Textbook Guide

Modern Principles of Economics, 1st Edition

Wed, 2012-02-01 19:44 | by ddoctor

By Tyler Cowen and Alex Tabarrok

This guide helps you find LearnLiberty videos to supplement Tyler Cowen and Alex Tabarrok’s Modern Principles of Economics textbook. The table of contents for the textbook is shown below with links to videos that explain the concepts. These videos provide new ways for professors and students to explain and understand economic concepts.

Modern Principles of Economics explains how order emerges from freedom of choice. To understand the world, we must consider when self-interest promotes the social interest and when it does not. Thus, Modern Principles analyzes externalities, public goods, and ethical issues with market incomes and trade. Moreover, the textbook always applies economic theory to real-world problems, such as the decline of ocean fisheries, climate change, and the shortage of human organs for transplant.

Part 1: SUPPLY AND DEMAND

  • Chapter 2. Supply and Demand

    • The demand curve for oil
    • Consumer surplus
    • What shifts the demand curve?
    • Important demand shifters
      • Income
      • Population
      • Price of substitutes
      • Price of complements
      • Expectation's tastes
    • The supply curve for oil
    • Producer surplus
    • What shifts the supply curve?
    • Important supply shifters
      • Technological innovations and changes in the price of inputs
      • Taxes and subsidies
      • Expectations
      • Entry or exit of producers
      • Changes in opportunity costs

  • Chapter 3. Equilibrium: How Supply and Demand Determine Prices

    • Equilibrium and the adjustment process
      • Who competes with whom?
    • Gains from trade are maximized at the equilibrium price and quantity
    • Does the model work? Evidence from the laboratory
    • Shifting demand and supply curves
    • Terminology: Demand compared to quantity demanded and supply compared to quantity supplied
    • Understanding the price of oil

  • Chapter 4. Elasticity and Its Applications

    • The elasticity of demand
      • Determinants of the elasticity of demand
      • Calculating the elasticity of demand
        • Using the midpoint method to calculate the elasticity of demand
      • Total revenues and the elasticity of demand
      • Applications of demand elasticity
        • How American farmers have worked themselves out of a job
        • Why the war on drugs is hard to win
    • The elasticity of supply
      • Determinants of the elasticity of supply
      • Calculating the elasticity of supply
        • Using the midpoint method to calculate the elasticity of supply
      • Applications of supply elasticity
        • Gun buyback programs
        • The economics of slave redemption
    • Using elasticities for quick predictions
      • How much would the price of oil fall if the Artic National Wildlife Refuge were opened for drilling?

Part 2: THE PRICE SYSTEM

  • Chapter 9. Externalities: When Prices Send the Wrong Signals

    • External costs, external benefits, and efficiency
      • External costs
      • External benefits
    • Private solutions to externality problems
    • Government solutions to externality problems
      • Command and control
      • Tradable allowances
      • Comparing tradable allowances and Pigouvian taxes

Part 3: FIRMS AND FACTOR MARKETS

  • Chapter 10. Profits, Prices and Costs Under Competition

    • What price to set?
    • What quantity to produce?
    • Invisible hand property #1: The minimization of the total costs of production
    • Profits and the average cost curve
    • When to enter the average cost curve
    • When to enter and exit an industry
    • Entry and exit with uncertainty and sunk costs
    • Invisible hand property #2: The balance of industries
      • Creative destruction
    • Deriving industry supply curves
      • Constant cost industries
      • Increasing cost industries
      • A special case: The decreasing cost industry

  • Chapter 11. Monopoly

    • Market power
    • How a firm uses market power to maximize profit
      • The elasticity of demand and the monopoly markup
    • The costs of monopoly: deadweight loss
    • The costs of monopoly: corruption and inefficiency
    • The benefits of monopoly: incentives for research and development
      • Patent buyouts: A potential solution
    • Economies of scale and the regulation of monopoly
      • I want my MTV
      • Electric shock
      • California’s perfect storm
    • Other sources of market power

  • Chapter 12. Price Discrimination

    • Price discrimination
      • Preventing arbitrage
    • Price discrimination is common
      • Universities and perfect price discrimination
    • Is price discrimination bad?
      • Why misery loves company and how price discrimination helps to cover fixed costs
    • Tying and bundling
      • Tying
      • Bundling
      • Bundling and cable TV

  • Chapter 13. Cartels, Games, and Network Goods

    • Cartels
      • Cheating on the OPEC cartel
      • New entrants and demand response break down cartels
      • Sustainable cartels in a market setting
      • Government prosecution and regulation
        • Government-supported cartels
      • Summing up: Successful cartels
    • Network goods
      • Network goods are usually sold by monopolies and oligopolies
      • The “best” product may not always win
      • Standard wars are common
      • Competition “for the market” instead of “in the market”
      • Music is a network good

