Principles of Microeconomics 3e (OpenStax)
- Page ID
- 338759
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\(\newcommand{\avec}{\mathbf a}\) \(\newcommand{\bvec}{\mathbf b}\) \(\newcommand{\cvec}{\mathbf c}\) \(\newcommand{\dvec}{\mathbf d}\) \(\newcommand{\dtil}{\widetilde{\mathbf d}}\) \(\newcommand{\evec}{\mathbf e}\) \(\newcommand{\fvec}{\mathbf f}\) \(\newcommand{\nvec}{\mathbf n}\) \(\newcommand{\pvec}{\mathbf p}\) \(\newcommand{\qvec}{\mathbf q}\) \(\newcommand{\svec}{\mathbf s}\) \(\newcommand{\tvec}{\mathbf t}\) \(\newcommand{\uvec}{\mathbf u}\) \(\newcommand{\vvec}{\mathbf v}\) \(\newcommand{\wvec}{\mathbf w}\) \(\newcommand{\xvec}{\mathbf x}\) \(\newcommand{\yvec}{\mathbf y}\) \(\newcommand{\zvec}{\mathbf z}\) \(\newcommand{\rvec}{\mathbf r}\) \(\newcommand{\mvec}{\mathbf m}\) \(\newcommand{\zerovec}{\mathbf 0}\) \(\newcommand{\onevec}{\mathbf 1}\) \(\newcommand{\real}{\mathbb R}\) \(\newcommand{\twovec}[2]{\left[\begin{array}{r}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\ctwovec}[2]{\left[\begin{array}{c}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\threevec}[3]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\cthreevec}[3]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\fourvec}[4]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\cfourvec}[4]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\fivevec}[5]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\cfivevec}[5]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\mattwo}[4]{\left[\begin{array}{rr}#1 \amp #2 \\ #3 \amp #4 \\ \end{array}\right]}\) \(\newcommand{\laspan}[1]{\text{Span}\{#1\}}\) \(\newcommand{\bcal}{\cal B}\) \(\newcommand{\ccal}{\cal C}\) \(\newcommand{\scal}{\cal S}\) \(\newcommand{\wcal}{\cal W}\) \(\newcommand{\ecal}{\cal E}\) \(\newcommand{\coords}[2]{\left\{#1\right\}_{#2}}\) \(\newcommand{\gray}[1]{\color{gray}{#1}}\) \(\newcommand{\lgray}[1]{\color{lightgray}{#1}}\) \(\newcommand{\rank}{\operatorname{rank}}\) \(\newcommand{\row}{\text{Row}}\) \(\newcommand{\col}{\text{Col}}\) \(\renewcommand{\row}{\text{Row}}\) \(\newcommand{\nul}{\text{Nul}}\) \(\newcommand{\var}{\text{Var}}\) \(\newcommand{\corr}{\text{corr}}\) \(\newcommand{\len}[1]{\left|#1\right|}\) \(\newcommand{\bbar}{\overline{\bvec}}\) \(\newcommand{\bhat}{\widehat{\bvec}}\) \(\newcommand{\bperp}{\bvec^\perp}\) \(\newcommand{\xhat}{\widehat{\xvec}}\) \(\newcommand{\vhat}{\widehat{\vvec}}\) \(\newcommand{\uhat}{\widehat{\uvec}}\) \(\newcommand{\what}{\widehat{\wvec}}\) \(\newcommand{\Sighat}{\widehat{\Sigma}}\) \(\newcommand{\lt}{<}\) \(\newcommand{\gt}{>}\) \(\newcommand{\amp}{&}\) \(\definecolor{fillinmathshade}{gray}{0.9}\)- 1.1: Welcome to Economics!
- This page introduces economics, emphasizing its importance and distinguishing between microeconomics and macroeconomics. It discusses the use of theories and models by economists to analyze economic issues and the organization of economies through various systems. The text also features key terms, concepts, self-check questions, review questions, and critical thinking prompts to aid in the understanding of the subject.
- 1.1.1: Introduction
- 1.1.2: What Is Economics, and Why Is It Important?
