Microeconomics in Context: 4th Edition (Paperback) book cover

Microeconomics in Context

4th Edition

By Neva Goodwin, Jonathan M. Harris, Julie A. Nelson, Pratistha Joshi Rajkarnikar, Brian Roach, Mariano Torras


614 pages | 159 Color Illus.

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Microeconomics in Context lays out the principles of microeconomics in a manner that is thorough, up to date, and relevant to students. Like its counterpart, Macroeconomics in Context, the book is uniquely attuned to economic, social, and environmental realities. The "In Context" books offer affordability, accessible presentation, and engaging coverage of current policy issues from economic inequality and global climate change to taxes and globalization.

Key features include:

  • Clear explanations of basic concepts and analytical tools, with advanced models presented in optional chapter appendices;
  • Presentation of policy issues in historical, environmental, institutional, social, political, and ethical contexts—an approach that fosters critical evaluation of the standard microeconomic models, such as welfare analysis, labor markets, and market competition;
  • A powerful graphical presentation of various measures of well-being in the United States and other countries, including income inequality, taxes, educational attainment, and environmental quality;
  • Broad definitions of well-being using both traditional economic metrics and factors such as environmental quality, health, equity, and political inclusion;
  • Significantly revised chapters on globalization and trade, economic and social inequality, labor markets, and public goods;
  • Expanded coverage of high-interest topics such as behavioral economics, labor markets, and economic discrimination;
  • Full complement of instructor and student support materials online.

This new edition also features more international data and analysis, and further material on the importance of economic power in shaping policy. The latest addition to the "In Context" series combines real-world relevance with a thorough grounding in multiple economic paradigms.


"In my endorsement of the previous edition of Microeconomics in Context, I called it 'hands down the best'. This new edition is even better. Not only is it still very accessible to students, but it is even more highly relevant. The authors present the economy as fully embedded in its wider context – social, political, historical, and environmental – and then bring in a rich understanding of economic theory to help us not only to understand the world, but also to change it."

-- Professor Judith Robinson, Castleton State College

"This textbook shifts our thinking and teaching about microeconomics! The integration of cutting-edge economic insights and applications to underexplored issues of unpaid labor, inequality, climate change, and globalization makes the book relevant and engaging. With this contextual approach and the tools offered, we are better equipped to promote improvements in societal well-being."

-- Professor Fiona MacPhail, University of Northern British Columbia

Table of Contents

Part I: The Context for Economic Analysis Chapter 0: Microeconomics and Well-Being Chapter 1: Economic Activity in Context 1. Our Starting Point 2. The Goals of an Economy 2.1 Intermediate and Final Goals 2.2 Traditional Economic Goals 2.3 Components of Well-Being 2.4 Economics and Well-Being 3. The Issues That Define Economics 3.1 The Four Essential Economic Activities 3.2 The Three Basic Economic Questions 4. Economic Tradeoffs 4.1 Society’s Production Possibilities Frontier 4.2 Tradeoffs Over Time 5. Microeconomics in Context 5.1 The Traditional Economic Model 5.2 The Contextual Approach Chapter 2: Markets and Society 1. The Three Spheres of Economic Activity 1.1 The Core Sphere 1.2 The Public Purpose Sphere 1.3 The Business Sphere 1.4 The Size of the Three Spheres 1.5 The Informal Sphere and Less Industrialized Countries 2. The Role of Markets 2.1 Three Definitions of Markets 2.2 Institutional Requirements of Markets

