Economics, 6th Edition

About the Book

Show Students How Economics is Relevant

• NEW! Real-world business chapter-opening cases have been updated with new companies or the latest information. They set a context for learning while also sparking students' interest and providing a unifying theme for the chapter by showing how the economic concepts presented impact a real business.
• A Personal Dimension: Economics in Your Life feature in each chapter opener helps students relate to the material. Students are prompted to think about questions posed in this feature as they work through the chapter. At the end of the chapter, the authors provide answers to these questions.
• An Inside Look feature at the end of chapters 1-4 helps students apply economic thinking to current events and policy debates, and have all been updated for the sixth edition. These features consist of newspaper articles that illustrate how key principles have been used by the company featured in the chapter-opening case to make a business decision. The authors provide an analysis of the article, corresponding graph(s), and Thinking Critically exercises. Additional articles and analysis are updated weekly on MyEconLab.
• NEW! 38 Making the Connection features help students tie economic concepts to current events and policy issues by revealing how the information they are learning has been used in actual situations.
• NEW! and UPDATED! Figures and tables have been added and/or updated to present information in an easy-to-read format.
• UPDATED! End-of-chapter problems have been either replaced or updated and some include graphs for students to analyze.
• UPDATED! Real-Time Data Exercises. Easy to assign and automatically graded, Real-Time Data Analysis exercises use up-to-the-minute, real-time Macroeconomic data. These exercises communicate directly with the Federal Reserve Bank of St. Louis’s FRED site, so every time FRED posts new data, students see new data. As a result, Real-Time Data Analysis exercises offer a no-fuss solution for instructors who want to make the most recent data a central part of their macro course.

