evaluate the writer’s argument. When you hear
Access for free at openstax.org
1.2 • Microeconomics and Macroeconomics 15
classmates, co-workers, or political candidates talking about economics, you will be able to distinguish
between common sense and nonsense. You will find new ways of thinking about current events and about
personal and business decisions, as well as current events and politics.
The study of economics does not dictate the answers, but it can illuminate the different choices.
1.2 Microeconomics and Macroeconomics
LEARNING OBJECTIVES
By the end of this section, you will be able to:
• Describe microeconomics
• Describe macroeconomics
• Contrast monetary policy and fiscal policy
Economics is concerned with the well-being of allpeople, including those with jobs and those without jobs, as | {"creator": "PDFMiner", "moddate": "2022-12-07T14:23:05-06:00", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "creationdate": "2022-12-07T14:15:44-06:00", "file_name": "Microeconomics3e.pdf", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "producer": "Prince 14.2 (www.princexml.com)", "title": "Principles of Microeconomics 3e", "upload_timestamp": "2026-02-07T15:24:38.309401", "batch_upload": true, "file_type": ".pdf", "total_pages": 597, "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "file_size_mb": 26.99, "uploaded_via": "batch_uploader"} |
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0.015959521755576134,
-0.06913503259420395,
-0.0836276... | • Describe macroeconomics
• Contrast monetary policy and fiscal policy
Economics is concerned with the well-being of allpeople, including those with jobs and those without jobs, as
well as those with high incomes and those with low incomes. Economics acknowledges that production of
useful goods and services can create problems of environmental pollution. It explores the question of how
investing in education helps to develop workers’ skills. It probes questions like how to tell when big businesses
or big labor unions are operating in a way that benefits society as a whole and when they are operating in a way
that benefits their owners or members at the expense of others. It looks at how government spending, taxes,
and regulations affect decisions about production and consumption.
It should be clear by now that economics covers considerable ground. We can divide that ground into two | {"uploaded_via": "batch_uploader", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "creationdate": "2022-12-07T14:15:44-06:00", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "title": "Principles of Microeconomics 3e", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "batch_upload": true, "file_name": "Microeconomics3e.pdf", "upload_timestamp": "2026-02-07T15:24:38.309401", "creator": "PDFMiner", "total_pages": 597, "producer": "Prince 14.2 (www.princexml.com)", "file_type": ".pdf", "file_size_mb": 26.99, "moddate": "2022-12-07T14:23:05-06:00"} |
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0.02740... | and regulations affect decisions about production and consumption.
It should be clear by now that economics covers considerable ground. We can divide that ground into two
parts: Microeconomics focuses on the actions of individual agents within the economy, like households,
workers, and businesses. Macroeconomics looks at the economy as a whole. It focuses on broad issues such as
growth of production, the number of unemployed people, the inflationary increase in prices, government
deficits, and levels of exports and imports. Microeconomics and macroeconomics are not separate subjects,
but rather complementary perspectives on the overall subject of the economy.
To understand why both microeconomic and macroeconomic perspectives are useful, consider the problem of
studying a biological ecosystem like a lake. One person who sets out to study the lake might focus on specific | {"file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "creator": "PDFMiner", "creationdate": "2022-12-07T14:15:44-06:00", "total_pages": 597, "producer": "Prince 14.2 (www.princexml.com)", "file_name": "Microeconomics3e.pdf", "file_size_mb": 26.99, "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "file_type": ".pdf", "upload_timestamp": "2026-02-07T15:24:38.309401", "uploaded_via": "batch_uploader", "moddate": "2022-12-07T14:23:05-06:00", "batch_upload": true, "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "title": "Principles of Microeconomics 3e"} |
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0.03706097975373268,
-0.00502141984179616,
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0.041011... | studying a biological ecosystem like a lake. One person who sets out to study the lake might focus on specific
topics: certain kinds of algae or plant life; the characteristics of particular fish or snails; or the trees
surrounding the lake. Another person might take an overall view and instead consider the lake's ecosystem
from top to bottom; what eats what, how the system stays in a rough balance, and what environmental stresses
affect this balance. Both approaches are useful, and both examine the same lake, but the viewpoints are
different. In a similar way, both microeconomics and macroeconomics study the same economy, but each has
a different viewpoint.
