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1.4 End-of-Chapter Material

In Conclusion

Economics is all around us. We all make dozens of economic decisions every day—some big, some small. Your decisions—and those of others—shape the world we live in. In this book, we will help you develop an understanding of economics by looking at examples of economics in the everyday world. Our belief is that the best way to study economics is to understand how economists think about such examples.

With this in mind, we have organized our book rather differently from most economics textbooks. It is built not around the theoretical concepts of economics but around different applications—economic illustrations as you encounter them in your own life or see them in the world around you. As you read this book, we will show you how economists analyze these illustrations, introducing you to the tools of economics as we proceed. After you have read the whole book, you will have been introduced to all the fundamental tools of economics, and you will also have seen them in action. Most of the tools are used in several different applications, thus allowing you to practice using them and gain a deeper understanding of how they work.

You can see this organization at work in our table of contents. In fact, there are two versions of the table of contents so that both students and instructors can easily see how the book is organized. The student table of contents focuses on the applications and the questions that we address in each chapter. The instructor table of contents lists the theoretical concepts introduced in each chapter so that instructors can easily see how economic theory is developed and used in the book.

We have also gathered all the tools of economics into a toolkit. You will see many links to this toolkit as you read the book. You can refer to the toolkit as needed when you want to be reminded of how a tool works, and you can also use it as a study aid when preparing for exams and quizzes.

Exercises

  1. A map is a model constructed by geographers and cartographers. Like an economic model, it is a simplified representation of reality. Suppose you have a map of your hometown in front of you. Think of one question about your town that you could answer using the map. Think of another question about your town for which the map would be useless.
  2. Which of the following questions do you think would be studied by a macroeconomist and which by a microeconomist? (Note: we don’t expect you to be able to answer all these questions yet.)

    1. What should the European Central Bank do about increasing prices in Europe?
    2. What happens to the price of ice cream in the summer?
    3. Should you take out a student loan to pay for college?
    4. What happens when the US government cuts taxes and pays for these tax cuts by borrowing money?
    5. What would happen to the prices of computers if Apple and Microsoft merged into a single firm?

Economics Detective

  1. Look at a newspaper on the Internet. Find a news story about macroeconomics. How do you know that it is about macroeconomics? Find a news story about microeconomics. How do you know that it is about microeconomics?