Fundamentals of Economics
Textbook: Economics (21e) by McConnell, Brue, and Flynn, McGraw Hill Irwin, 2018. ISBN: 978-1260386059.
Economics Online Learning Center
Go to this website for the PPT slides, videos, quizzes, study guides, and other important chapter-by-chapter information.
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ECON 2003 - Advice from Students
Economics Online Learning Center
Go to this website for the PPT slides, videos, quizzes, study guides, and other important chapter-by-chapter information.
Helpful online learning tools:
Khan Academy
Lynda.com
NBC Learn Higher Education
ECON 2003 - Advice from Students
What is the Flipped classroom?
Pre-Class Activities
1. Watch the Chapter narrated slides.
2. Complete the pre-class homework questions.
Additional videos, articles, or activities may be assigned, as necessary.
Pre-Class Activities
1. Watch the Chapter narrated slides.
2. Complete the pre-class homework questions.
Additional videos, articles, or activities may be assigned, as necessary.
Chapter 1: Limits, Alternatives, and Choices
Chapter 1: Limits, Alternatives, and Choices
After reading this chapter, you should be able to:
After reading this chapter, you should be able to:
- Define economics and the features of the economic perspective.
- Describe the role of economic theory in economics.
- Distinguish microeconomics from macroeconomics.
- List the categories of scarce resources and delineate the nature of the economizing problem.
- Apply production possibilities analysis, increasing opportunity costs, and economic growth.
- (Appendix) Understand graphs, curves, and slopes as they relate to economics.
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Chapter 2: The Market System and the Circular Flow
After reading this chapter, you should be able to:
- Differentiate between a command system and a market system.
- List the main characteristics of the market system.
- Explain how the market system answers the four fundamental questions.
- Discuss how the market system adjusts to change and promotes progress.
- Describe the mechanics of the circular flow model.
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Chapter 3: Demand, Supply, and Market Equilibrium
After reading this chapter, you should be able to:
- Describe demand and explain how it can change.
- Describe supply and explain how it can change.
- Relate how supply and demand interact to determine market equilibrium.
- Explain how changes in supply and demand affect equilibrium prices and quantities.
- Identify what government-set prices are and how they can cause product surpluses and shortages.
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Video Links:
Chapter 3: The Demand Curve (23 Mb download) Chapter 3: The Supply Curve (21 Mb download) Chapter 3: Equilibrium (40 Mb download) Chapter 3: Curves Shifting (47 Mb download) What's Behind the Slide in Oil Price? | ||||
Chapter 4: Market Failures: Public Goods and Externalities
After reading this chapter, you should be able to:
- Differentiate between demand-side market failures and supply-side market failures.
- Explain consumer surplus and producer surplus, and discuss how properly functioning markets maximize their sum while optimally allocating resources.
- Identify how public goods are distinguished from private goods, and explain the method for determining the optimal quantity of a public good.
- Explain how positive and negative externalities cause under-and overallocations of resources, and how they might be corrected.
- Show why we normally won't want to pay what it would cost to eliminate every last bit of a negative externality.
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Chapter 6: Elasticity
After completing this chapter, you should be able to:
1. Define price elasticity of demand and compute the coefficient of elasticity given appropriate data on prices and quantities.
2. Explain the meaning of elastic, inelastic, and unitary price elasticity of demand.
3. Recognize graphs of perfectly elastic and perfectly inelastic demand.
4. Use the total-revenue test to determine whether elasticity of demand is elastic, inelastic, or unitary.
5. Describe the price elasticity of demand along a linear demand curve.
6. List four major determinants of price elasticity of demand.
7. Explain how a change in each of the determinants of price elasticity would affect the elasticity coefficient.
8. Define price elasticity of supply and compute the coefficient of elasticity given appropriate data on prices and quantities.
9. Explain how the producer’s ability to shift resources to alternative uses and time affect price elasticity of supply.
10. Define income elasticity of demand and compute the coefficient of elasticity given appropriate data on income and quantities.