Whether you are scrutinizing lakes or economics, the micro and the macro insights should blend with each
other. In studying a lake, the micro insights about particular plants and animals help to understand the overall | {"total_pages": 597, "moddate": "2022-12-07T14:23:05-06:00", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "creator": "PDFMiner", "upload_timestamp": "2026-02-07T15:24:38.309401", "file_size_mb": 26.99, "file_type": ".pdf", "producer": "Prince 14.2 (www.princexml.com)", "file_name": "Microeconomics3e.pdf", "batch_upload": true, "creationdate": "2022-12-07T14:15:44-06:00", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "uploaded_via": "batch_uploader", "title": "Principles of Microeconomics 3e"} |
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-0.0... | food chain, while the macro insights about the overall food chain help to explain the environment in which
individual plants and animals live.
In economics, the micro decisions of individual businesses are influenced by whether the macroeconomy is
healthy. For example, firms will be more likely to hire workers if the overall economy is growing. In turn,
macroeconomy's performance ultimately depends on the microeconomic decisions that individual
households and businesses make.
Microeconomics
What determines how households and individuals spend their budgets? What combination of goods and
services will best fit their needs and wants, given the budget they have to spend? How do people decide
whether to work, and if so, whether to work full time or part time? How do people decide how much to save for
the future, or whether they should borrow to spend beyond their current means? | {"source": "downloads\\business\\economics\\Microeconomics3e.pdf", "creationdate": "2022-12-07T14:15:44-06:00", "title": "Principles of Microeconomics 3e", "file_type": ".pdf", "upload_timestamp": "2026-02-07T15:24:38.309401", "producer": "Prince 14.2 (www.princexml.com)", "file_name": "Microeconomics3e.pdf", "uploaded_via": "batch_uploader", "batch_upload": true, "total_pages": 597, "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "moddate": "2022-12-07T14:23:05-06:00", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "creator": "PDFMiner", "file_size_mb": 26.99} |
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the future, or whether they should borrow to spend beyond their current means?
What determines the products, and how many of each, a firm will produce and sell? What determines the
16 1 • Welcome to Economics!
prices a firm will charge? What determines how a firm will produce its products? What determines how many
workers it will hire? How will a firm finance its business? When will a firm decide to expand, downsize, or even
close? In the microeconomics part of this book, we will learn about the theory of consumer behavior, the
theory of the firm, how markets for labor and other resources work, and how markets sometimes fail to work
properly.
Macroeconomics
What determines the level of economic activity in a society? In other words, what determines how many goods | {"file_size_mb": 26.99, "upload_timestamp": "2026-02-07T15:24:38.309401", "file_type": ".pdf", "batch_upload": true, "file_name": "Microeconomics3e.pdf", "moddate": "2022-12-07T14:23:05-06:00", "uploaded_via": "batch_uploader", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "title": "Principles of Microeconomics 3e", "producer": "Prince 14.2 (www.princexml.com)", "creator": "PDFMiner", "total_pages": 597, "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "creationdate": "2022-12-07T14:15:44-06:00"} |
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Macroeconomics
What determines the level of economic activity in a society? In other words, what determines how many goods
and services a nation actually produces? What determines how many jobs are available in an economy? What
determines a nation’s standard of living? What causes the economy to speed up or slow down? What causes
firms to hire more workers or to lay them off? Finally, what causes the economy to grow over the long term?
We can determine an economy's macroeconomic health by examining a number of goals: growth in the
standard of living, low unemployment, and low inflation, to name the most important. How can we use
government macroeconomic policy to pursue these goals? A nation's central bank conducts monetary policy,
which involves policies that affect bank lending, interest rates, and financial capital markets. For the United
States, this is the Federal Reserve. A nation's legislative body determines fiscal policy, which involves | {"source": "downloads\\business\\economics\\Microeconomics3e.pdf", "creator": "PDFMiner", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "file_name": "Microeconomics3e.pdf", "batch_upload": true, "file_size_mb": 26.99, "total_pages": 597, "uploaded_via": "batch_uploader", "upload_timestamp": "2026-02-07T15:24:38.309401", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "creationdate": "2022-12-07T14:15:44-06:00", "file_type": ".pdf", "producer": "Prince 14.2 (www.princexml.com)", "title": "Principles of Microeconomics 3e", "moddate": "2022-12-07T14:23:05-06:00"} |
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0.06777031719684601,
-0.07955845445394516,
0.07568051666021347,
-0.07137708365917206,
-0.067... | States, this is the Federal Reserve. A nation's legislative body determines fiscal policy, which involves
government spending and taxes. For the United States, this is the Congress and the executive branch, which
originates the federal budget. These are the government's main tools. Americans tend to expect that
government can fix whatever economic problems we encounter, but to what extent is that expectation
realistic? These are just some of the issues that we will explore in the macroeconomic chapters of this book.