- 1.1.3: Microeconomics and Macroeconomics
- 1.1.4: How Economists Use Theories and Models to Understand Economic Issues
- 1.1.5: How To Organize Economies- An Overview of Economic Systems
- 1.1.6: Key Terms
- 1.1.7: Key Concepts and Summary
- 1.1.8: Self-Check Questions
- 1.1.9: Review Questions
- 1.1.10: Critical Thinking Questions
- 1.2: Choice in a World of Scarcity
- This page discusses economic decision-making, emphasizing individual choices within budget constraints and the production possibilities frontier's importance. It addresses objections to economic approaches, defines essential terms, and includes self-check questions. Additionally, critical thinking problems encourage deeper engagement with the concepts presented.
- 1.2.1: Introduction
- 1.2.2: How Individuals Make Choices Based on Their Budget Constraint
- 1.2.3: The Production Possibilities Frontier and Social Choices
- 1.2.4: Confronting Objections to the Economic Approach
- 1.2.5: Key Terms
- 1.2.6: Key Concepts and Summary
- 1.2.7: Self-Check Questions
- 1.2.8: Review Questions
- 1.2.9: Critical Thinking Questions
- 1.2.10: Problems
- 1.3: Demand and Supply
- This page covers key economic concepts related to goods and services markets, focusing on demand, supply, and market equilibrium. It explains shifts in demand and supply, changes in equilibrium price and quantity, and the effects of price ceilings and floors. Additionally, it highlights the interplay between demand, supply, and market efficiency, and includes sections for key terms, self-check, and critical thinking questions to enhance understanding.
- 1.3.1: Introduction
- 1.3.2: Free Markets and Efficiency
- 1.3.3: Free Markets – Enhanced Growth
- 1.3.3.1: Free Markets - Sustainability
- 1.3.3.1.1: Free Markets – Enhanced Growth
- 1.3.4: Demand, Supply, and Equilibrium in Markets for Goods and Services
- 1.3.5: Shifts in Demand and Supply for Goods and Services
- 1.3.6: Changes in Equilibrium Price and Quantity- The Four-Step Process
- 1.3.7: Price Ceilings and Price Floors
- 1.3.8: Demand, Supply, and Efficiency
- 1.3.9: Key Terms
- 1.3.10: Key Concepts and Summary
- 1.3.11: Self-Check Questions
- 1.3.12: Review Questions
- 1.3.13: Critical Thinking Questions
- 1.3.14: Problems
- 1.4: Elasticity
- This page provides a comprehensive overview of elasticity in economics, covering price elasticity of demand and supply, along with polar cases and pricing applications. It features key terms, concepts, self-check questions, and critical thinking inquiries, serving as a thorough guide to understanding elasticity's significance in economic analysis and its broader implications.
- 1.4.1: Introduction
- 1.4.2: Rubber Band Theory
- 1.4.3: Price Elasticity of Demand and Price Elasticity of Supply
- 1.4.4: Polar Cases of Elasticity and Constant Elasticity
- 1.4.5: Elasticity and Pricing
- 1.4.6: Elasticity in Areas Other Than Price
- 1.4.7: Key Terms
- 1.4.8: Key Concepts and Summary
- 1.4.9: Self-Check Questions
- 1.4.10: Review Questions
- 1.4.11: Critical Thinking Questions
- 1.4.12: Problems
- 1.5: Poverty and Economic Inequality
- This page discusses poverty and income inequality, covering definitions of the poverty line, poverty traps, safety nets, measurement and causes of income inequality, and government policies for reduction. It also features key terms, concepts, self-check, review, and critical thinking questions related to these subjects.
- 1.5.1: Introduction
- 1.5.2: Drawing the Poverty Line
- 1.5.3: The Poverty Trap
- 1.5.4: The Safety Net
- 1.5.5: Income Inequality- Measurement and Causes
- 1.5.6: Government Policies to Reduce Income Inequality
- 1.5.7: Key Terms
- 1.5.8: Key Concepts and Summary
- 1.5.9: Self-Check Questions
- 1.5.10: Review Questions
- 1.5.11: Critical Thinking Questions
- 1.5.12: Problems
- 1.6: Environmental Protection and Negative Externalities
- This page discusses environmental economics, focusing on pollution economics, regulations, market tools, and the costs and benefits of U.S. environmental laws. It highlights international environmental issues and the balance between economic growth and environmental protection, while also providing key terms, concepts, review questions, and critical thinking prompts for better comprehension of the topic.