11. Explain the relationship of income elasticity of demand to normal and inferior goods.
12. Define cross-elasticity of demand and compute the coefficient of elasticity given appropriate data on prices and quantities.
13. Explain cross-elasticity of demand and how it is used to determine substitute, complementary, and independent goods.
14. Apply the various types of elasticity to contemporary issues such as taxation and drug policy.
15. Define and identify the terms and concepts listed at end of the chapter.
1. Define price elasticity of demand and compute the coefficient of elasticity given appropriate data on prices and quantities.
2. Explain the meaning of elastic, inelastic, and unitary price elasticity of demand.
3. Recognize graphs of perfectly elastic and perfectly inelastic demand.
4. Use the total-revenue test to determine whether elasticity of demand is elastic, inelastic, or unitary.
5. Describe the price elasticity of demand along a linear demand curve.
6. List four major determinants of price elasticity of demand.
7. Explain how a change in each of the determinants of price elasticity would affect the elasticity coefficient.
8. Define price elasticity of supply and compute the coefficient of elasticity given appropriate data on prices and quantities.
9. Explain how the producer’s ability to shift resources to alternative uses and time affect price elasticity of supply.
10. Define income elasticity of demand and compute the coefficient of elasticity given appropriate data on income and quantities.
11. Explain the relationship of income elasticity of demand to normal and inferior goods.
12. Define cross-elasticity of demand and compute the coefficient of elasticity given appropriate data on prices and quantities.
13. Explain cross-elasticity of demand and how it is used to determine substitute, complementary, and independent goods.
14. Apply the various types of elasticity to contemporary issues such as taxation and drug policy.
15. Define and identify the terms and concepts listed at end of the chapter.
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Chapter 9: Businesses and the Costs of Production
After completing this chapter, students should be able to:
1. Explain the difference between a plant, a firm, and an industry.
2. State the advantages and disadvantages of the corporate form of business.
3. Describe the principal-agent problem.
4. Distinguish between explicit and implicit costs, and between accounting, normal, and economic profits.
5. Explain why normal profit is an economic cost, but economic profit is not.
6. Calculate accounting and economic profit.
7. Differentiate between the short run and the long run.
8. Graph and explain the relationship between total, marginal, and average product.
9. Explain the law of diminishing returns.
10. Compute and graph marginal and average product when given total product data.
11. Distinguish between fixed, variable, and total costs.
12. Explain the difference between average and marginal costs.
13. Compute and graph AFC, AVC, ATC, and marginal cost when given total cost data.
14. Explain how AVC, ATC, and marginal cost relate to one another.
15. Explain what can cause cost curves to rise or fall.
16. Explain the difference between short-run and long-run costs.
17. State why the long-run average cost is expected to be U-shaped.
18. Identify causes of economies and diseconomies of scale.
19. Indicate the relationship between economies of scale and the number of firms in an industry.
20. Define and identify terms and concepts listed at the end of the chapter.
1. Explain the difference between a plant, a firm, and an industry.
2. State the advantages and disadvantages of the corporate form of business.
3. Describe the principal-agent problem.
4. Distinguish between explicit and implicit costs, and between accounting, normal, and economic profits.
5. Explain why normal profit is an economic cost, but economic profit is not.
6. Calculate accounting and economic profit.
7. Differentiate between the short run and the long run.
8. Graph and explain the relationship between total, marginal, and average product.
9. Explain the law of diminishing returns.
10. Compute and graph marginal and average product when given total product data.
11. Distinguish between fixed, variable, and total costs.
12. Explain the difference between average and marginal costs.
13. Compute and graph AFC, AVC, ATC, and marginal cost when given total cost data.
14. Explain how AVC, ATC, and marginal cost relate to one another.
15. Explain what can cause cost curves to rise or fall.
16. Explain the difference between short-run and long-run costs.
17. State why the long-run average cost is expected to be U-shaped.
18. Identify causes of economies and diseconomies of scale.
19. Indicate the relationship between economies of scale and the number of firms in an industry.
20. Define and identify terms and concepts listed at the end of the chapter.
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Chapter 15: Technology, R&D, and Efficiency
After completing this chapter, students should be able to:
1. List the four basic market models and characteristics of each.
2. Describe characteristics of a purely competitive firm and industry.
3. Explain how a purely competitive firm views demand for its product and marginal revenue from each additional unit sale.