1.3 How Economists Use Theories and Models to Understand Economic Issues
LEARNING OBJECTIVES
By the end of this section, you will be able to:
•
Interpret a circular flow diagram
• Explain the importance of economic theories and models
• Describe goods and services markets and labor markets
FIGURE 1.6 John Maynard Keynes One of the most influential economists in modern times was John Maynard | {"moddate": "2022-12-07T14:23:05-06:00", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "upload_timestamp": "2026-02-07T15:24:38.309401", "creationdate": "2022-12-07T14:15:44-06:00", "creator": "PDFMiner", "file_size_mb": 26.99, "producer": "Prince 14.2 (www.princexml.com)", "uploaded_via": "batch_uploader", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "title": "Principles of Microeconomics 3e", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "file_name": "Microeconomics3e.pdf", "file_type": ".pdf", "batch_upload": true, "total_pages": 597} |
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FIGURE 1.6 John Maynard Keynes One of the most influential economists in modern times was John Maynard
Keynes. (Credit: “John Maynard Keynes” by IMF/Wikimedia Commons, Public Domain)
John Maynard Keynes (1883–1946), one of the greatest economists of the twentieth century, pointed out that
economics is not just a subject area but also a way of thinking. Keynes (Figure 1.6) famously wrote in the
introduction to a fellow economist’s book: “[Economics] is a method rather than a doctrine, an apparatus of the
mind, a technique of thinking, which helps its possessor to draw correct conclusions.” In other words,
economics teaches you how to think, not what to think.
LINK IT UP
Watch this video (http://openstax.org/l/Keynes) about John Maynard Keynes and his influence on economics.
Access for free at openstax.org
1.3 • How Economists Use Theories and Models to Understand Economic Issues 17 | {"file_type": ".pdf", "title": "Principles of Microeconomics 3e", "creationdate": "2022-12-07T14:15:44-06:00", "file_name": "Microeconomics3e.pdf", "creator": "PDFMiner", "producer": "Prince 14.2 (www.princexml.com)", "file_size_mb": 26.99, "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "upload_timestamp": "2026-02-07T15:24:38.309401", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "total_pages": 597, "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "uploaded_via": "batch_uploader", "moddate": "2022-12-07T14:23:05-06:00", "batch_upload": true} |
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0.062703... | Access for free at openstax.org
1.3 • How Economists Use Theories and Models to Understand Economic Issues 17
Economists see the world through a different lens than anthropologists, biologists, classicists, or practitioners
of any other discipline. They analyze issues and problems using economic theories that are based on
particular assumptions about human behavior. These assumptions tend to be different than the assumptions
an anthropologist or psychologist might use. A theory is a simplified representation of how two or more
variables interact with each other. The purpose of a theory is to take a complex, real-world issue and simplify it
down to its essentials. If done well, this enables the analyst to understand the issue and any problems around
it. A good theory is simple enough to understand, while complex enough to capture the key features of the
object or situation you are studying. | {"creator": "PDFMiner", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "creationdate": "2022-12-07T14:15:44-06:00", "file_name": "Microeconomics3e.pdf", "file_size_mb": 26.99, "file_type": ".pdf", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "upload_timestamp": "2026-02-07T15:24:38.309401", "uploaded_via": "batch_uploader", "batch_upload": true, "producer": "Prince 14.2 (www.princexml.com)", "title": "Principles of Microeconomics 3e", "total_pages": 597, "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "moddate": "2022-12-07T14:23:05-06:00"} |
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0.023081162944436073,
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0.0900794193148613,
-0.011207499541342258,
0.0498... | it. A good theory is simple enough to understand, while complex enough to capture the key features of the
object or situation you are studying.