NEW! and UPDATED! Content Changes by Chapter

• Chapter 1:
• New discussion of whether smart devices will revolutionize health care, along with analysis of how Google is adding to its growing list of technological innovations by partnering with Swiss pharmaceutical company Novartis to develop smart contact lenses to help patients manage diabetes, have been added.
• A new Solved Problem examines how managers at medical technology firm OraSure use marginal analysis to make an advertising decision.
• A new Making the Connection examines how opportunity costs can help us understand why many students have stopped attending college football games.
• Chapter 2:
• New discussion of the manufacturing decisions managers at Tesla Motors face, has been added.
• An Inside Look discusses the resources Apple has assembled to meet an aggressive plan to develop and produce an electric vehicle as early as 2020.
• A new Making the Connection uses Sir Arthur Conan Doyle’s legendary character Sherlock Holmes to illustrate copyright laws for books and movies.
• Chapter 3:
• New discussion of the market for smartwatches is included.
• An Inside Look examines how the Apple smartwatch is inspiring the development of other wearable devices.
• Three new Making the Connections: “Are Smartwatches Substitutes for Smartphones?,” “Tough Times for Big Macs and Golf,” and “Demand and Supply Trashes Plastic Recycling” have been added.
• Chapter 4:
• An updated discussion of how Airbnb and the sharing economy affects rent control policy in San Francisco is included.
• An Inside Look examines why government officials in Malibu, California imposed a tax on short-term rentals of apartments booked through Airbnb.
• A new Making the Connection looks at why investors expect Uber to be very profitable.
• Chapter 5:
• New discussion of President Obama’s Clean Power Plan has been added.
• A new Making the Connection uses the frequent conflicts between passengers over reclining airline seats to illustrate property rights.
• Chapter 6:
• Now has a revised and updated discussion of the price elasticity of gasoline.
• A new Making the Connection discusses why Amazon cares about price elasticity.
• Chapter 7:
• New discussion of how the Patient Protection and Affordable Care Act of 2010 could affect the health care plan at T. Cain Grocery, which operates five Piggly Wiggly supermarkets in Alabama and Florida, has been added.
• A new Solved Problem shows students how to use the demand and supply model to explain changes in health care spending.
• A new Making the Connection discusses the increasing importance of health care in the U.S. economy.
• Chapter 8:
• New discussion of Twitter and the benefits and costs of becoming a publicly owned firm, has been added.
• A new Solved Problem analyzes why Warren Buffett likes mutual funds, while another discusses whether Dodd-Frank will improve corporate governance.
• Two new Making the Connections: “Why Are Fewer Young People Starting Businesses?” and “Why Are Many People Poor Stock Market Investors?” have been added.
• Chapter 9:
• New discussion of President Obama, Nike, and the Trans-Pacific Partnership (TPP) is included.
• Three new Making the Connections: “Would New Balance Be Helped or Hurt by the Trans-Pacific Partnership?”; “Smoot-Hawley, the Politics of Tariffs, and Protecting a Vanishing Industry”; and “Protecting Consumer Health or Protecting U.S. Firms from Competition?” have been added.
• Chapter 10:
• Updated discussion of a failed pricing strategy at J.C. Penney is included.
• A new Making the Connection examines whether Uber is price gouging by charging more when demand for rides is high.
• Chapter 11:
• New discussion of MOOCs (massive open online courses) has been added.
• A new Making the Connection explains how UPS adopted new technology to deliver more packages with the same number of workers and planes.
• A new Solved Problem discusses how firms respond to differences in input price ratios.
• Chapter 12:
• Now includes discussion on cage-free eggs.
• A new Solved Problem examines when managers should shut down an oil well.
• Chapter 13:
• New discussion of the sources of Chipotle Mexican Grill’s success is included.
• Two new Making the Connections: “Is the Trend toward Healthy Eating a Threat to Chipotle’s Market Niche?” and “Are All Cupcakes the Same?” have been added.
• A new Solved Problem examines Buffalo Wild Wings’ strategy to differentiate its restaurants.
• Chapter 14:
• Now examines Apple, Spotify, and the music streaming revolution.
• Two new Making the Connections: “ Hard Times in Atlantic City” and “Do Airlines Collude on Capacity to Keep Prices High?” have been added.
• Chapter 15:
• A new Making the Connection examines whether the National Collegiate Athletic Association (NCAA) should be considered a monopoly.
• A new Solved Problem shows students how to determine a pricing strategy for a MOOC.
• Chapter 16:
• New coverage of Walt Disney’s MagicBands and how the company uses “big data” to help determine pricing is included.
• A new Making the Connection illustrates how clothing manufacturers can segment their sales by using outlet stores.
• Chapter 17:
• Discussion of how Rio Tinto Mines has used robots to replace some workers has been added.
• Three new Making the Connections: “Is Investing in a College Education a Good Idea,?” “Should You Fear the Effect of Robots on the Labor Market?,” and “Technology and the Earnings of ‘Superstars’” have been added.
• Chapter 18:
• Updated coverage of the debate about tax policy among the 2016 presidential candidates is included.
• A new Solved Problem about income mobility has been added.
• Chapter 19:
• Updated coverage of how the business cycle affects Ford Motor Company is included.
• A new Making the Connection about how calculating GDP changes the way the standard of living in Nigeria is measured has been added.
• Chapter 20:
• Now includes new discussion of JPMorgan’s 2015 decision to lay off workers.
• Two new Making the Connections: “Eight Million Workers Are Missing!” and “How Should We Categorize Unemployment at JPMorgan Chase?” are included.
• A new Solved Problem shows students how to use data to calculate real hourly wages.
• Chapter 21:
• Looks at how Corning has experienced long-run growth during the ups and downs of the business cycle.
• A new Solved Problem focuses on the connection between productivity and prosperity, and another shows students how to apply the loanable funds model to analyze the effect of budget deficits.  
• Chapter 22:
• Opens with new discussion of whether economic reforms will help to increase Mexico’s growth rate.
• A new Making the Connection compares economic growth in Mexico and China.
• Chapter 23:
• Contains an updated opener on the effects of fluctuations in aggregate expenditure on Intel.
• A new Making the Connection about the link between student loans and the number of young people purchasing homes is included.
• Chapter 24:
• New discussion of the effect of the business cycle on Delta Airlines has been added.
• A new Making the Connection discusses how unusually long it took following the 2007—2009 recession for real GDP and employment to return to the levels achieved at the business cycle peak.
• Chapter 25:
• There is new discussion of the 2015 banking crisis in Greece.
• A new Making the Connection on peer-to-peer lending has been added.
• Chapter 26:
• Includes material on the connection between monetary policy and borrowers in Europe paying negative nominal interest rates on bank loans.
• Two new Making the Connections examine the connection between central bank policies of quantitative easing and negative interest rates, and why the Federal Reserve usually ignores fluctuations in food and energy prices.
• Chapter 27:
• New discussion of the effects of federal government spending to rebuild a highway leading to the Golden Gate Bridge has been added.
• A new Making the Connection discusses whether macroeconomic policy is too dependent on the Federal Reserve.
• A new Solved Problem analyzes the effects of the Greek government attempting to balance its budget during a recession.
• Chapter 28:
• Examines why a company like Goodyear is concerned about monetary policy.
• A new Making the Connection looks at whether it is important for the Fed to provide the public with accurate guidance on the future of monetary policy.
• Chapter 29:
• New discussion on how fluctuations in the exchange rate affect IBM’s profits is included.
• A new Making the Connection examines whether a strong dollar is a good for the U.S. economy.
• A new Solved Problem analyzes how Subaru is affected by fluctuations in the value of the yen.
• Chapter 30:
• There is new discussion about how Bayer deals with fluctuating exchange rates.
• Two new Making the Connections: “Greece and Germany: Diverse Economies, Common Currency” and “The Chinese Yuan: The World’s Most Controversial Currency” have also been added.