4. Compute average, total, and marginal revenue when given a demand schedule for a purely competitive firm.
5. Use the marginal revenue–marginal cost approaches to determine short-run price and output that maximizes profits (or minimizes losses) for a competitive firm.
6. Graphically illustrate the profit-maximization, loss-minimization, and shut-down cases for a competitive firm, and calculate the profits and losses given revenue and cost data.
7. Find the short-run supply curve when given short-run cost schedules for a competitive firm.
8. Construct an industry short-run supply curve from information on single competitive firms in the industry.
9. Identify the breakeven and shutdown points along the competitive firm’s short-run supply curve.
10. Explain the long-run equilibrium position for a competitive firm using entry and exit of firms to explain adjustments from disequilibrium positions.
11. Explain the shape of long-run industry supply curves in constant-cost and increasing-cost industries.
12. Differentiate between productive and allocative efficiency.
13. Explain why allocative efficiency and productive efficiency are achieved where P = minimum ATC = MC.
14. Define and identify terms and concepts listed at the end of the chapter.
1. List the four basic market models and characteristics of each.
2. Describe characteristics of a purely competitive firm and industry.
3. Explain how a purely competitive firm views demand for its product and marginal revenue from each additional unit sale.
4. Compute average, total, and marginal revenue when given a demand schedule for a purely competitive firm.
5. Use the marginal revenue–marginal cost approaches to determine short-run price and output that maximizes profits (or minimizes losses) for a competitive firm.
6. Graphically illustrate the profit-maximization, loss-minimization, and shut-down cases for a competitive firm, and calculate the profits and losses given revenue and cost data.
7. Find the short-run supply curve when given short-run cost schedules for a competitive firm.
8. Construct an industry short-run supply curve from information on single competitive firms in the industry.
9. Identify the breakeven and shutdown points along the competitive firm’s short-run supply curve.
10. Explain the long-run equilibrium position for a competitive firm using entry and exit of firms to explain adjustments from disequilibrium positions.
11. Explain the shape of long-run industry supply curves in constant-cost and increasing-cost industries.
12. Differentiate between productive and allocative efficiency.
13. Explain why allocative efficiency and productive efficiency are achieved where P = minimum ATC = MC.
14. Define and identify terms and concepts listed at the end of the chapter.
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Chapter 26: An Introduction to Macroeconomics
After completing this chapter, students should be able to:
- Understand the basic statistical tools and measures that economists use to analyze the economy.
- Differentiate between nominal GDP and real GDP (gross domestic product).
- Understand the basic concept of unemployment.
- Understand the basic measure of inflation.
- Explain the miracle of modern economic growth.
- Understand and define the basic concepts of savings and investment.
- Differentiate between financial investment and economic investment.
- Understand the role of expectations and uncertainty in economic activity.
- Explain how unanticipated shocks to supply and demand affect the economy under fixed and flexible prices.
- Explain the role of inventories in the economy.
- Explain the difference between “sticky prices” and “flexible prices” and understand the basic evidence supporting the two concepts.
- Define and identify terms and concepts listed at the end of the chapter.
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Chapter 27: Measuring Domestic Output and National Income
After completing this chapter, students should be able to:
- State the purposes of national income accounting.
- List the components of GDP in the output (expenditures) approach and in the income approach.
- Compute GDP using either the expenditure or income approach when given national income data.
- Differentiate between gross and net investment.
- Explain why changes in inventories are investments.
- Discuss the relationship between net investment and economic growth.
- Compute NDP, NI, PI, and DI when given relevant data.
- Describe the system represented by the circular flow in this chapter when given a copy of the diagram.
- Calculate a GDP price index using simple hypothetical data.
- Find real GDP by adjusting nominal GDP with use of a price index.