3. Types of Markets 3.1 Markets Defined by What Is Sold 3.2 Markets Defined by How Prices Are Determined 4. Advantages and Limitations of Markets 4.1 Overview of Advantages and Disadvantages of Markets 4.2 Assessing Market Outcomes Part II: Basic Economic Analysis Chapter 3: Supply and Demand 1. Introduction to the Microeconomic Market Model 2. The Theory of Supply 2.1 The Supply Schedule and Supply Curve 2.2 Changes in Supply 2.3 Nonprice Determinants of Supply 3. The Theory of Demand 3.1 The Demand Schedule and Demand Curve 3.2 Changes in Demand 3.3 Nonprice Determinants of Demand 4. The Theory of Market Adjustment 4.1 Surplus, Shortage, and Equilibrium 4.2 Market Forces and Other Considerations 4.3 Shifts in Supply and Demand 5. Topics in Market Analysis 5.1 Real-World Prices 5.2 Markets and Equity 5.3 Shortage, Scarcity, and Inadequacy 5.4 Precision Versus AccuracyChapter 4: Elasticity 1. The Price Elasticity of Demand 1.1 Price Inelastic Demand 1.2 Price Elastic Demand 1.3 Measuring Price Elasticity 1.4 Two Extreme Cases 1.5 Demand Curves and Elasticity 1.6 Elasticity and Revenues 1.7 Price Elasticity of Demand in the Real World 2. The Price Elasticity of Supply 3. Income Elasticity of Demand

4. Income and Substitution Effects of a Price Change 5. Short-Run Versus Long-Run Elasticity Chapter 5: Welfare Analysis 1. Welfare Economics 2. Consumer Surplus 2.1 Quantifying Consumer Benefits 2.2 Consumer Surplus and Demand Curves 2.3 Consumer Surplus in an Entire Market 3. Producer Surplus 3.1 Quantifying Producer Benefits 3.2 Producer Surplus and Supply Curves 3.3 Producer Surplus in an Entire Market

4. Social Efficiency 4.1 Market Equilibrium and Social Efficiency 4.2 Price Ceilings 4.3 Price Floors 5. Policy Inferences from Welfare Analysis 5.1 Laissez-Faire Economics 5.2 Market Failure Chapter 6: International Trade and Trade Policy 1. Trade, Specialization, and Productivity 2. Gains from Trade 2.1 The Theory of Comparative Advantage 2.2 Factor-Price Equalization 2.3 Other Benefits of Free Trade 3. Drawbacks of Free Trade 3.1 Vulnerability and Lock-In 3.2 Power Differentials 3.3 Trade and the Environment 3.4 Inequality and Other Social Impacts of Trade 4. Globalization and Policy 4.1 Globalization Data and Trends 4.2 National Trade Policies 4.3 International Trade Agreements 5. Conclusion: Free Trade and Fair Trade Appendix: A Formal Theory of Gains from Trade Part III: Economics and Society Chapter 7: Economic Behavior and Rationality

1. Historical Perspectives on Economic Behavior 1.1 Classical Economic Views of Human Nature 1.2 The Neoclassical Model 2. Modern Perspectives on Economic Behavior 2.1 Behavioral Economics 2.2 The Role of Time in Economic Decisions 2.3 The Role of Emotions in Economic Decisions 2.4 The Role of Influential Factors 2.5 Selfishness and Altruism 2.6 Insights from Neuroeconomics 3. Economic Behavior in Contextual Economics 3.1 Alternatives to Maximizing Behavior 3.2 The Model of Economic Behavior in Contextual Economics 4. Policy Inferences from our Model of Economic Behavior 4.1 Predictable Irrationality and Nudges

4.2 Government Policy Examples 4.3 Concluding Thoughts Chapter 8: Consumption and Consumer Society 1. Economic Theory and Consumption 1.1 Consumer Sovereignty 1.2 The Budget Line 1.3 Consumer Utility

1.4 Limitations of the Standard Consumer Model 2. Consumption in Historical and International Context 2.1 A Brief History of Consumer Society 2.2 Limits to Modern Consumerism 3. Consumption in a Social Context

3.1 Social Comparisons 3.2 Advertising 3.3 Private Versus Public Consumption 4. Consumption in an Environmental Context 4.1 The Link Between Consumption and the Environment 4.2 Green Consumerism

5. Consumption and Well-Being 5.1 Does Money Buy Happiness? 5.2 Affluenza and Voluntary Simplicity 5.3 Consumption and Public Policy Appendix: A Formal Theory of Consumer Behavior Chapter 9: Markets for Labor 1. Economic Theory of Labor Markets 1.1 The Firm’s Decision to Hire Labor 1.2 The Individual’s Decision to Supply Labor 1.3 The Individual Supply Curve for Labor 1.4 The Market Supply Curve for Labor

