Economics

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.

• Evidence-Based Economics (EBE) features show how economists use data to answer the question posed in the opening paragraph of each chapter. The EBEs use actual data from field experiments, lab experiments, naturally occurring data, or government 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. Examples:

• Is Facebook free?
• Why are you so much more prosperous than your great-great-grandparents were?
• Is College worth it?
• Are tropical and semitropical areas condemned to poverty by their geographies?
• Will free trade cause you to lose your job?
• What caused the recession of 2007-2009?
• Is there value in putting yourself into someone else’s shoes?
• Are companies like Nike harming workers in Vietnam?
• What is the optimal size for government?

• Letting the Data Speak features reinforces 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:

• Should McDonald’s be interested in elasticities?
• Income inequality in the United States
• 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:

• 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?

• 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 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.

• A comprehensive treatment of Growth and Development. Chapter 21, Economic Growth, shows how economic growth has transformed many countries over the past 200 years. A simplified version of the Solow Model is in an optional appendix for instructors who want a more in-depth treatment. Chapter 22 explores why the whole world isn’t economically developed and considers fundamental causes of prosperity.
 
• Three key markets that play a central role in macro analysis. Chapter 23 begins with the labor market, competitive equilibrium, and how imperfectly flexible wages lead to unemployment. Chapter 24 extends the analysis by incorporating the credit market, and Chapter 25 introduces the monetary system and the market for bank reserves.
 
• A modern framework to analyze and explain short-run fluctuations. The authors’ approach is inclusive and integrative, utilizing the most relevant and useful insights from many different schools of economic thought.  The labor market and unemployment are at the center of the analysis, as the authors believe that the labor market is the most informative lens through which beginning economics students can understand economic fluctuations. In this part of the book, the discussion extends to the role of financial markets and financial crises. Chapter 26 lays the foundation of the approach, showing how a wide range of economic shocks causes short-run fluctuations and how a model of fluctuations can be constructed using the labor market. Chapter 27 discusses the monetary and fiscal policies utilized to partially offset aggregate fluctuations.
 
• A view of the global economy. Chapter 28 shows how international trade works using the concepts of specialization, comparative advantage, and opportunity cost. Chapter 29 studies how exchange rates are determined, how the foreign exchange market operates, and how changes in the real exchange rate impact the macroeconomy.

• The new Digital Interactives in Pearson’s MyEconLab  are poised to change how students learn core economic concepts. Organized in progressive levels, each focusing on a core learning outcome, Digital Interactives immerse students in a fundamental economic principle, helping them to learn actively. They can be presented in class as visually stimulating, highly engaging lecture tools, and can also be assigned with assessment questions for grading. Digital Interactives are designed for use in traditional, online, and hybrid courses, and many incorporate real-time data, as well as data display and analysis tools.
 
• Interactive Reading Assignments in MyEconLab enable educators to encourage core reading by providing an assessment incentive along the way. These short reading segments feature embedded exercises that prompt students to learn actively. And, they're automatically graded, so educators can integrate assessment into reading assignments quickly and easily.