Principles of economics [antikvár]

PREFACE At the end of 2000 the United States was in its tenth consecutive year of an economic expansion, the longest in the country's history. Unemployment was at its lowest since 1970, productivity growth was high, and although oil prices had risen sharply, inflation was low. Chronic federal budget deficits had turned into budget surpluses; the Asian economies that suffered sharp downturns in 1998 were recovering fairly well (except for Japan): and even the transitional economies in Eastern Europe and Russia seemed to have turned the corner with reasonable rates of growth. Presidential candidates George W. Bush and A1 Gore slugged it out in the fall of 2000 over alternative tax cut and social security proposals. Perhaps the greatest change in the past three years has been the dramatic emergence of the technology-based "new economy." There can be no question that the dawn of the information age and the power of the Internet have changed the economy in ways that we do not yet fully understand. It has led to increased productivity, new products, and the transformation of many markets. What we don't know is how it will play out in the long run. Will the stock market continue to produce extraordinary returns to investors? As this edition goes to press there are signs that the U.S. economy may be slowing down. President-elect George W. Bush and his economic advisors expressed concern in mid December about a possible recession in 2001, and the Federal Reserve stated after its December 19, 2000, meeting that the risks were "weighted mainly toward conditions that may generate economic weakness in the foreseeable future." Others, however, were concerned that inflation may be a problem in the future because of tight labor markets and possible lagged responses to higher oil prices. How rapidly times change. It has been our goal in writing this sixth edition to highlight many of these changes and the debates surroimding them. It is not our role to forecast future events. It is rather our goal in revising the text to set the discussion in an up-to-date world context and to highlight what we do and do not understand about it. More than one million students have used Principles of Economics or one of its split volumes. We have made every effort in this new edition to be responsive to our readers' suggestions while maintaining the book's basic focus and pedagogical organization. THE FOUNDATION Despite major revisions and new features, the themes of the sixth edition are the same themes of the first five editions. The purpose of this book is to introduce the discipline of economics and to provide a basic understanding of how economies function. This requires a blend of economic theory, institutional material, and real-world applications. We have maintained a balance between these ingredients in every chapter in this book. THREE-TIERED EXPLANATIONS: STORIES-GRAPHS-EQUATIONS Professors who teach principles of economics are faced with a classroom of students with different abilities, backgrounds and learning styles. For some, analytical material is difficult no matter how it is presented; for others, graphs and equations seem to come naturally. The problem facing instructors and textbook authors is how to convey the core principles of the discipline to as many students as possible without selling the better students short. Our approach to this problem is to present each core concept in three ways: ¦ First, each concept is presented in the context of a simple intuitive story or illustrative example in words followed by a numerical illustration. ¦ Second, the numerical example is presented graphically. ¦ And finally, where appropriate, equations are used. Perhaps the best example of our approach can be found in Chapter 7, "Short-Run Costs and Output Decisions," where we show an independent accountant facing diminishing returns. 25