  • Chapter 14. Labor Markets

    • The demand for labor and the marginal product of labor
    • Supply of labor
    • Labor market issues
      • Why do janitors in the United States earn more than janitors in India even when they do the same job?
      • Human capital
      • Compensating differentials
      • Do unions raise wages?
    • How bad is labor market discrimination, or can Lakisha catch a break?
      • Statistical discrimination
      • Preference-based discrimination
        • Discrimination by employers
        • Discrimination by customers
        • Discrimination by employees
        • Discrimination by government
      • Why discrimination isn’t always easy to identify

  • Chapter 15. Getting Incentives Right: Lessons for Business, Sports, Politics and Life

    • Lesson one: you get what you pay for
      • Prisons for profit?
      • Piece rates vs. hourly wages
    • Lesson two: tie pay to performance to reduce risk
      • Tournament theory
      • Improving executive compensation with pay for relative performance
      • Environment risk and ability risk
      • Tournaments and grades
    • Lesson three: money isn’t everything

  • Chapter 16. Stock Markets and Personal Finance

    • Passive vs. active investing
      • Why is it hard to beat the market?
    • How to really pick stocks, seriously
      • Diversify
      • Avoid high fees
      • Compound returns build wealth
      • The no free lunch principle or no return without risk
    • Other benefits and costs of stock markets
      • Bubble, bubble, toil, and trouble

Part 4: GOVERNMENT

  • Chapter 17. Public Goods and the Tragedy of the Commons

    • Four types of goods
    • Private goods and public goods
    • Nonrival private goods
      • The peculiar case of advertising
    • Common resources and the tragedy of the commons
      • Happy solutions to the tragedy of the commons
      • Appendix: The tragedy of the commons; how fast?

  • Chapter 19. Political Economy

    • Voters and the incentive to be ignorant
    • Special interests and the incentive to be informed
    • Voter myopia and political business cycles
    • Two cheers for democracy
      • The median voter theorem
      • Democracy and nondemocracy
      • Democracy and famine
      • Democracy and growth

Part 5: ECONOMIC GROWTH

  • Chapter 20. GDP and The Measurement of Progress

    • What is GDP?
      • GDP is the market value
      • … of all final…
      • …goods and services…
      • …produced…
      • …within a country…
      • …in a year…
    • Growth rates
    • Nominal vs. real GDP
      • Real GDP growth
      • Real GDP growth per capita
    • Cyclical and short-run changes in GDP
    • The many ways of splitting GDP
      • The national-spending approach: Y=C+I+G+NX
      • The factor-income approach: The other side of the spending coin
      • Why split?
    • Problems with GDP as a measure of output and welfare
      • GDP does not count the underground economy
      • GDP does not count nonmarket production
      • GDP does not count leisure
      • GDP does not count bads: environmental costs
      • GDP does not measure the distribution of income

  • Chapter 22. Growth, Capital Accumulation, and the Economics of Ideas: Catching up vs. the Cutting Edge

    • The Solow Model and catch-up growth
      • Capital, production and diminishing returns
      • Capital growth equals investment minus depreciation
      • Why capital alone cannot be the key to economic growth
      • Better ideas drive long-run economic growth
    • The Solow Model: details and further lessons
      • The Solow Model and an increase in investment rate
      • The Solow Model and conditional convergence
      • From catching up to cutting edge
      • Solow and the economics of the ideas in one diagram
    • Growing on the cutting edge: the economics of ideas
      • Research and development is investment for profit
      • Spillovers, and why there aren’t enough good ideas
      • Government’s role in the production of new ideas
      • Market size and research and development
    • The future of economic growth
    • Appendix: excellent growth

  • Chapter 23. Savings, Investment, and the Financial System

    • The supply of savings
      • Individuals want to smooth consumption
      • Individuals are impatient
      • Marketing and psychological factors
      • The interest rate
    • The demand to borrow
      • Individuals want to smooth consumption
      • Borrowing is necessary to finance large investments
      • The interest rate
    • Equilibrium in the market for loanable funds
      • Shifts in supply and demand
    • The role of intermediaries: banks, bonds, and stock markets
      • Banks
      • The bond markets
        • Bond prices and interest rates
      • The stock market
    • What happens when intermediation fails?
      • Insecure property rights
      • Controls on interest rates and inflation
      • Politicized lending and government-owned banks
      • Bank failures and panics
    • Appendix: bond pricing and arbitrage

Part 6: BUSINESS FLUCTUATIONS

  • Chapter 24. Unemployment and Labor Force Participation

    • Defining unemployment
      • How good an indicator is the unemployment rate?
    • Frictional unemployment
    • Structural unemployment
      • Labor regulations and structural unemployment
      • Labor regulations to reduce structural unemployment
      • Factors that affect structural unemployment
    • Cyclical unemployment
      • The natural unemployment rate
    • Labor force participation
      • Lifecycle effects and demographics
      • Incentives
        • Taxes and benefits
        • Incentives and the increase in female labor force participation
        • How the pill increased female labor force participation

