Microeconomics, Global Edition 9th Edition

Book Preface

For students who care about how the world works, microeconomics is prob-ably the most relevant, interesting, and important subject they can study. (Macroeconomics is the second-most important subject.) A good grasp of microeconomics is vital for managerial decision making, for designing and understanding public policy, and, more generally, for appreciating how a mod-ern economy functions. In fact, even understanding the news each day often requires knowledge of microeconomics.
We wrote this book, Microeconomics, because we believe that students need to be exposed to the new topics that have come to play a central role in microeco-nomics over the years—topics such as game theory and competitive strategy, the roles of uncertainty and information, and the analysis of pricing by firms with market power. We also felt that students need to be shown how microeconomics can help us to understand what goes on in the world and how it can be used as a practical tool for decision making. Microeconomics is an exciting and dynamic subject, but students need to be given an appreciation of its relevance and use-fulness. They want and need a good understanding of how microeconomics can actually be used outside the classroom.

To respond to these needs, the ninth edition of Microeconomics provides a treatment of microeconomic theory that stresses its relevance and application to both managerial and public policy decision making. This applied emphasis is accomplished by including examples that cover such topics as the analysis of demand, cost, and market efficiency; the design of pricing strategies; investment and production decisions; and public policy analysis. Because of the importance that we attach to these examples, they are included in the flow of the text. (A complete list is included on the endpapers inside the front cover.)
The coverage in this edition of Microeconomics incorporates the dramatic chang-es that have occurred in the field in recent years. There has been growing interest in game theory and the strategic interactions of firms (Chapters 12 and 13), in the role and implications of uncertainty and asymmetric information (Chapters 5 and 17), in the pricing strategies of firms with market power (Chapters 10 and 11), in the design of policies to deal efficiently with externalities such as environmental pollution (Chapter 18), and in behavioral economics (Chapter 19).

That the coverage in Microeconomics is comprehensive and up to date does not mean that it is “advanced” or difficult. We have worked hard to make the exposition clear and accessible as well as lively and engaging. We believe that the study of microeconomics should be enjoyable and stimulating. We hope that our book reflects this belief. Except for appendices and footnotes, Microeconom-ics uses no calculus. As a result, it should be suitable for students with a broad range of backgrounds. (Those sections that are more demanding are marked with an asterisk and can be easily omitted.)

Changes in the Ninth Edition

Each new edition of this book is built on the success of prior editions by adding some new topics, by adding and updating examples, and by im-proving the exposition of existing materials. We continue that tradition in this ninth edition. We have made a number of changes throughout the book, but the most important are the following:

We added a new chapter (Chapter 19) on behavioral economics. Behav-ioral economics goes beyond the simple paradigm of maximizing some-thing (e.g., utility, output, profit) subject to a constraint (e.g., income, cost, demand and cost). While this paradigm has been extremely powerful in helping us understand how markets work, it does not accurately describe how real-world consumers and firms behave. The new and flourishing field of behavioral economics incorporates findings from psychology into our descriptions of how consumers and firms make decisions. Although the previous edition of this book had a section on behavioral economics (that appeared in Chapter 5), we decided that this topic was sufficiently impor-tant to deserve a chapter of its own.

We have updated many of the examples (as we do in every new edition), but we also added several new ones.

• We now have several examples of taxicab markets that include the entry of “ride-share” services like Uber and Lyft (Chapters 9 and 13).
• We added an example about Tesla’s new battery factory (its “Gigafactory”) and how scale economies will reduce the cost of batteries for electric cars (Chapter 7).
• We added an example on merger policy (Chapter 10) and one on the Auto Parts Cartel (Chapter 12).
• We even have two examples (in Chapters 1 and 12) that deal with the pricing of this textbook.
• As part of the new Chapter 19, we added several examples that are “behav-ioral” in nature, including consumers’ use of credit card debt (and apparent willingness to pay extremely high interest rates) and decisions to join and use health clubs.
• With the exception of the new Chapter 19, the layout of this edition is simi-lar to that of the prior edition. This has allowed us to continue to define key terms in the margins (as well as in the Glossary at the end of the book) and to use the margins to include Concept Links that relate newly developed ideas to concepts introduced previously in the text.

Alternative Course Designs

This new edition of Microeconomics offers instructors considerable flexibil-ity in course design. For a one-quarter or one-semester course stressing the basic core material, we would suggest using the following chapters and sections of chapters: 1 through 6, 7.1–7.4, 8 through 10, 11.1–11.3, 12, 14, 15.1–15.4, 18.1–18.2, and 18.5. A somewhat more ambitious course might also in-clude parts of Chapters 5, 16, and 19 and additional sections in Chapters 7 and 9. To emphasize uncertainty and market failure, an instructor should also include substantial parts of Chapters 5 and 17.

Depending on one’s interests and the goals of the course, other sections could be added or used to replace the materials listed above. A course emphasizing modern pricing theory and business strategy would include all of Chapters 11, 12, and 13 and the remaining sections of Chapter 15. A course in managerial economics might also include the appendices to Chapters 4, 7, and 11, as well as the appendix on regression analysis at the end of the book. A course stressing welfare economics and public policy should include Chapter 16 and additional sections of Chapters 18 and 19.

Finally, we want to stress that those sections or subsections that are more demanding and/or peripheral to the core material have been marked with an asterisk. These sections can easily be omitted without detracting from the flow of the book.