Sometimes economists use the term model instead of theory. Strictly speaking, a theory is a more abstract
representation, while a model is a more applied or empirical representation. We use models to test theories,
but for this course we will use the terms interchangeably.
For example, an architect who is planning a major office building will often build a physical model that sits on
a tabletop to show how the entire city block will look after the new building is constructed. Companies often
build models of their new products, which are more rough and unfinished than the final product, but can still
demonstrate how the new product will work.
A good model to start with in economics is the circular flow diagram (Figure 1.7). It pictures the economy as | {"creationdate": "2022-12-07T14:15:44-06:00", "moddate": "2022-12-07T14:23:05-06:00", "file_type": ".pdf", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "upload_timestamp": "2026-02-07T15:24:38.309401", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "file_name": "Microeconomics3e.pdf", "producer": "Prince 14.2 (www.princexml.com)", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "creator": "PDFMiner", "batch_upload": true, "total_pages": 597, "uploaded_via": "batch_uploader", "title": "Principles of Microeconomics 3e", "file_size_mb": 26.99} |
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0.001460143132135272,
0.02562839537858963,
0.02427046000957489,
-0.000... | demonstrate how the new product will work.
A good model to start with in economics is the circular flow diagram (Figure 1.7). It pictures the economy as
consisting of two groups—households and firms—that interact in two markets: the goods and services market
in which firms sell and households buy and the labor market in which households sell labor to business firms
or other employees.
FIGURE 1.7 The Circular Flow Diagram The circular flow diagram shows how households and firms interact in the
goods and services market, and in the labor market. The direction of the arrows shows that in the goods and
services market, households receive goods and services and pay firms for them. In the labor market, households
provide labor and receive payment from firms through wages, salaries, and benefits.
Firms produce and sell goods and services to households in the market for goods and services (or product | {"file_type": ".pdf", "file_name": "Microeconomics3e.pdf", "uploaded_via": "batch_uploader", "title": "Principles of Microeconomics 3e", "total_pages": 597, "upload_timestamp": "2026-02-07T15:24:38.309401", "producer": "Prince 14.2 (www.princexml.com)", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "creationdate": "2022-12-07T14:15:44-06:00", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "batch_upload": true, "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "creator": "PDFMiner", "file_size_mb": 26.99, "moddate": "2022-12-07T14:23:05-06:00"} |
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0.01368... | provide labor and receive payment from firms through wages, salaries, and benefits.
Firms produce and sell goods and services to households in the market for goods and services (or product
market). Arrow “A” indicates this. Households pay for goods and services, which becomes the revenues to
firms. Arrow “B” indicates this. Arrows A and B represent the two sides of the product market. Where do
households obtain the income to buy goods and services? They provide the labor and other resources (e.g.,
land, capital, raw materials) firms need to produce goods and services in the market for inputs (or factors of
production). Arrow “C” indicates this. In return, firms pay for the inputs (or resources) they use in the form of
wages and other factor payments. Arrow “D” indicates this. Arrows “C” and “D” represent the two sides of the
factor market.
Of course, in the real world, there are many different markets for goods and services and markets for many | {"batch_upload": true, "title": "Principles of Microeconomics 3e", "creationdate": "2022-12-07T14:15:44-06:00", "moddate": "2022-12-07T14:23:05-06:00", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "uploaded_via": "batch_uploader", "file_size_mb": 26.99, "total_pages": 597, "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "producer": "Prince 14.2 (www.princexml.com)", "upload_timestamp": "2026-02-07T15:24:38.309401", "creator": "PDFMiner", "file_name": "Microeconomics3e.pdf", "file_type": ".pdf"} |
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Of course, in the real world, there are many different markets for goods and services and markets for many
different types of labor. The circular flow diagram simplifies this to make the picture easier to grasp. In the
diagram, firms produce goods and services, which they sell to households in return for revenues. The outer
circle shows this, and represents the two sides of the product market (for example, the market for goods and
18 1 • Welcome to Economics!
services) in which households demand and firms supply. Households sell their labor as workers to firms in
return for wages, salaries, and benefits. The inner circle shows this and represents the two sides of the labor
market in which households supply and firms demand.
