Microeconomics, 2nd edition

For principles of microeconomics courses.

An evidence-based approach to economics

Microeconomics presents real economic questions and data to help students learn about the world around them. The text uses themes of optimization, equilibrium, and empiricism to illustrate the power of simple economic ideas and explain and predict what's happening in today's society.

In the 2nd Edition, each chapter begins with an empirical question that is relevant to the life of a student. This is later answered using data in the Evidence-Based Economics feature. As a result of the text's practical emphasis, students learn to apply economic principles to guide the decisions they make in their own daily lives.

Personalize learning with MyLab Economics

MyLab™ Economics is an online homework, tutorial, and assessment program designed to work with this text to engage students and improve results. Within its structured environment, students practice what they learn, test their understanding, and pursue a personalized study plan that helps them better absorb course material and understand difficult concepts.

• Learning Aids. Tied to the textbook, MyLab Economics homework and practice questions regenerate algorithmically to give students unlimited opportunity for practice and mastery. Additionally, Learning Aids such as Help me Solve This offer helpful feedback at the point-of-use when students enter incorrect answers.
• Digital interactives. Economic principles are not static ideas, and learning them shouldn’t be either! Digital Interactives are dynamic and engaging assessment activities that promote critical thinking and application of key economic principles. Each Digital Interactive has 3 to 5 progressive levels and requires approximately 20 minutes to explore, apply, compare, and analyze each topic. Many Digital Interactives include real-time data from FRED allowing professors and students to display, in graph and table form, up-to-the-minute data on key macro variables. Digital Interactives can be assigned and graded within MyLab Economics, or used as a lecture tool to encourage engagement, classroom conversation, and group work.
• Interactive Graphs in MyLab Economics enhance the student learning experience. Students can manipulate the coordinates and parameters of these graphs and watch the graphs change in real time, thereby deepening their conceptual understanding of the material.
• Personalized Learning. Not every student learns the same way or at the same rate. With the growing need for acceleration through many courses, it's more important than ever to meet students where they learn. Personalized learning in MyLab Economics gives you the flexibility to incorporate the approach that best suits of your course and your students.
• The Study Plan acts as a tutor, providing personalized recommendations for each of your students based on his or her ability to master the learning objectives in your course. This allows students to focus their study time by pinpointing the precise areas they need to review, and allowing them to use customized practice and learning aids--such as videos, eText, tutorials, and more--to get them back on track. Using the report available in the Gradebook, you can then tailor course lectures to prioritize the content where students need the most support--offering you better insight into classroom and individual performance.
• Dynamic Study Modules help students study effectively on their own by continuously assessing their activity and performance in real time. Here's how it works: students complete a set of questions with a unique answer format that also asks them to indicate their confidence level. Questions repeat until the student can answer them all correctly and confidently. Once completed, Dynamic Study Modules explain the concept using materials from the text. These are available as graded assignments prior to class, and accessible on smartphones, tablets, and computers. NEW! Instructors can now remove questions from Dynamic Study Modules to better fit their course. Available for select titles.