A Real-world Approach to Microeconomics

• Introductory chapters provide students with a solid foundation in the basics, including marginal analysis and economic efficiency.
• In Chapter 4, the concepts of consumer and producer surplus are used to measure the economic effects of price ceilings and price floors as they relate to the familiar examples of rental properties and minimum wage.
• In Chapter 8, students get a basic understanding of how firms are organized and how to raise funds and provide information to investors. How entrepreneurs can meet consumer wants and efficiently organize production in a market system is also covered.
• Early coverage of policy issues is included, such as:
• Health care policy (Chapters 1 and 7)
• Rent control and the minimum wage (Chapter 4)
• Air pollution, global warming, and public goods (Chapter 5)
• Government policy toward illegal drugs (Chapter 6)
• Complete coverage of monopolistic competition is included. A full chapter is devoted to monopolistic competition prior to covering oligopoly and monopoly in Chapters 14 and 15. It is also located directly after perfect competition (Chapter 12), allowing for early discussion of topics such as brand management and sources of competitive success, so that instructors can cover this important topic without loss of continuity. The monopolistic competition model introduces the downward-sloping demand curve material usually introduced in a monopoly chapter, helping students grasp the important point that nearly all firms–not just monopolies–face downward-sloping demand curves.
• Extensive, realistic game theory coverage in Chapter 14 analyzes competition among oligopolists (including Apple, Amazon, Dell, Spotify, and Walmart), helping students to understand how companies with market power make strategic decisions in many competitive situations.
• Unique coverage of pricing strategy inChapter 16 explores how firms use pricing strategies to increase profits. Students encounter pricing strategies everywhere and relevant, familiar examples are used to illustrate how companies use strategies such as price discrimination, cost-plus pricing, and two-part tariffs.

Understand Basic Macroeconomic Issues

• Broad discussion of macro statistics in Chapters 19 and 20 helps clarify some of the policy issues encountered in later chapters, including the important differences between the payroll survey and the household survey for understanding conditions in the labor market; and the employment—population ratio, which is not covered in some other books but which many economists regard as a key measure of labor market performance.
• Early coverage of long-run topics is included as it is important that students understand business cycles to interpret economic events; this material is often discussed only briefly or omitted entirely in other books.
• As some instructors prefer to have a short-run orientation to their macro courses, with a strong emphasis on policy, Chapter 21 has been structured so that its discussion of long-run growth is sufficient for educators who want to move quickly to short-run analysis.
• Chapter 22 uses a simple neoclassical growth model to explain important growth issues, such as the decline of the Soviet economy, the long-run prospects for growth in China, the implications of the slowdown in productivity growth for the U.S. economy, and the failure of many developing countries to sustain high growth rates. Students are also challenged via discussion of “Why Isn’t the Whole World Rich?”
• A flexible presentation of aggregate demand and aggregate supply (AD-AS) enables instructors to teach the course in a fashion that suits their goals. The text includes a layered, full-color acetate for the Dynamic AD-AS Model, but also includes basic AD-AS graphs that make it possible to omit Dynamic AD-AS altogether.
• Extensive coverage of monetary policy is included in Chapters 26 and 28. Because of the central role monetary policy plays in the economy and in students’ curiosity about business and financial news, two full chapters are devoted to this topic. Together, they emphasize issues involved in the Fed’s choice of monetary policy targets; include coverage of the Taylor rule; and examine the the debate over the Fed’s policies, including recent proposals in Congress to reduce the Fed’s independence.
• Coverage of both the demand-side and supply-side effects of fiscal policy is included in Chapter 27. The text distinguishes between automatic stabilizers and discretionary fiscal policy, and also provides significant coverage of the supply-side effects of fiscal policy.
• A self-contained but thorough discussion of the Keynesian income—expenditure approach (the “45°-line diagram,” or “Keynesian cross”) is included and is useful for introducing students to the short-run relationship between spending and production. Many instructors, however, prefer to omit this material, so the 45°-line diagram is used only in Chapter 23. Discussions of monetary and fiscal policy in Chapters 26 and 27 use only the AD—AS model, making it possible to omit Chapter 23.
• Extensive international coverage is included throughout the text.Chapters 9, 29, and 30 give students a good understanding of international trading and financial systems, which is essential to understanding the macroeconomy and satisfying their curiosity about the economic world around them. Additionally, international comparisons are weaved into the narratives of several other chapters, including discussion of labor market policies in Chapter 28 and central banking in Chapter 25.
• Flexible chapter organization satisfies a variety of approaches to teaching principles of macroeconomics.
• Discussion of long-run economic growth in Chapter 21 makes it possible for instructors to omit the more thorough discussion of these issues in Chapter 22. Discussion of the Keynesian 45°-line diagram is confined to Chapter 23 so that instructors who do not use this approach can proceed directly to aggregate demand and aggregate supply analysis in Chapter 24.
• While two chapters are devoted to monetary policy, the first of these–Chapter 26–is a self-contained discussion, so instructors may safely omit the material in Chapter 28 if they so choose.
• Finally, instructors may choose to omit all three of the international chapters (9, 29, and 30), and cover just Chapter 9 on international trade, or cover just Chapter 29, or cover Chapters 29 and 30 (while omitting Chapter 9). A flexibility chart is provided to help select the chapters and order best suited to your classroom needs.