  • Chapter 25. Inflation and the Quantity Theory of Money

    • Defining and measuring inflation
      • Price indexes
      • Inflation in the United States and around the world
    • The quantity theory of money
      • The cause of inflation
      • An inflation parable
    • The costs of inflation
      • Price confusion and money illusion
      • Inflation redistributes wealth
        • Hyperinflation and the breakdown of financial intermediation
      • Inflation interacts with other taxes
      • Inflation is painful to stop
    • Appendix: Get real! An excellent adventure

  • Chapter 26. Business Fluctuations and the Dynamic Aggregate Demand-Aggregate Supply Model

    • A skeleton model
      • The Solow Growth curve
        • Shifts in the Solow Growth curve
      • The dynamic aggregate demand curve
        • Shifts in the dynamic aggregate demand curve
    • The real business-cycle model: Real shocks and the Solow Growth curve
      • Shocks to aggregate demand in the real business-cycle model
    • The new Keynesian model
      • The short-run aggregate supply curve
        • Sticky wages
        • Shifting the SRAS curve
        • The parable of the angry professor
        • Sticky prices
      • Shocks to aggregate demand in the new Keynesian model
        • An increase in M in the new Keynesian model
        • Shocks to the components of aggregate demand
        • A decrease in C in the new Keynesian model
        • Why changes in V tend to be temporary
        • Other factors that shift the AD Curve
      • Understanding the Great Depression: aggregate demand shocks and real shocks
        • Aggregate demand shocks and the Great Depression
        • Real shocks and the Great Depression

  • Chapter 27. The Real Business Cycle Model: Shocks and Transmission Mechanisms

    • Shocks
      • Oil shocks
      • Shocks, shocks, shocks
    • How transmission mechanisms amplify and spread shocks
      • Intertemporal substitution
      • Uncertainty and irreversible investments
      • Labor adjustment costs
      • Time bunching
      • Sticky wages and prices
      • Transmission mechanisms: summary
    • Appendix: Business fluctuations and the Solow model

Part 7: MACROECONOMIC POLICY AND INSTITUTIONS

  • Chapter 28. The Federal Reserve System and Open Market Operations

    • What is the Federal Reserve System?
    • The U.S. money supplies
    • Fractional reserve banking, the reserve ratio, and the money multiplier
    • How the Fed controls money supply
      • Open market operations
        • Open market operations and interest rates
        • The Fed controls a real rate only in the short run
      • Discount rate lending and the term auction facility
        • The term auction facility
      • Required reserves and payment of interest on reserves
    • The Federal Reserve and systemic risk
    • Revisiting aggregate demand and monetary policy
    • Who controls the Fed?
    • Appendix: The money multiplier process in detail

  • Chapter 29. Monetary Policy

    • Monetary policy: The best case
      • Rules vs. discretion
      • Reversing course and engineering a decrease in aggregate demand
      • The Fed as manager of market confidence
    • The negative real shock dilemma
    • The problem with positive shocks: The 1997-2006 housing boom and bust

  • Chapter 30. The Federal Budget: Taxes and Spending

    • Tax revenues
      • The individual income tax
        • Taxes on capital gains and interest and dividends
        • The alternative minimum tax (AMT)
      • Social Security and Medicare taxes
      • The corporate income tax
      • The bottom line on the distribution of federal taxes
    • Spending
      • Social Security
      • Defense
      • Medicare and Medicaid
      • Unemployment, insurance, and welfare spending
      • Everything else
      • The national debt, interest on the national debt, and deficits
    • Will the U.S. government go bankrupt?
      • The future is hard to predict
    • Revenues and spending undercount the role of government in the economy

  • Chapter 31. Fiscal Policy

    • Fiscal Policy: the best case
      • The multiplier
    • The limits to fiscal policy
      • Crowding out
        • Selling more bonds to finance fiscal policy
        • Tax rebates and tax cuts as a tool of fiscal policy
        • A special case of crowding out: Ricardian Equivalence
      • A drop in the bucket: Can government spend enough to stimulate
        • Aggregate demand?
      • A matter of timing
        • Automatic stabilizers
      • Government spending vs. tax cuts as expansionary fiscal policy
      • Fiscal policy does not work well to combat real shocks
    • When fiscal policy might make matters worse
    • So when is fiscal policy a good idea?

Part 8: INTERNATIONAL ECONOMICS

  • Chapter 32. International Finance

    • The U.S. trade deficit and your trade deficit
    • The balance of payments
      • The current account
      • The capital account, sometimes called the financial account
      • The official reserves account
      • How the pieces fit together
      • Two sides, one coin
      • The bottom line on the trade deficit
    • What are exchange rates?
      • Exchange rate determination in the short run
        • Changes in demand for currency
        • Changes in the supply of a currency
      • Exchange rate determination in the long run
        • The purchasing power parity theorem is only approximately true
    • How monetary and fiscal policy affect exchange rates and how exchange rates affect aggregate demand
      • Monetary policy
      • Fiscal policy
    • Fixed vs. floating exchange rates
      • The problem with pegs
    • What are the IMF and the World Bank?
      • International monetary fund
      • The World Bank

  • BACK-OF-BOOK APPENDICES

    • Reading graphs in economics
    • Answers to check yourself