- 1.6.1: Introduction
- 1.6.2: The Economics of Pollution
- 1.6.3: Command-and-Control Regulation
- 1.6.4: Market-Oriented Environmental Tools
- 1.6.5: The Benefits and Costs of U.S. Environmental Laws
- 1.6.6: International Environmental Issues
- 1.6.7: The Tradeoff between Economic Output and Environmental Protection
- 1.6.8: Key Terms
- 1.6.9: Key Concepts and Summary
- 1.6.10: Self-Check Questions
- 1.6.11: Review Questions
- 1.6.12: Critical Thinking Questions
- 1.6.13: Problems
- 1.7: Positive Externalities and Public Goods
- This page discusses the significance of innovation investments, government roles in promoting it, and public goods concepts. It features key terms and summaries, along with self-check and review questions, to enhance comprehension and critical thinking on the subject.
- 1.8: Production, Costs, and Industry Structure
- This page covers economic concepts such as explicit and implicit costs, and distinguishes between accounting and economic profit. It addresses production and costs in short and long runs and includes key terms and concepts. Furthermore, it summarizes critical thinking questions, review questions, and problems for deeper comprehension of the material.
- 1.8.1: Introduction
- 1.8.2: Explicit and Implicit Costs, and Accounting and Economic Profit
- 1.8.3: Production in the Short Run
- 1.8.4: Costs in the Short Run
- 1.8.5: Production in the Long Run
- 1.8.6: Costs in the Long Run
- 1.8.7: Key Terms
- 1.8.8: Key Concepts and Summary
- 1.8.9: Self-Check Questions
- 1.8.10: Review Questions
- 1.8.11: Critical Thinking Questions
- 1.8.12: Problems
- 1.9: Perfect Competition
- This page provides a structured overview of perfect competition, detailing its importance, firm decision-making on output and market dynamics, and market efficiency. It incorporates essential terms, key concepts, self-assessment tools, review questions, and problem-solving elements to facilitate a deeper comprehension of the topic.
- 1.9.1: Introduction
- 1.9.2: Perfect Competition and Why It Matters
- 1.9.3: How Perfectly Competitive Firms Make Output Decisions
- 1.9.4: Entry and Exit Decisions in the Long Run
- 1.9.5: Efficiency in Perfectly Competitive Markets
- 1.9.6: Key Terms
- 1.9.7: Key Concepts and Summary
- 1.9.8: Self-Check Questions
- 1.9.9: Review Questions
- 1.9.10: Critical Thinking Questions
- 1.9.11: Problems
- 1.10: Monopoly
- This page presents a study guide on monopolies, detailing their formation through barriers to entry, profit maximization strategies, and includes essential terms, self-check and review questions, and critical thinking prompts.
- 1.10.1: Introduction
- 1.10.2: Market Environment
- 1.10.3: How Monopolies Form- Barriers to Entry
- 1.10.4: How a Profit-Maximizing Monopoly Chooses Output and Price
- 1.10.5: Key Terms
- 1.10.6: Key Concepts and Summary
- 1.10.7: Self-Check Questions
- 1.10.8: Review Questions
- 1.10.9: Critical Thinking Questions
- 1.10.10: Problems
- 1.11: Monopolistic Competition and Oligopoly
- This page examines monopolistic competition and oligopoly, highlighting their roles as intermediate market structures. Monopolistic competition features many firms with differentiated products, resulting in temporary pricing power but zero long-term economic profits.
- 1.11.1: Introduction
- 1.11.2: Monopolistic Competition
- 1.11.3: Oligopoly
- 1.11.4: Matrix Games
- 1.11.5: Nash Equilibrium
- 1.11.6: Mixed Strategies
- 1.11.7: Subgame Perfection
- 1.11.8: Examples
- 1.11.9: Key Terms
- 1.11.10: Key Concepts and Summary
- 1.11.11: Self-Check Questions
- 1.11.12: Review Questions
- 1.11.13: Critical Thinking Questions
- 1.11.14: Problems
- 1.12: Monopoly and Antitrust Policy
- This page discusses corporate mergers in natural gas and telecommunications, examining their competitive impacts and antitrust laws. It addresses the balance between economies of scale and oligopoly risks, highlights government regulation challenges, and introduces market concentration assessment tools like concentration ratios and HHI.