Foster Thorough Understanding via a Flexible, Student-focused Approach

• An accessible writing style brings concepts to life. 94% of 1,500 students from different colleges and universities across the country who reviewed Hubbard/O'Brien rated the writing style an "A" or "B" compared to their current Principles of Economics textbook in use.

• NEW! 16 Solved problems throughout the text provide models of how to solve an economic problem by breaking it down step-by-step. Each solved problem includes a problem statement, delineated steps to solve the problem, a graph, and a Your Turnfeature that directs students to related end-of-chapter problems for immediate practice. This keeps students focused on the main ideas of each chapter, and prevents them from getting bogged down due to a lack of basic math or word-problem skills.

Also Available with MyEconLab^®

This title is also available with MyEconLab—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.

• Videos, accompanying the text’s Making the Connection feature, provide real-world reinforcement of key concepts. Approximately two- or three-minutes in length, each video depicts author Glenn Hubbard explaining the key point of the Making the Connection feature and includes engaging visuals, such as new photos or graphs, that are not included in the main book. These videos summarize key content and bring applications of concepts to life. Each video is paired with one or more exercises that help test students’ understanding of these key applications.

• Concept Checks at the end of each Learning Objective act as “speed bumps” that encourage students to stop and check their understanding of fundamental terms and concepts before moving on to the next section. Consisting of a few multiple-choice, true/false, or fill-in-the-blank questions, they help students assess their progress on a section-by-section basis, so they can better prepare for homework, quizzes, and exams.
• 267 Animated graphs in MyEconLab accompany the numbered figures in the text, helping students better understand how to analyze and work with graphs. More dynamic than graphs on a printed page, they help students understand shifts in curves, movements along curves, and changes in equilibrium values. Each figure or table animation is paired with an exercise that helps test students’ understanding of these key concepts.  
• 60 + Interactive Solved Problems serve as models of how to solve economic problems by breaking them down step-by-step. Each of the Solved Problems in the text is accompanied by a similar problem in MyEconLab, so students can practice and build their problem-solving skills. These interactive tutorials help students learn to think like economists and apply basic problem-solving skills to homework, quizzes, and exams. The goal is for students to build skills they can use to analyze real-world economic issues they hear and read about in the news.
• UPDATED! 25 Graphs Have Been Updated with Real-Time Data from FRED (Federal Reserve Economic Data)–a comprehensive, up-to-date data set maintained by the Federal Reserve Bank of St. Louis. Students can display a pop-up graph that shows new data plotted in the graph, to better understand how to work with data and understand how including new data affects graphs.
• UPDATED! 50+ Interactive Problems and Exercises Have Been Updated with Real-Time Data from FRED. The end-of-chapter problems in select chapters include Real-Time Data Exercises that use the latest data from FRED to help students become familiar with this key data source, learn how to locate data, and develop skills in interpreting data.