• The Enhanced eText keeps students engaged in learning on their own time, while helping them achieve greater conceptual understanding of course material.
• Experiments are a fun and engaging way to promote active learning and mastery of important economic concepts. Pearson’s Experiments program is flexible and easy for instructors and students to use. Single-player experiments allow your students to play against virtual players from anywhere at any time so long as they have an Internet connection. Multiplayer experiments allow you to assign and manage a real-time experiment with your class. Pre- and post-questions for each experiment are available for assignment in MyLab Economics.
• Economics Exercise Builder allows you to build customized exercises, including multiple-choice, graph drawing, and free-response items--many of which are generated algorithmically so that each time a student works them, a different variation is presented.
• Reporting Dashboard. View, analyze, and report learning outcomes clearly and easily, and get the information you need to keep your students on track throughout the course, with the new Reporting Dashboard. Available via the MyLab Economics Gradebook and fully mobile-ready, the Reporting Dashboard presents student performance data at the class, section, and program levels in an accessible, visual manner.
• Learning Catalytics™ helps you generate class discussion, customize your lecture, and promote peer-to-peer learning with real-time analytics. As a student response tool, Learning Catalytics uses students’ smartphones, tablets, or laptops to engage them in more interactive tasks and thinking.
• NEW! Upload a full PowerPoint® deck for easy creation of slide questions.
• NEW! Team names are no longer case sensitive.
• Help your students develop critical thinking skills.
• Monitor responses to find out where your students are struggling.
• Rely on real-time data to adjust your teaching strategy.
• Automatically group students for discussion, teamwork, and peer-to-peer learning.
• LMS Integration. You can now link from Blackboard Learn, Brightspace by D2L, Canvas, or Moodle to MyLab Economics. Access assignments, rosters, and resources, and synchronize grades with your LMS Gradebook. For students, single sign-on provides access to all the personalized learning resources that make studying more efficient and effective.

About the book

Teach economics through three unified themes

Three key principles--optimization, equilibrium, and empiricism--lie at the heart of the authors’ approach. Chapters 1—4 introduce these key themes, and lay the groundwork for understanding the economic way of thinking about the world.

1. Optimization. The first principle--that people try to choose the best available option--is optimization. Economists believe that optimization explains most choices people make, including minor decisions like deciding whether to eat a cheeseburger, and major decisions like deciding whom to date or marry. When people fail to optimize perfectly, economic reasoning can be used to analyze the mistake and to suggest a better course of action.
2. Equilibrium. Economic systems tend toward equilibrium, wherein each economic actor feels that he or she cannot do any better by picking another course of action. This principle highlights the connections among economic actors and their choices. In a state of equilibrium, consumers and purveyors of goods and services are simultaneously optimizing, and their behaviors are consequently intertwined.
3. Empiricism. While the first two key principles are conceptual, the third is methodological. Economists use data to test economic theories, learn about the world, and speak to policymakers. The emphasis on matching theories with real-world data to answer specific questions helps to show students the evidence behind the theory, making economics concrete, interesting, and fun.

Real issues engage students with the content

• NEW! Examination of causality. By studying recent research that reports a positive correlation between expensive weddings and high rates of divorce, students will learn to determine the difference between correlation and causality, and better understand the role of omitted variables (Chapter 2).
• REVISED! Coverage of the fracking revolution and its impact on oil and gas prices. Supply and demand come alive when students can see how the recent rightward shift in the oil supply curve--due to the development of fracking technologies--has played a role in halving the equilibrium price of oil (Chapter 4).   
• NEW! Focus on the shared economy. The role of surge pricing in equilibrating Uber driver supply and rider demand is discussed, helping students to more deeply understand the markets that they personally use (Chapter 7).
• NEW! Emphasis on the role of microeconomics in examining prominent social issues. From natural disaster management to global inequality, students examine important social issues--such as how to reduce fracking-generated earthquakes by applying the concept of externalities, inequality in Scandinavia, broadband access, and more.
• NEW! Coverage of the recent election to teach topics like probability. Students use analytic tools to understand how to interpret forecasts on the eve of the election (Chapter 15).