- 1.12.1: Introduction
- 1.12.2: Corporate Mergers
- 1.12.3: Regulating Anticompetitive Behavior
- 1.12.4: Regulating Natural Monopolies
- 1.12.5: The Great Deregulation Experiment
- 1.12.6: Key Terms
- 1.12.7: Key Concepts and Summary
- 1.12.8: Self-Check Questions
- 1.12.9: Review Questions
- 1.12.10: Critical Thinking Questions
- 1.12.11: Problems
- 1.13: Consumer Choices
- This page discusses consumer behavior and decision-making in economics, focusing on consumption choices influenced by income and prices, alongside an introduction to behavioral economics. It includes key terms, concepts, and sections for self-check, review, and critical thinking to enhance understanding.
- 1.13.1: Introduction
- 1.13.2: Consumption Choices
- 1.13.3: How Changes in Income and Prices Affect Consumption Choices
- 1.13.4: Behavioral Economics- An Alternative Framework for Consumer Choice
- 1.13.5: Key Terms
- 1.13.6: Key Concepts and Summary
- 1.13.7: Self-Check Questions
- 1.13.8: Review Questions
- 1.13.9: Critical Thinking Questions
- 1.13.10: Problems
- 1.14: Labor and Financial Markets
- This page covers labor and financial markets, focusing on demand and supply dynamics. It explains how the market system effectively communicates information and includes key terms, concepts, as well as self-check, review, and critical thinking questions to enhance comprehension.
- 1.14.1: Introduction
- 1.14.2: Demand and Supply at Work in Labor Markets
- 1.14.3: Demand and Supply in Financial Markets
- 1.14.4: The Market System as an Efficient Mechanism for Information
- 1.14.5: Key Terms
- 1.14.6: Key Concepts and Summary
- 1.14.7: Self-Check Questions
- 1.14.8: Review Questions
- 1.14.9: Critical Thinking Questions
- 1.14.10: Problems
- 1.15: Labor Markets and Income
- This page explores labor markets, covering theoretical foundations, wage determination in imperfect competition, union impacts, bilateral monopolies, employment discrimination, and immigration challenges. It includes key terms, self-check and review questions, and critical thinking prompts for deeper understanding of these topics.
- 1.15.1: Introduction
- 1.15.2: The Theory of Labor Markets
- 1.15.3: Wages and Employment in an Imperfectly Competitive Labor Market
- 1.15.4: Market Power on the Supply Side of Labor Markets- Unions
- 1.15.5: Bilateral Monopoly
- 1.15.6: Employment Discrimination
- 1.15.7: Immigration
- 1.15.8: Key Terms
- 1.15.9: Key Concepts and Summary
- 1.15.10: Self-Check Questions
- 1.15.11: Review Questions
- 1.15.12: Critical Thinking Questions
- 1.16: Information, Risk, and Insurance
- This page discusses imperfect and asymmetric information in insurance, covering key terms, concepts, and inclusion of self-check and review questions to aid comprehension. It focuses on how imperfect information influences decision-making and the dynamics of insurance markets.
- 1.17: Financial Markets
- This page covers financial capital and wealth accumulation, focusing on how businesses and households acquire financial capital and personal wealth strategies. It includes key terms, educational content, self-checks, reviews, and critical thinking questions to enhance understanding of financial principles and practices.
- 1.17.1: Introduction
- 1.17.2: How Businesses Raise Financial Capital
- 1.17.3: How Households Supply Financial Capital
- 1.17.4: How to Accumulate Personal Wealth
- 1.17.5: Key Terms
- 1.17.6: Key Concepts and Summary
- 1.17.7: Self-Check Questions
- 1.17.8: Review Questions
- 1.17.9: Critical Thinking Questions
- 1.17.10: Problems
- 1.18: Public Economy
- This page explores the relationship between economics and democracy, highlighting issues like low voter turnout due to rational ignorance, the impact of special interest groups, and flaws in democratic structures. It critiques the influence of funding on legislation, discusses median voter theory, and examines barriers such as voting cycles that complicate majority representation.