This version of the circular flow model is stripped down to the essentials, but it has enough features to explain
how the product and labor markets work in the economy. We could easily add details to this basic model if we | {"creator": "PDFMiner", "file_type": ".pdf", "title": "Principles of Microeconomics 3e", "producer": "Prince 14.2 (www.princexml.com)", "batch_upload": true, "file_size_mb": 26.99, "upload_timestamp": "2026-02-07T15:24:38.309401", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "file_name": "Microeconomics3e.pdf", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "uploaded_via": "batch_uploader", "total_pages": 597, "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "creationdate": "2022-12-07T14:15:44-06:00", "moddate": "2022-12-07T14:23:05-06:00"} |
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0.03936990350484848,
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0.046... | how the product and labor markets work in the economy. We could easily add details to this basic model if we
wanted to introduce more real-world elements, like financial markets, governments, and interactions with the
rest of the globe (imports and exports).
Economists carry a set of theories in their heads like a carpenter carries around a toolkit. When they see an
economic issue or problem, they go through the theories they know to see if they can find one that fits. Then
they use the theory to derive insights about the issue or problem. Economists express theories as diagrams,
graphs, or even as mathematical equations. (Do not worry. In this course, we will mostly use graphs.)
Economists do not figure out the answer to the problem first and then draw the graph to illustrate. Rather, they
use the graph of the theory to help them figure out the answer. Although at the introductory level, you can | {"moddate": "2022-12-07T14:23:05-06:00", "producer": "Prince 14.2 (www.princexml.com)", "creationdate": "2022-12-07T14:15:44-06:00", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "title": "Principles of Microeconomics 3e", "batch_upload": true, "file_type": ".pdf", "file_size_mb": 26.99, "uploaded_via": "batch_uploader", "file_name": "Microeconomics3e.pdf", "creator": "PDFMiner", "total_pages": 597, "upload_timestamp": "2026-02-07T15:24:38.309401", "source": "downloads\\business\\economics\\Microeconomics3e.pdf"} |
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-0.... | use the graph of the theory to help them figure out the answer. Although at the introductory level, you can
sometimes figure out the right answer without applying a model, if you keep studying economics, before too
long you will run into issues and problems that you will need to graph to solve. We explain both micro and
macroeconomics in terms of theories and models. The most well-known theories are probably those of supply
and demand, but you will learn a number of others.
1.4 How To Organize Economies: An Overview of Economic Systems
LEARNING OBJECTIVES
By the end of this section, you will be able to:
• Contrast traditional economies, command economies, and market economies
• Explain gross domestic product (GDP)
• Assess the importance and effects of globalization
Think about what a complex system a modern economy is. It includes all production of goods and services, all | {"upload_timestamp": "2026-02-07T15:24:38.309401", "total_pages": 597, "title": "Principles of Microeconomics 3e", "uploaded_via": "batch_uploader", "creationdate": "2022-12-07T14:15:44-06:00", "file_size_mb": 26.99, "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "file_type": ".pdf", "creator": "PDFMiner", "moddate": "2022-12-07T14:23:05-06:00", "producer": "Prince 14.2 (www.princexml.com)", "batch_upload": true, "file_name": "Microeconomics3e.pdf", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf"} |
02ef02ab-30d5-44cf-bcde-bd9749de690e | [
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0.002324176486581564,
0.019834548234939575,
0.00... | • Assess the importance and effects of globalization
Think about what a complex system a modern economy is. It includes all production of goods and services, all
buying and selling, all employment. The economic life of every individual is interrelated, at least to a small
extent, with the economic lives of thousands or even millions of other individuals. Who organizes and
coordinates this system? Who ensures that, for example, the number of televisions a society provides is the
same as the amount it needs and wants? Who ensures that the right number of employees work in the
electronics industry? Who ensures that televisions are produced in the best way possible? How does it all get
done?
