Economics for Dummies, 3rd Edition PDF by Sean Masaki Flynn


Economics for Dummies, Third Edition

By Sean Masaki Flynn, PHD

Economics For Dummies

Table of Contents



About This Book

Foolish Assumptions

Icons Used in This Book

Beyond the Book

Where to Go from Here

Part 1: Economics: The Science of How People Deal with Scarcity

Chapter 1: What Economics Is and Why You Should Care

Considering a Little Economic History

Framing Economics as the Science of Scarcity

Sending Microeconomics and Macroeconomics to Separate


Understanding How Economists Use Models and Graphs

Chapter 2: Cookies or Ice Cream? Exploring Consumer Choices

Describing Human Behavior with a Choice Model

Pursuing Personal Happiness

You Can’t Have Everything: Examining Limitations

Making Your Choice: Deciding What and How Much You Want

Exploring Violations and Limitations of the Economist’s

Choice Model

Chapter 3: Producing Stuff to Maximize Happiness

Figuring Out What’s Possible to Produce

Deciding What to Produce

Promoting Technology and Innovation

Part 2: Microeconomics: The Science of Consumer and Firm


Chapter 4: Supply and Demand Made Easy

Deconstructing Demand

Sorting Out Supply

Bringing Supply and Demand Together

Price Controls: Keeping Prices Away from Market


Chapter 5: Introducing Homo Economicus, the Utility-

Maximizing Consumer

Choosing by Ranking

Getting Less from More: Diminishing Marginal Utility

Choosing Among Many Options When Facing a Limited


Deriving Demand Curves from Diminishing Marginal Utility

Chapter 6: The Core of Capitalism: The Profit-

Maximizing Firm

A Firm’s Goal: Maximizing Profits

Facing Competition

Analyzing a Firm’s Cost Structure

Comparing Marginal Revenues with Marginal Costs

Pulling the Plug: When Producing Nothing Is Your Best Bet

Chapter 7: Why Economists Love Free Markets and


Ensuring That Benefits Exceed Costs: Competitive Free


When Free Markets Lose Their Freedom: Dealing with

Deadweight Losses

Hallmarks of Perfect Competition: Zero Profits and Lowest

Possible Costs

Chapter 8: Monopolies: Bad Behavior without


Examining Profit-Maximizing Monopolies

Comparing Monopolies with Competitive Firms

Considering Good Monopolies

Regulating Monopolies

Chapter 9: Oligopoly and Monopolistic Competition:

Middle Grounds

Oligopolies: Looking at the Allure of Joining Forces

Understanding Incentives to Cheat the Cartel

Regulating Oligopolies

Studying a Hybrid: Monopolistic Competition

Part 3: Applying the Theories of Microeconomics

Chapter 10: Property Rights and Wrongs

Allowing Markets to Reach Socially Optimal Outcomes

Examining Externalities: The Costs and Benefits Others Feel

from Your Actions

Tragedy of the Commons: Overexploiting Commonly

Owned Resources

Chapter 11: Asymmetric Information and Public Goods

Facing Up to Asymmetric Information

Providing Public Goods

Chapter 12: Health Economics and Healthcare Finance

Defining Health Economics and Healthcare Finance

Noting the Limits of Health Insurance

Comparing Healthcare Internationally

Inflated Demand: Suffering from “Free” and Reduced-Cost Healthcare

Investigating Singapore’s Secrets

Chapter 13: Behavioral Economics: Investigating Irrationality

Explaining the Need for Behavioral Economics

Complementing Neo-Classical Economics with Behavioral Economics

Examining our Amazing, Efficient, and Error-Prone Brains Surveying Prospect Theory

Countering Myopia and Time Inconsistency

Gauging Fairness and Self-Interest

Part 4: Macroeconomics: The Science of Economic Growth and Stability

Chapter 14: How Economists Measure the Macroeconomy

Getting a Grip on the GDP (and Its Parts)

Diving In to the GDP Equation

Making Sense of International Trade and Its Effect on the Economy

Chapter 15: Inflation Frustration: Why More Money Isn’t Always Good

Buying an Inflation: When Too Much Money Is a Bad Thing

Measuring Inflation

Pricing the Future: Nominal and Real Interest Rates

Chapter 16: Understanding Why Recessions Happen

Introducing the Business Cycle

Striving for Full-Employment Output

Returning to Y*: The Natural Result of Price Adjustments

Responding to Economic Shocks: Short-Run and Long-Run Effects

Heading toward Recession: Getting Stuck with Sticky Prices

Achieving Equilibrium with Sticky Prices: The Keynesian Model

Chapter 17: Fighting Recessions with Monetary and Fiscal Policy

Stimulating Demand to End Recessions

Generating Inflation: The Risk of Too Much Stimulation

Figuring Out Fiscal Policy

Dissecting Monetary Policy

Chapter 18: Grasping Origins and Effects of Financial Crises

Understanding How Debt-Driven Bubbles Develop

Seeing the Bubble Burst

After the Crisis: Looking at Recovery

Part 5: The Part of Tens

Chapter 19: Ten Seductive Economic Fallacies

The Lump of Labor

The World Is Facing Overpopulation

Sequence Indicates Causation

Protectionism Is the Best Solution to Foreign Competition

The Fallacy of Composition

If It’s Worth Doing, Do It 100 Percent

Free Markets Are Dangerously Unstable

Low Foreign Wages Mean That Rich Countries Can’t Compete

Tax Rates Don’t Affect Work Effort

Forgetting Unintended Consequences

Chapter 20: Ten Economic Ideas to Hold Dear

Self-Interest Can Improve Society

Free Markets Require Regulation

Economic Growth Relies on Innovation

Freedom and Democracy Make Us Richer

Education Raises Living Standards

Intellectual Property Boosts Innovation

Weak Property Rights Cause All Environmental Problems

International Trade Is a Good Thing

Government Can Provide Public Goods

Preventing Inflation Is Easy

Chapter 21: Ten (Or So) Famous Economists

Adam Smith

David Ricardo

Karl Marx

Alfred Marshall

John Maynard Keynes

Kenneth Arrow and Gerard Debreu

Milton Friedman

Paul Samuelson

Robert Solow

Gary Becker

Robert Lucas

Appendix: Glossary

About the Author

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