1.5 Market Demand Curves 1.6 Market Adjustment 2. Explaining Variations in Wages 2.1 Wage Variations in the Neoclassical Labor Model 2.2 Social Norms, Bargaining Power, and Labor Unions 2.3 Efficiency Wages and Dual Labor Markets 2.4 Discrimination 3. Contemporary Labor Issues and Policies 3.1 Labor Force Participation Rates 3.2 Labor Market Flexibility 3.3 Labor Markets and Immigration 3.4 Cooperatives

3.5 Work/Life Balance 3.5 Labor Markets, Inequality, and Power Appendix: A Formal Model of a Firm’s Hiring Decision Part IV: Essential Topics for Contemporary Economics Chapter 10: Economic and Social Inequality 1. Defining and Measuring Inequality 1.1 Inequality of What? 1.2 Measuring Inequality 2. Inequality Trends and Further Considerations 2.1 Income Inequality Over Time in the United States 2.2 Wealth Inequality 2.3 Further Perspectives on Inequality 2.4 Economic Mobility 3. International Data on Inequality 3.1 Cross-Country Comparisons 3.2 Global Inequality 4. Causes and Consequences of Inequality 4.1 Causes of Inequality 4.2 Consequences of Inequality 5. Responding to Inequality 5.1 Tax and Transfer Policies 5.2 Wage Policies 5.3 Public Spending and Regulatory Policies 5.4 Addressing Inequality in Developing and Transitional Countries 5.5 Concluding Thoughts Chapter 11: Taxes and Tax Policy 1. Economic Theory and Taxes 1.1 Taxes in the Supply-and-Demand Model 1.2 Tax Revenues 1.3 Welfare Analysis of Taxation 2. The Structure of Taxation in the United States 2.1 Tax Progressivity 2.2 Federal Income Taxes 2.3 Federal Social Insurance Taxes 2.4 Federal Corporate Taxes 2.5 Other Federal Taxes 2.6 State and Local Taxes 3. Tax Analysis and Policy Issues 3.1 Tax Data for the United States 3.2 International Data on Taxes 3.3 Current Tax Policy Issues Chapter 12: The Economics of the Environment 1. The Theory of Externalities 1.1 Negative Externalities in the Supply-and-Demand Model 1.2 Internalizing Negative Externalities 1.3 Positive Externalities 1.4 Policy Implications of Externalities 2. Valuing the Environment 2.1 Total Economic Value 2.2 Nonmarket Valuation Methodologies 2.3 Cost-Benefit Analysis 3. Environmental Policies in Practice 3.1 Policy Options 3.2 Design and Performance of Environmental Policies Appendix: Formal Analysis of Negative Externalities Chapter 13: Common Property Resources and Public Goods 1. Goods Other Than Private Goods 2. Artificially Scarce Goods 3. Common Property Resources 3.1 Modeling a Common Property Resource

3.2 Policies for Common Property Resource Management 4. Public Goods 5. Climate Change 5.1 Climate Change Data and Projections 5.2 Economic Analysis of Climate Change 5.3 Climate Change Policy 5.4 Economics of Renewable Energy Part V: Resources, Production, and Market Organization Chapter 14: Capital Stocks and Resource Management 1. Capital Stocks 1.1 Stocks Versus Flows 1.2 The Five Types of Natural Capital 2. Natural Capital 2.1 Renewable and Nonrenewable Natural Capital 2.2 Natural Capital and Sustainability 3. Manufactured Capital 3.1 Fixed Manufactured Capital 3.2 Inventories 3.3 Manufactured Capital in the Core and Public Purpose Spheres 4. Human Capital 4.1 Physical Human Capital 4.2 Intangible Human Capital 5. Social Capital 6. Financial Capital 6.1 Equity Finance 6.2 Debt Finance 7. Sustaining Capital Stocks Chapter 15: Production Costs 1. An Overview of Production 1.1 The Goals of Production 1.2 An Economic Perspective on Production 2. Types of Production Costs 2.1 Fixed Versus Variable Costs 2.2 Accounting Versus Economic Costs 2.3 Private Versus External Costs 3. The Production Function 3.1 Thinking About Inputs and Outputs 3.2 Graphing Production Functions 3.3 Production in the Short Run 4. Production Costs 4.1 Production Costs in the Short Run 4.2 Production Costs in the Long Run 4.3 Production Process ChoiceChapter 16: Perfectly Competitive Markets 1. Understanding Market Power and Competition