There are at least three ways that societies organize an economy. The first is the traditional economy, which is
the oldest economic system and is used in parts of Asia, Africa, and South America. Traditional economies | {"creationdate": "2022-12-07T14:15:44-06:00", "batch_upload": true, "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "total_pages": 597, "moddate": "2022-12-07T14:23:05-06:00", "uploaded_via": "batch_uploader", "file_size_mb": 26.99, "upload_timestamp": "2026-02-07T15:24:38.309401", "file_name": "Microeconomics3e.pdf", "creator": "PDFMiner", "file_type": ".pdf", "title": "Principles of Microeconomics 3e", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "producer": "Prince 14.2 (www.princexml.com)"} |
3a21c337-5b6c-4ff2-b45f-01b2dd5e1b98 | [
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-... | the oldest economic system and is used in parts of Asia, Africa, and South America. Traditional economies
organize their economic affairs the way they have always done (i.e., tradition). Occupations stay in the family.
Most families are farmers who grow the crops using traditional methods. What you produce is what you
consume. Because tradition drives the way of life, there is little economic progress or development.
Access for free at openstax.org
1.4 • How To Organize Economies: An Overview of Economic Systems 19
FIGURE 1.8 A Command Economy Ancient Egypt was an example of a command economy. (Credit: "Pyramids at
Giza" by Jay Bergesen/Flickr Creative Commons, CC BY 2.0)
Command economies are very different. In a command economy, economic effort is devoted to goals passed
down from a ruler or ruling class. Ancient Egypt was a good example: a large part of economic life was devoted | {"moddate": "2022-12-07T14:23:05-06:00", "title": "Principles of Microeconomics 3e", "creationdate": "2022-12-07T14:15:44-06:00", "producer": "Prince 14.2 (www.princexml.com)", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "total_pages": 597, "uploaded_via": "batch_uploader", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "file_name": "Microeconomics3e.pdf", "file_type": ".pdf", "creator": "PDFMiner", "file_size_mb": 26.99, "upload_timestamp": "2026-02-07T15:24:38.309401", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "batch_upload": true} |
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-0.0... | down from a ruler or ruling class. Ancient Egypt was a good example: a large part of economic life was devoted
to building pyramids, like those in Figure 1.8, for the pharaohs. Medieval manor life is another example: the
lord provided the land for growing crops and protection in the event of war. In return, vassals provided labor
and soldiers to do the lord’s bidding. In the last century, communism emphasized command economies.
In a command economy, the government decides what goods and services will be produced and what prices it
will charge for them. The government decides what methods of production to use and sets wages for workers.
The government provides many necessities like healthcare and education for free. Currently, Cuba and North
Korea have command economies.
FIGURE 1.9 A Market Economy Nothing says “market” more than The New York Stock Exchange. (Credit: work by
Erik Drost/Flickr Creative Commons, CC BY 2.0) | {"title": "Principles of Microeconomics 3e", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "producer": "Prince 14.2 (www.princexml.com)", "creator": "PDFMiner", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "file_name": "Microeconomics3e.pdf", "moddate": "2022-12-07T14:23:05-06:00", "total_pages": 597, "file_size_mb": 26.99, "creationdate": "2022-12-07T14:15:44-06:00", "upload_timestamp": "2026-02-07T15:24:38.309401", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "uploaded_via": "batch_uploader", "batch_upload": true, "file_type": ".pdf"} |
1c884d78-945e-4e43-8c99-a4891a7a9bd6 | [
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0.03938189893960953,
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-0... | Korea have command economies.
FIGURE 1.9 A Market Economy Nothing says “market” more than The New York Stock Exchange. (Credit: work by
Erik Drost/Flickr Creative Commons, CC BY 2.0)
Although command economies have a very centralized structure for economic decisions, market economies
have a very decentralized structure. A market is an institution that brings together buyers and sellers of goods
or services, who may be either individuals or businesses. The New York Stock Exchange (Figure 1.9) is a prime
example of a market which brings buyers and sellers together. In a market economy, decision-making is
decentralized. Market economies are based on private enterprise: the private individuals or groups of private
individuals own and operate the means of production (resources and businesses). Businesses supply goods
and services based on demand. (In a command economy, by contrast, the government owns resources and | {"file_type": ".pdf", "file_size_mb": 26.99, "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "upload_timestamp": "2026-02-07T15:24:38.309401", "total_pages": 597, "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "title": "Principles of Microeconomics 3e", "moddate": "2022-12-07T14:23:05-06:00", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "uploaded_via": "batch_uploader", "creationdate": "2022-12-07T14:15:44-06:00", "creator": "PDFMiner", "producer": "Prince 14.2 (www.princexml.com)", "file_name": "Microeconomics3e.pdf", "batch_upload": true} |
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0.04331298917531967,
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-0.020... | and services based on demand. (In a command economy, by contrast, the government owns resources and
businesses.) Supply of goods and services depends on what the demands are. A person’s income is based on
their ability to convert resources (especially labor) into something that society values. The more society values
the person’s output, the higher the income (think Lady Gaga or LeBron James). In this scenario, market forces,
not governments, determine economic decisions.
