Mr Big

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Chapter Summaries

Chapter Chapter Chapter Chapter Chapter Chapter Chapter Chapter Chapter Chapter Chapter Chapter Chapter Chapter Chapter Chapter Chapter Chapter Chapter Chapter Chapter Chapter Chapter Chapter Chapter Chapter Chapter Chapter Chapter Chapter Chapter

1: The Fundamentals of Economics 2: Markets and Government in a Modern Economy 3: Basic Elements of Supply and Demand 4: Applications of Supply and Demand 5: Demand and Consumer Behavior 6: Production and Business Organization 7: Analysis of Costs 8: Analysis of Perfectly Competitive Markets 9: Imperfect Competition and Its Polar Case of Monopoly 10: Oligopoly and Monopolistic Competition 11: Uncertainty and Game Theory 12: How Markets Determine Incomes 13: The Labor Market 14: Land and Capital 15: Comparative Advantage and Protectionism 16: Government Taxation and Expenditure 17: Promoting More Efficient Markets 18: Protecting the Environment 19: Efficiency vs. Equality: The Big Tradeoff 20: Overview of Macroeconomics 21: Measuring Economic Activity 22: Consumption and Investment 23: Business Fluctuations and the Theory of Aggregate Demand 24: The Multiplier Model 25: Money, Banking, and Financial Markets 26: Central Banking and Monetary Policy 27: The Process of Economic Growth 28: The Challenge of Economic Development 29: Exchange Rates and the International Financial System 30: Open-Economy Macroeconomics 31: Unemployment and the Foundations of Aggregate Supply

Chapter 32: Ensuring Price Stability Chapter 33: The Warring Schools of Macroeconomics Chapter 34: Policies for Growth and Stability

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Chapter 1 Summary

A. Introduction 1. What is economics? Economics is the study of how societies choose to use scarce productive resources that have alternative uses, to produce commodities of various kinds, and to distribute them among different groups. We study economics to understand not only the world we live in but also the many potential worlds that reformers are constantly proposing to us. 2. Goods are scarce because people desire much more than the economy can produce. Economic goods are scarce, not free, and society must choose among the limited goods that can be produced with its available resources. 3. Microeconomics is concerned with the behavior of individual entities such as markets, firms, and households. Macroeconomics views the performance of the economy as a whole. Through all economics, beware of the fallacy of composition and the post hoc fallacy, and remember to keep other things constant. B. The Three Problems of Economic Organization 4. Every society must answer three fundamental questions: what, how, and for whom? What kinds and quantities are produced among the wide range of all possible goods and services? How are resources used in producing these goods? And for whom are the goods produced (that is, what is the distribution of income and consumption among different individuals and classes)? 5. Societies answer these questions in different ways. The most important forms of economic organization today are command and market. The command economy is directed by centralized government control; a market economy is guided by an informal system of prices and profits in which most decisions are made by private individuals and firms. All societies have different combinations of command and market; all societies are mixed economies.

C. Society's Technological Possibilities 6. With given resources and technology, the production choices between two goods such as butter and guns can be summarized in the production-possibility frontier (PPF). The PPF shows how the production of one good (such...
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