What’s New and Improved?
One of the benefits of writing a successful text is the opportunity to revise—to delete the outdated and install the new, to rewrite misleading or ambiguous statements, to introduce more relevant illustrations, to improve the organizational structure, and to enhance the learning aids.

We trust that you will agree that we have used this opportunity wisely and fully. Some of the more significant changes include the following:

New Public Finance Chapter
This traditional public finance chapter adds considerable new content to existing material that previously appeared in Chapter 5: Public Goods and Externalities. The chapter includes a circular flow diagram with government; an overview of Federal, state, and local tax revenues and expenditures; explanations of marginal and average tax rates; discussions of the benefits-received and ability-to-pay principles of taxation; an explanation of progressive, regressive, and proportional taxes; tax incidence and efficiency losses due to taxation; and the redistributive incidence of the overall tax-spending system in the United States.

New and updated “Illustrating the Idea,” “Applying the Analysis,” and “Photo Op” Pieces
These examples, applications, and illustrations help drive home central economic ideas in a student-oriented, real-world manner.  New content includes a discussion of beekeepers to explain the Coase Theorem, analysis of the effects of rising gas prices on companies like FedEx and Symantec, and an illustration of Federal versus state and local spending.

New Discussions of the Financial Crisis and the Recession
In this edition, we have focused on incorporating an analysis of the financial crisis, the recession, and the hesitant recovery into our discussions of macroeconomics.  Although we found many ways to work the recession into our macro chapters, we are confident that our basic macroeconomic models will serve equally well in explaining economic recovery and expansion back to the economy’s historical growth path. The new inclusions relating to the recession simply help students see the relevance of the models to what they are seeing in the news and perhaps experiencing in their own lives. The overall tone of the book, including the macro, continues to be optimistic with respect to the long-term growth prospects of market economies.

Reworked End-of-Chapter Questions and Problems
We have extensively reworked the end-of-chapter questions, and we have added new problems to each chapter. The questions are analytic and often ask for free responses, whereas the problems are mainly quantitative. We have aligned the questions and problems with the learning objectives presented at the beginning of the chapters. All of the questions and problems are assignable through McGraw-Hill’s Connect Economics, and many contain additional algorithmic variations and can be automatically graded within the system.

Chapter-by-Chapter Changes
In addition to the changes and new features listed above, chapter-specific revisions include:

Chapter 1: Limits, Alternatives, and Choices features updated discussion of the 2007-2009 recession and streamlined coverage of the main concepts.

Chapter 2: The Market System and the Circular Flow includes an improved discussion of the circular flow model, additional coverage of property rights, and updated global data.

Chapter 3: Demand, Supply, and Market Equilibrium begins with a revised introduction to supply and demand and contains additional clarifications of key concepts.

Chapter 4: Elasticity of Demand and Supply provides an updated discussion of elasticity.

Chapter 5: Market Failures: Public Goods and Externalities features improved coverage of market failures and the distinction between demand-side and supply-side market failures, new topics including consumer and producer surplus and efficiency (deadweight) loss, enhanced discussion of public versus private goods, a new “Illustrating the Idea” piece on the Coase Theorem, and a more complete discussion of correcting for externalities. The coverage of financing public goods and taxation has been moved to Chapter 12 on public finance.

Chapter 6: Businesses and Their Costs includes an improved discussion of costs and a new “Applying the Analysis” piece that discusses rising gas prices.

Chapter 7: Pure Competition features revised discussions of pure competition in the long run and efficiency in pure competition, plus an expanded figure illustrating a competitive firm and market in long-run equilibrium.

Chapter 8: Pure Monopoly contains an updated figure showing the inefficiency of pure monopoly relative to a purely competitive industry and a revised discussion of efficiency.

Chapter 9: Monopolistic Competition and Oligopoly includes a revised introduction, an updated figure illustrating the inefficiency of monopolistic competition, and an improved discussion of cartels and collusion.

Chapter 10: Wage Determination features improved discussions to clarify the main concepts.

Chapter 11: Income Inequality and Poverty contains extensive updates to the data on the distribution of income, poverty, and family wealth, plus revised coverage of income-maintenance programs.

Chapter 12: Public Finance: Expenditures and Taxes is a new chapter that incorporates the taxation content from the first-edition chapter “Public Goods and Externalities,” plus an expanded circular flow model, content on government purchases and transfer payments, material on federal, state, and local tax sources, efficiency losses from taxes, and additional discussion of tax incidence.

Chapter 13: GDP and Economic Growth includes a revised discussion of GDP accounting and updated coverage of productivity changes.

Chapter 14: Business Cycles, Unemployment, and Inflation contains a new chapter introduction, an improved discussion of business cycles and their causes, and detailed coverage of current unemployment rates and inflation throughout the world.

Chapter 15: Aggregate Demand and Aggregate Supply features detailed discussion, application, and analysis of the recession of 2007-2009. 

Chapter 16: Fiscal Policy, Deficits, and Debt includes important updates related to the recession, the subsequent policy response, and the debt debate.

Chapter 17: Money, Banking, and Financial Institutions provides an extensive discussion of the 2007-2008 financial crisis and the postcrisis financial services industry.

Chapter 18: Interest Rates and Monetary Policy features updated coverage of recent U.S. monetary policy, a new explanation of the liquidity trap, a new discussion of the Fed’s response to the financial crisis, and a new “Applying the Analysis” piece on the Fed’s balance sheet and its extensive growth.

Chapter 19: Long-Run Aggregate Supply and Aggregate Demand contains streamlined coverage and clarification of the main concepts.

Chapter 20: International Trade and Exchange Rates includes updated material on recent U.S. trade deficits and a revised discussion related to changes in the relative value of the U.S. dollar.