Most economies in the real world are mixed. They combine elements of command and market (and even
traditional) systems. The U.S. economy is positioned toward the market-oriented end of the spectrum. Many
countries in Europe and Latin America, while primarily market-oriented, have a greater degree of government
20 1 • Welcome to Economics!
involvement in economic decisions than the U.S. economy. China and Russia, while over the past several | {"file_name": "Microeconomics3e.pdf", "batch_upload": true, "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "file_size_mb": 26.99, "upload_timestamp": "2026-02-07T15:24:38.309401", "file_type": ".pdf", "total_pages": 597, "title": "Principles of Microeconomics 3e", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "producer": "Prince 14.2 (www.princexml.com)", "moddate": "2022-12-07T14:23:05-06:00", "creator": "PDFMiner", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "creationdate": "2022-12-07T14:15:44-06:00", "uploaded_via": "batch_uploader"} |
3f23614c-76bb-4b0b-ae0e-e554419b45d1 | [
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0.00007372872642008588,
-0.0434969924390316,
0.038527388125658035,
-0.05784326046705246,
-0.... | involvement in economic decisions than the U.S. economy. China and Russia, while over the past several
decades have moved more in the direction of having a market-oriented system, remain closer to the command
economy end of the spectrum. The Heritage Foundation provides perspective on countries’ economic freedom,
as the following Clear It Up feature discusses.
CLEAR IT UP
What countries are considered economically free?
Who is in control of economic decisions? Are people free to do what they want and to work where they want? Are
businesses free to produce when they want and what they choose, and to hire and fire as they wish? Are banks free
to choose who will receive loans, or does the government control these kinds of choices? Each year, researchers at
the Heritage Foundation and the Wall Street Journallook at 50 different categories of economic freedom for
countries around the world. They give each nation a score based on the extent of economic freedom in each | {"file_size_mb": 26.99, "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "file_type": ".pdf", "upload_timestamp": "2026-02-07T15:24:38.309401", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "creator": "PDFMiner", "producer": "Prince 14.2 (www.princexml.com)", "moddate": "2022-12-07T14:23:05-06:00", "file_name": "Microeconomics3e.pdf", "creationdate": "2022-12-07T14:15:44-06:00", "title": "Principles of Microeconomics 3e", "total_pages": 597, "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "batch_upload": true, "uploaded_via": "batch_uploader"} |
37b4344d-4fa6-454b-b5f5-03fc54e8d00d | [
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-0.034111615270376205,
0.048668187111616135,
-0.0745668113231659,
-0.00999956764280796,
-0.022... | countries around the world. They give each nation a score based on the extent of economic freedom in each
category. Note that while the Heritage Foundation/WSJ index is widely cited by an array of scholars and
publications, it should be regarded as only one viewpoint. Some experts indicate that the index’s category choices
and scores are politically biased. However, the index and others like it provide a useful resource for critical
discussion of economic freedom.
The 2016 Heritage Foundation’s Index of Economic Freedom report ranked 178 countries around the world: Table
1.1 lists some examples of the most free and the least free countries. Although technically not a separate country,
Hong Kong has been granted a degree of autonomy such that, for purposes of measuring economic statistics, it is
often treated as a separate country. Several additional countries were not ranked because of extreme instability that | {"creationdate": "2022-12-07T14:15:44-06:00", "producer": "Prince 14.2 (www.princexml.com)", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "upload_timestamp": "2026-02-07T15:24:38.309401", "file_type": ".pdf", "file_name": "Microeconomics3e.pdf", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "total_pages": 597, "creator": "PDFMiner", "moddate": "2022-12-07T14:23:05-06:00", "title": "Principles of Microeconomics 3e", "batch_upload": true, "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "uploaded_via": "batch_uploader", "file_size_mb": 26.99} |
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