- 1.18.1: Introduction
- 1.18.2: Voter Participation and Costs of Elections
- 1.18.3: Special Interest Politics
- 1.18.4: Flaws in the Democratic System of Government
- 1.18.5: Key Terms
- 1.18.6: Key Concepts and Summary
- 1.18.7: Self-Check Questions
- 1.18.8: Review Questions
- 1.18.9: Critical Thinking Questions
- 1.18.10: Problems
- 1.19: International Trade
- This page summarizes a chapter on international trade, focusing on absolute and comparative advantage, implications of absolute advantage, and intra-industry trade. It emphasizes the benefits of lowering trade barriers and includes key terms, self-check and review questions, and critical thinking prompts to improve understanding of international trade complexities and advantages.
- 1.19.1: Introduction
- 1.19.2: Trade in our daily lives
- 1.19.3: Absolute and Comparative Advantage
- 1.19.4: What Happens When a Country Has an Absolute Advantage in All Goods
- 1.19.5: Intra-industry Trade between Similar Economies
- 1.19.6: Trade barriers- Tariffs, subsidies and quotas
- 1.19.7: The Benefits of Reducing Barriers to International Trade
- 1.19.8: Key Terms
- 1.19.9: Key Concepts and Summary
- 1.19.10: Self-Check Questions
- 1.19.11: Review Questions
- 1.19.12: Critical Thinking Questions
- 1.19.13: Problems
- 1.20: Globalization and Protectionism
- This page discusses trade policy aspects such as protectionism, its effects on consumers and jobs, and arguments for limiting imports. It examines government implementation of trade policies, the trade-offs involved, and offers resources for further understanding through key terms, concepts, and self-assessment questions.
- 1.20.1: Introduction
- 1.20.2: Protectionism- An Indirect Subsidy from Consumers to Producers
- 1.20.3: International Trade and Its Effects on Jobs, Wages, and Working Conditions
- 1.20.4: Arguments in Support of Restricting Imports
- 1.20.5: How Governments Enact Trade Policy- Globally, Regionally, and Nationally
- 1.20.6: The Tradeoffs of Trade Policy
- 1.20.7: Key Terms
- 1.20.8: Key Concepts and Summary
- 1.20.9: Self-Check Questions
- 1.20.10: Review Questions
- 1.20.11: Critical Thinking Questions
- 1.20.12: Problems
- 1.21: Appendix
- This page covers three fundamental mathematical concepts in economics: the use of graphs and algebra in illustrating supply and demand, the role of indifference curves in demonstrating consumer preferences and responses to economic changes, and the importance of present discounted value (PDV) in evaluating investments by comparing current costs with future benefits. Additionally, it emphasizes the need for critical interpretation of data representations.
- 1.21.1: Appendix A- The Use of Mathematics in Principles of Economics
- 1.21.2: Appendix B- Indifference Curves
- 1.21.3: Appendix C- Present Discounted Value
- 1.21.4: Answer Key
- 1.21.4.1: Chapter 1
- 1.21.4.2: Chapter 2
- 1.21.4.3: Chapter 3
- 1.21.4.4: Chapter 4
- 1.21.4.5: Chapter 5
- 1.21.4.6: Chapter 6
- 1.21.4.7: Chapter 7
- 1.21.4.8: Chapter 8
- 1.21.4.9: Chapter 9
- 1.21.4.10: Chapter 10
- 1.21.4.11: Chapter 11
- 1.21.4.12: Chapter 12
- 1.21.4.13: Chapter 13
- 1.21.4.14: Chapter 14
- 1.21.4.15: Chapter 15
- 1.21.4.16: Chapter 16
- 1.21.4.17: Chapter 17
- 1.21.4.18: Chapter 18
- 1.21.4.19: Chapter 19
- 1.21.4.20: Chapter 20
Thumbnail: Pike Place farmers market in Seattle. (CC BY-SA 4.0; Ron Clausen via Wikipedia)