An evidence based approach using real issues and data

• Evidence-Based Economics (EBE) features show how economists use data to answer the question posed in the opening paragraph of each chapter. EBEs use actual data from field experiments, lab experiments, and the government or naturally occurring data, while highlighting major concepts in the chapter. These features let students get a real look at economics as it plays out in the world around them, and gives them the skills to question systematically and evaluate what they read. Examples include:
• NEW! Uber and the invisible hand?
• NEW! What can the government do to lower earthquakes in Oklahoma?
• Is Facebook free?
• Is college worth it?
• Will free trade cause you to lose your job?
• What is the optimal size for government?
• Letting the Data Speak features reinforce the theme of evidence behind the theory. These short, targeted explorations analyze an economic question by using real data as the foundation of the discussion. Among the many issues explored:
• NEW!Discussion of forecasts on the eve of the election
• Should McDonald’s be interested in elasticities?
• Income inequality in the US
• Fair trade products
• Life expectancy and innovation
• Do wages really go down if the labor supply increases?
• Managing expectations
• Why do some firms advertise and others don’t?
• Choice and Consequence features emphasize optimization--one of the key themes in the book--by focusing on making the best decision. These features ask students to make an economic decision, or evaluate the consequences of past real decisions. The authors then explain how an economist might analyze the same decision. Examples of choices investigated include:
• Do people really optimize?
• The power of growth
• The unintended consequences of fixing market prices
• Foreign aid and corruption
• Should LeBron James paint his own house?
• Too big to fail
• Does revenge have an evolutionary logic?

Show the importance of microeconomic concepts in everyday life

Practical coverage of microeconomics helps students see how they can apply course content in their own decision-making.

• An integrated approach to consumption and production. Chapters 5 and 6 show students that consumption and production are really two sides of the same coin, glued together by the idea of incentives. Upon grasping the commonalities and linkages between the processes of consumer and producer decisions, the student is able to view the whole picture and better understand how these concepts tie together.
• In-depth coverage of game theory that yields powerful insights. Chapter 13 is devoted entirely to game theory, which is a source of some very powerful economic insights. This chapter emphasizes that it helps us better understand the world when we place ourselves in the shoes of someone else. In so doing, each student may develop a deeper understanding of how to choose a strategy that is a best response to the strategies of others. In this chapter, game theory is applied to many situations, including pollution, soccer, and advertising, to name a few.
• An innovative suite that extends the microeconomic toolbox. Chapters 15—17 help students see the relevance of the study of microeconomics, which is applicable to real-life topics such as how compound interest causes an investment’s value to grow over time, adverse selection in the health insurance market, and the bargaining that takes place in auctions every day--from eBay to estate auctions to charity auctions. And the book comes to a close in an innovative fashion with Chapter 18 on social economics. Exploring the economics of charity and fairness and the economics of revenge, this final chapter drives home the fact that economic principles can be extended to every corner of our world.

About the book

Real issues engage students with the content

• Examination of causality. By studyingrecent research that reports a positive correlation between expensive weddings and high rates of divorce, students will learn to determine the difference between correlation and causality, and better understand the role of omitted variables (Chapter 2).
• Coverage of the fracking revolution and its impact on oil and gas prices. Supply and demand come alive when students can see how the recent rightward shift in the oil supply curve--due to the development of fracking technologies--has played a role in halving the equilibrium price of oil (Chapter 4).   
• Focus on the shared economy. The role of surge pricing in equilibrating Uber driver supply and rider demand is discussed, helping students to more deeply understand the markets that they personally use (Chapter 7).
• Emphasis on the role of microeconomics in examining prominent social issues. From natural disaster management to global inequality, students examine important social issues–such as how to reduce fracking-generated earthquakes by applying the concept of externalities, inequality in Scandinavia, broadband access, and more.
• Coverage of the recent election to teach topics like probability. Students use analytic tools to understand how to interpret forecasts on the eve of the election (Chapter 15).

An evidence based approach using real issues and data

• Evidence-Based Economics (EBE) features show how economists use data to answer the question posed in the opening paragraph of each chapter. EBEs use actual data from field experiments, lab experiments, and the government or naturally occurring data, while highlighting major concepts in the chapter. These features let students get a real look at economics as it plays out in the world around them, and gives them the skills to question systematically and evaluate what they read. Examples include:
• Uber and the invisible hand?
• What can the government do to lower earthquakes in Oklahoma?
• Letting the Data Speak features reinforce the theme of evidence behind the theory. These short, targeted explorations analyze an economic question by using real data as the foundation of the discussion. Among the many issues explored:
• Discussion of forecasts on the eve of the election