- List seven shortcomings of GDP as an index of social welfare.
- Explain what is meant by the underground economy and state its approximate size in the United States and how that compares to other nations.
- Give an estimate of actual 2014 (or later) U.S. GDP in trillions of dollars and be able to rank the United States relative to a few other countries.
- Define and identify terms and concepts listed at the end of the chapter.
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Chapter 28: Economic Growth
After completing this chapter, students should be able to:
- Define two measures of economic growth.
- Explain why growth is a desirable goal.
- Identify two main sources of growth.
- Explain and apply the “rule of 70.”
- Give average long-term growth rates for the United States and qualifications of raw data.
- Show economic growth using production possibilities analysis and aggregate demand–aggregate supply analysis.
- Describe the growth record of the U.S. economy since 1950, including two measures of its long‑term growth rates.
- Identify six major factors that contributed to U.S. economic growth according to empirical studies.
- List three primary reasons for the rise in the average rate of productivity growth in the United States since 1995.
- List five reasons for increasing returns during the period of productivity growth.
- Evaluate the potential for the average rate of productivity growth to be a permanent phenomenon.
- Identify and explain the arguments for and against economic growth.
- Define and identify terms and concepts at the end of the chapter.
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Chapter 29: Business Cycles, Unemployment, and Inflation
After reading this chapter, you should be able to:
- Describe the business cycle and its primary phases.
- Illustrate how unemployment and inflation are measured.
- Explain the types of unemployment and inflation and their various economic impacts.
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Chapter 32: Aggregate Demand and Aggregate Supply
After reading this chapter, you should be able to:
- Define aggregate demand (AD) and explain the factors that cause it to change.
- Define aggregate supply (AS) and explain the factors that cause it to change.
- Discuss how AD and AS determine an economy's equilibrium price level and level of real GDP.
- Describe how the AD-AS model explains periods of demand-pull inflation, cost-push inflation, and recession.
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Chapter 33: Fiscal Policy, Deficits, and Debt
After reading this chapter, you should be able to:
- Identify and explain the purposes, tools, and limitations of fiscal policy.
- Explain the role of built-in stabilizers in dampening business cycles.
- Describe how the cyclically adjusted budget reveals the status of U.S. fiscal policy.
- Discuss the size, composition, and consequences of the U.S. public debt.
- Explain why there is a long-run fiscal imbalance in the Social Security system.
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Chapter 34: Money, Banking, and Financial Institutions
After reading this chapter, you should be able to:
- Identify and explain the functions of money and the components of the U.S. money supply.
- Describe what "backs" the money supply, making us willing to accept it as payment.
- Discuss the makeup of the Federal Reserve and the U.S. banking system.
- Identify the functions and responsibilities of the Federal Reserve.
- Identify and explain the main factors that contributed to the financial crisis of 2007–2008.
- Discuss the actions of the U.S. Treasury that helped keep the banking and financial crisis of 2007–2008 from worsening.
- Identify the main subsets of the financial services industry in the United States and provide examples of some firms in each category.
- Describe how banks create money in a "fractional reserve" banking system.
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Video: Monetary Policy (Solman video)
Video: Steering the Course (The Fed) (Solman video) Video: In Plain English | ||||||||
Chapter 36: Interest Rates and Monetary Policy
After reading this chapter, you should be able to:
- Discuss how the equilibrium interest rate is determined in the market for money.
- List and explain the goals and tools of monetary policy.
- Describe the mechanisms by which monetary policy affects GDP and the price level.
- Discuss the effectiveness of monetary policy and its shortcomings.
- Describe how the Fed has used monetary policy in recent years to promote macroeconomic stability.
Important Links:
Bankrate |
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International Trade and Exchange Rates
After completing this chapter, students should be able to:
1. Describe how international trade impacts our everyday lives.
2. Define trade deficit and trade surplus and describe the U.S. experience.
3. Compare the dollar value of U.S. exports and imports of goods and the dollar value of U.S. exports and imports of services.