• Question Help. MyEconLab's homework and practice questions are correlated to the textbook. Many are algorithmically generated to give students unlimited opportunity for practice and mastery, and offer helpful feedback when students enter incorrect answers. Questions include various learning aids like guided solutions and other multimedia assets for extra help at point-of-use.
• Current News Exercises. Every week, current Microeconomic and Macroeconomic news stories, with accompanying exercises, are posted to MyEconLab. Assignable and auto-graded, these multi-part exercises ask students to recognize and apply economic concepts to real-world events.
• 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 MyEconLab.
• Digital Interactives are designed 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 used as a lecture tool or 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. Digital Interactives include Opportunity Cost, Comparative Advantage, Unemployment, Consumer Price Index and Inflation, Monetary Policy, Supply and Demand, and Gross Domestic Product. Each of these is available for classroom presentation and also in an assignable mode.
• Learning Catalytics™.Generate class discussion, guide your lecture, and promote peer-to-peer learning with real-time analytics. MyEconLab with eText now provides Learning Catalytics—an interactive student response tool that uses students’ smartphones, tablets, or laptops to engage them in more sophisticated tasks and thinking. Instructors, you can:
• Pose a variety of questions that help your students develop critical thinking skills
• Monitor responses to find out where students are struggling
• Use real-time data to adjust your instructional strategy and try other ways of engaging your students during class
• Manage student interactions by automatically grouping students for discussion, teamwork, and peer-to-peer learning

• Enhanced eText. Engagement in lecture is essential to student success, and continuing that engagement outside of class is just as critical. MyEconLab with Enhanced eText keeps students engaged in learning on their own time, while helping them achieve greater conceptual understanding of course material. The Enhanced eText’s animations bring learning to life, and its interactive tutorials and exercises allow students to apply the very concepts they’re reading about. The results of all exercises feed into the MyEconLab Study Plan, powered by Knewton, which provides an exceptional adaptive learning experience for each individual student. Combining resources that illuminate content with accessible self-assessment, MyEconLab with Enhanced eText provides students with a complete digital learning experience–all in one place.
• Key Terms Quiz links provide opportunities for students to check their knowledge of the definitions and uses of key terms.
• Adaptive Learning. Not every student learns the same way and at the same rate. And now, thanks to advances in adaptive learning technology, you no longer have to teach as if they do. MyEconLab with Adaptive Learning assesses student performance and activity in real time and, using data and analytics, personalizes content to reinforce concepts that target each student’s strengths and weaknesses. 

• Adaptive Study Plan (Powered by Knewton). MyEconLab’s Study Plan is now powered by a sophisticated adaptive learning engine that tailors learning material to meet the unique needs of each student. MyEconLab’s new Adaptive Learning Study Plan monitors students’ performances on homework, quizzes, and tests and continuously makes recommendations based on their performance. If a student is struggling with mastering critical Economic concepts, the Adaptive Study Plan will provide customized remediation activities–based on personal proficiencies, number of attempts, or difficulty of questions–to get the student back on track. The recommendations can be across multiple chapters and can even extrapolate a student’s future trouble spots and provide them with learning material and practice to avoid pitfalls. To see how the Adaptive Study Plan works, visit:http://www.youtube.com/watch?v=0ryAu8yG6Z8
• 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.

• 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 Gradebook and fully mobile-ready, the Reporting Dashboard presents student performance data at the class, section, and program levels in an accessible, visual manner.
• HTML5 Player Enhancements. In addition to matching the Flash player’s support of Accessibility requirements, the HTML5 player has a new “Show Work” feature to allow students to enter text either from a keyboard or stylus and to draw freehand on different backgrounds, such as a coordinate graph, with multiple fonts and colors. Students can also continue to upload images such as phone-photos of handwritten work. Printing enhancements include:

• a more pen-and-paper-friendly layout of exercises
• the ability for instructors to choose whether to print the header; to include an honor statement; and to print with answers inline, after each question, or on a separate sheet.
• Mobile Player. Students and instructors will be able to access multimedia resources and complete assessments right at their fingertips, on any mobile device. Highlights of Pearson's MyLab Mobile Player:
• Works on mobile devices and tablets, as well as laptop and desktop computers
• Fresh and intuitive design
• Compatible with browser-based magnification settings