1.1 The Business Perspective on Competition and Market Power 1.2 The Consumer Perspective on Competition and Market Power 1.3 The Citizen Perspective on Competition and Market Power 1.4 The Economists’ Perspective on Competition and Market Power 2. Perfect Competition 2.1 The Conditions of Perfect Competition 2.2 Examples of Perfect Competition? 3. Profit Maximization Under Perfect Competition 3.1 Revenues

3.2 Profit Maximization Example 3.3 Profits Under Perfect Competition 4. Losses and Exit 4.1 Losses in the Short Run 4.2 Losses in the Long Run 5. Production, Efficiency, and Equity 5.1 Path Dependence 5.2 Network Externalities 5.3 Markets, Efficiency, and Equity Appendix: A Formal Model of Perfect CompetitionChapter 17: Markets with Market Power 1. The Traditional Models 2. Pure Monopoly: One Seller 2.1 The Conditions of Monopoly 2.2 Examples of Monopoly 2.3 Profit Maximization for a Monopolist 2.4 Monopoly and Inefficiency 2.5 Can Monopoly Be Efficient? 3. Monopolistic Competition 3.1 The Conditions of Monopolistic Competition 3.2 Examples of Monopolistic Competition 3.3 Profit Maximization with Monopolistic Competition 3.4 Monopolistic Competition and Long-Run Efficiency 4. Oligopoly 4.1 Market Structure of an Oligopolistic Industry 4.2 Oligopoly and the Behavior of Firms 4.3 Examples of Oligopoly 5. Market Power, Well-Being, and Politics 5.1 Market Concentration and Politics 5.2 Final Thoughts Appendix: Formal Analysis of Monopoly and Monopolistic Competition

About the Authors

Neva Goodwin is Co-Director of the Global Development and Environment Institute (GDAE) at Tufts University, where she is the director of the electronic Social Science Library: Frontier Thinking in Sustainable Development and Human Well-Being. Her current interests focus on ecological restoration, especially with regard to soils.

Jonathan M. Harris is Senior Research Associate at the Global Development and Environment Institute at Tufts University. His current research focuses on the implications of large-scale environmental problems, especially global climate change, for macroeconomic theory and policy.

Julie A. Nelson is Professor of Economics at the University of Massachusetts Boston and Senior Research Fellow at the Global Development and Environment Institute at Tufts University. Many of her books and articles critique economic methodology from a feminist perspective. She has published in journals ranging from Econometrica and the Journal of Political Economy to Hypatia: A Journal of Feminist Philosophy and Ecological Economics.

Pratistha Joshi Rajkarnikar is a Postdoctoral Scholar at the Global Development and Environment Institute at Tufts University. Her research covers a broad range of topics on women’s empowerment, economic development, and the impacts of globalization on developing economies. She has taught economics in visiting positions at Trinity College and University of Massachusetts Boston.

Brian Roach is Director of the Theory and Education Program at the Global Development and Environment Institute at Tufts University, and a lecturer at Tufts and Brandeis Universities. He specializes in environmental economics, and is co-author (with Jonathan Harris) of Environmental and Natural Resource Economics: A Contemporary Approach.

Mariano Torras teaches economics at Adelphi University in Garden City, New York. A heterodox economist who specializes in ecological and development economics, his recent research has been in the areas of institutional economics and economic methodology; particular attention has been on approaches to addressing climate change.

Subject Categories

BISAC Subject Codes/Headings:
BUSINESS & ECONOMICS / Economics / Microeconomics