4. List the major imports and exports of the United States.
5. Identify the United States’ most important trading partner.
6. Summarize the importance of international trade to the U.S. in terms of overall volume.
7. Describe the relative importance of U.S. exports of goods when compared to other industrialized countries and the position of the U.S. exports as a percentage of total world trade.
8. Explain the principles of comparative advantage, terms of trade, and gains from trade.
9. Compute, when given appropriate data, the relative costs of producing two commodities in two countries and determine which nation has the comparative advantage in each good.
10. Compute, when given appropriate data, the range for the terms of trade.
11. Calculate the potential gains from trade and specialization for each nation and the world when given appropriate data.
12. Graph and explain how foreign exchange rates are determined.
13. Explain what it means for a currency to appreciate or depreciate, and how a change in the international price of a currency can affect relative price levels and the exports and imports of a nation.
14. Explain how U.S. exports create a demand for dollars and a supply of foreign exchange; and how U.S. imports create a demand for foreign exchange and a supply of dollars.
15. Describe approximately how much the U.S. dollar is worth relative to other nations.
16. Identify at least four ways in which governments interfere with free trade among nations.
17. Describe the economic impact of tariffs, including both direct and indirect effects.
18. Describe the political reasons that influence governments to impose trade barriers.
19. List three arguments in favor of protectionist barriers, and critically evaluate each.
20. Summarize the Smoot-Hawley Tariff Act, including its effects on the economy.
21. Explain the purpose and function of trade adjustment assistance, as well as criticisms of it.
22. Describe offshoring and its effects on the trade position of the United States.
23. Describe the purposes of the GATT and the WTO and explain the criticisms of the WTO.
24. Identify the current round of WTO trade negotiations.
25. Explain what is meant by a trade bloc or a free-trade zone, and name two regional trade blocs.
26. Describe the United States’ recent experience with trade deficits, including the causes and implications of the deficits.
27. Define and identify terms and concepts listed at the end of the chapter.
1. Describe how international trade impacts our everyday lives.
2. Define trade deficit and trade surplus and describe the U.S. experience.
3. Compare the dollar value of U.S. exports and imports of goods and the dollar value of U.S. exports and imports of services.
4. List the major imports and exports of the United States.
5. Identify the United States’ most important trading partner.
6. Summarize the importance of international trade to the U.S. in terms of overall volume.
7. Describe the relative importance of U.S. exports of goods when compared to other industrialized countries and the position of the U.S. exports as a percentage of total world trade.
8. Explain the principles of comparative advantage, terms of trade, and gains from trade.
9. Compute, when given appropriate data, the relative costs of producing two commodities in two countries and determine which nation has the comparative advantage in each good.
10. Compute, when given appropriate data, the range for the terms of trade.
11. Calculate the potential gains from trade and specialization for each nation and the world when given appropriate data.
12. Graph and explain how foreign exchange rates are determined.
13. Explain what it means for a currency to appreciate or depreciate, and how a change in the international price of a currency can affect relative price levels and the exports and imports of a nation.
14. Explain how U.S. exports create a demand for dollars and a supply of foreign exchange; and how U.S. imports create a demand for foreign exchange and a supply of dollars.
15. Describe approximately how much the U.S. dollar is worth relative to other nations.
16. Identify at least four ways in which governments interfere with free trade among nations.
17. Describe the economic impact of tariffs, including both direct and indirect effects.
18. Describe the political reasons that influence governments to impose trade barriers.
19. List three arguments in favor of protectionist barriers, and critically evaluate each.
20. Summarize the Smoot-Hawley Tariff Act, including its effects on the economy.
21. Explain the purpose and function of trade adjustment assistance, as well as criticisms of it.
22. Describe offshoring and its effects on the trade position of the United States.
23. Describe the purposes of the GATT and the WTO and explain the criticisms of the WTO.
24. Identify the current round of WTO trade negotiations.
25. Explain what is meant by a trade bloc or a free-trade zone, and name two regional trade blocs.
26. Describe the United States’ recent experience with trade deficits, including the causes and implications of the deficits.
27. Define and identify terms and concepts listed at the end of the chapter.
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