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Cover of Principles of Economics v4.0
August 2021
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ISBN (Digital): 

Principles of Economics

Version 4.0
By Libby Rittenberg, Alan Grant, and Timothy Tregarthen

Key Features

  • Over 90 hyperlinked videos, specifically chosen to capture students’ interest, counter the perception of economics as the “dismal science,” and reveal the deeper meanings of economic principles in memorable ways
  • The integrating theme for the microeconomics chapters is the marginal decision rule, a simple approach to choices that optimize the value of some objective. Instead of a hodgepodge of rules for different market conditions, the authors provide a commonly accepted foundational rule that can be applied within any market setting
  • The integrating theme for the macroeconomics chapters is the model of aggregate demand and aggregate supply. This model encourages learners to consider both short-run and long-run concepts in order to address a variety of policy issues and debates more efficiently
  • Every chapter begins with a brief Start Up scenario, a timely, real-world attention-getter that often puts students into a decision-making role. Examples include: Would you raise or lower public-transit fares to address rising costs? (Chapter 5); why is it so hard to find an inexpensive pair of eyeglasses (Chapter 11); and what’s the best strategy for becoming a millionaire (Chapter 23)
  • Seamlessly incorporates the lessons learned so far from the COVID-19 pandemic and the related recession
  • Relies heavily on real-world data to support the models presented, and not just where routinely expected (GDP, unemployment, inflation, etc.). For instance, in the macroeconomics portion of the book, the aggregate demand and aggregate supply chapter illustrates the remarkable correlation between consumer confidence and spending on durable goods over a 60-year time horizon (Figure 20.3); the microeconomics section of the book uses real-world data on longevity to determine the optimal duration of exercise
  • Supportive learning features include:
    • Start Up features are attention-getting real-world chapter-openers that vividly demonstrate the link between theory and reality, and are revisited throughout the chapter
    • Learning Objectives lead off every main section
    • Heads Up! notes warn of common errors and explain how to avoid making them
    • Key Takeaways in each section summarize content and link back to that section’s  Learning Objectives
    • Key Terms are boldfaced and defined in the margins
    • Pop! Goes the Econ features provide links to contemporary examples that connect with students. Engaging examples include “Perfect Substitutes (Books vs. Laptops)” (Section 3.2), “Forrest Gump and Monopoly Power” (Section 6.4), “Bart Simpson Starts a Bank Run,” (Section 22.3), and “Fiscal Policy in South Park” (Section 25.3)
    • Try It! problems are organized by main section. These problems encourage active learning and help students confirm they understand the material just covered. Each Try It! problem is linked to a similar end-of-chapter exercise
    • Case in Point scenarios are applications illustrating the influence of economic forces on real issues and real people such as “Getting Out of the Egg Business” (Section 5.3) or “Hold on Tight: Money Demand in the Coronavirus Crisis” (Section 23.4). Each Case in Point application is linked to an end-of-chapter problem
    • Summary pulls together the information presented in the chapter to enhance recall and facilitate test preparation
    • End-of-Chapter Concept Problems and Numerical Problems help students check understanding, promote discussion, and prompt learners to analyze and think critically about material just presented


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Principles of Economics is suitable for introductory economics courses usually called principles of economics, economics principles, introductory economics, or similar titles taught primarily at the undergraduate level at two- and four-year colleges and universities. The course may also be taught at the MBA level. This full-length volume encompasses both microeconomics and macroeconomics and would typically be used in a full-year sequence. Separate volumes titled Principles of Microeconomics and Principles of Macroeconomics are available for semester- or quarter-long courses.

This new version of Principles of Economics welcomes a third co-author, Alan Grant, who brings fresh, classroom-based insights that enliven the text and bring it fully up to date. The two core premises of this book remain constant, however: 

  1. Economics is a unified discipline and not a bewildering array of seemingly unrelated topics. As a result, Version 4.0 remains structured around key integrating themes of the marginal decision rule (microeconomics) and the model of aggregate demand and aggregate supply (macroeconomics).
  2. Basic economic principles are relevant to daily life and should be explained in everyday contexts. In this way, learners more readily perceive and understand the deeper meaning of core economic ideas. Engaging in-text applications and plentiful embedded video links are drawn from sports, politics, campus life, popular culture, and other familiar settings to illustrate the connections between theoretical principles and common experiences. 

Examples of the forward-looking perspective of Version 4.0 include new research on technological change and the wage gap, the impact of graduating college during an economic downturn, policies to reduce carbon emissions, and controversies surrounding the effectiveness of monetary and fiscal policy. This version also provides an up-to-date evaluation of the COVID-19 recession, including data-driven descriptions of the extraordinary policy response by the Federal Reserve and the government’s equally extraordinary fiscal response. There is also new discussion of the Chinese economy’s unprecedented economic growth and projections regarding the future pace of that growth. As in previous editions, there is an appropriate balance between current issues and historical context.

New in This Version

New in This Version:

  • Significantly reorganized and streamlined coverage:
    • The previous version’s coverage of interest rates and capital has been folded into Chapter 27 “Investment and Economic Activity.” Coverage of natural resources has been integrated into Chapter 15 “The Economics of the Environment and Natural Resources”
    • Labor market analysis is now presented  in a single chapter, Chapter 12 “Factor Markets”  
    • Coverage of basic antitrust is now included in Chapter 10 “Monopoly”
    • The macro section now begins with three chapters dedicated to three key components: output, inflation, and unemployment
    • The previous version’s extensive coverage of the Phillips curve has been streamlined and is now included in Chapter 24 “Monetary Policy and the Fed”
  • New or significantly reorganized chapters:
    • Chapter 17 “Introduction to the Macroeconomy: Measuring the Economy’s Output”
    • Chapter 18 “The Price Level and Inflation”
    • Chapter 19 “Unemployment”
    • Appendix B “The Solow Model of Economic Growth”
  • New or expanded sections on:
    • Taxes (Chapter 4)
    • Why elasticity matters (Chapter 5)
    • Asymmetric information and market failures in health care (Chapter 6)
    • Price discrimination (Chapter 11)
    • Partial equilibrium analysis of the gains from trade and the effects of tariffs (Chapter 14)
    • Fed’s new fourth tool of policy (Chapter 22)
    • In March 2022, a new write up on central banking was added via the "Regime Shift at the Fed" box (Section 22.4)
    • Functions of financial instruments (Chapter 23)
    • Solow Growth Model (Appendix B)
  • A total of 46 new or substantially revised Case in Point features that include:
    • The Opportunity Cost of COVID-19 (Chapter 1)
    • Is Beer a Normal Good? (Chapter 3)
    • Uber Finds the Market Equilibrium (Chapter 3)
    • The Topsy-Turvy World of 2020 Oil Prices (Chapter 4)
    • The Supply Elasticity of Toilet Paper and the Coronavirus Crisis of 2020 (Chapter 5)
    • Beating the Reaper: Exercise and the Production of Longevity (Chapter 8)
    • A Textbook Case of Market Power (Chapter 10)
    • Pro Sports Teams as Monopsonists (Chapter 12)
    • Thinking Outside the Box on Climate Change (Chapter 15)
    • Hidden Figures: GDP Surprises in the COVID Recession (Chapter 17)
    • Ay Caracas! Inflation, Venezuelan Style (Chapter 18)
    • Is Unemployment Insurance a Blessing or a Curse? (Chapter 19)
    • Tortoise and Hare: Will China Catch the United States? (Chapter 21)
    • Is Bitcoin Money? (Chapter 22)
    • Not-So-Great Financial Instruments Touch Off Great Recession (Chapter 23)
    • The Fed’s Job May Be Easing, but It Isn’t Easy (Chapter 24)
    • An Oprah Stimulus (Chapter 25)
    • Investment in a COVID Recovery (Chapter 27)
  • Substantially expanded, updated, upgraded illustration program featuring more use of color, such as
    • “A Demand Schedule and a Demand Curve” (Figure 3.1)
    • “An Increase in Demand” (Figure 3.2)
    • “Changes in Demand and Supply” (Figure 3.10)
    • “A Change in Expectations Affects the Price of Intel’s Corporate Stock” (Figure 4.8)
    • “Price Floors in Wheat Markets” (Figure 4.9)
    • “A Recessionary Gap” (Figure 20.14)
    • “An Inflationary Gap” (Figure 20.15)
    • “Expansionary Monetary Policy to Close a Recessionary Gap” (Figure 24.1)
  • Macroeconomics coverage draws more heavily on real-world data from the Federal Reserve Bank of St. Louis’s FRED database
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Instructor’s Manual

Instructor’s Manual

The Instructor’s Manual guides you through the main concepts of each chapter and important elements such as learning objectives, key terms, and key takeaways. Can include answers to chapter exercises, group activity suggestions, and discussion questions.

Instructor’s Manual

PowerPoint Lecture Notes

PowerPoint Lecture Notes

A PowerPoint presentation highlighting key learning objectives and the main concepts for each chapter are available for you to use in your classroom. You can either cut and paste sections or use the presentation as a whole.

PowerPoint Lecture Notes

Test Generator - powered by Cognero

Test Generator - powered by Cognero

FlatWorld has partnered with Cognero, a leading online assessment system, that allows you to create printable tests from FlatWorld provided content.

Test Bank Files for Import to Learning Management Systems

Test Bank Files for Import to Learning Management Systems

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Solutions Manual

Solutions Manual

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Solutions Manual

Test Item File

Test Item File

Need assistance in supplementing your quizzes and tests? Our test-item files (in Word format) contain many multiple-choice, fill-in-the-blank, and short-answer questions.

Sample Syllabi

Sample Syllabi

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Libby Rittenberg Colorado College

Libby Rittenberg (PhD Rutgers University) is Professor Emerita of Economics at Colorado College. She also served as the Dean of Summer Programs as well as the college’s ombudsperson. As a professor, she frequently taught Principles of Economics, Intermediate Macroeconomic Theory, Comparative Economic Systems, and a senior seminar on the International Political Economy. Throughout her academic career, Libby was deeply involved in study abroad education and directed programs in central Europe and Turkey. She was honored to have been a Fulbright Lecturer. Her research has focused on the internationally oriented areas of economics, with numerous articles on comparative and development economics, and a particular emphasis on the Turkish economy. 

Alan Grant Baker University

Alan Grant (PhD Kansas State University) is the Barbara and Charles A. Duboc University Professor at Baker University. Nationally recognized for teaching excellence, his research has been published in numerous professional journals and has been highlighted in The Wall Street Journal, Businessweek, The Economist, and The New York Times. Alan is the author or co-author of two FlatWorld titles: Economic Analysis of Social Issues and, with Libby Rittenberg and Timothy Tregarthen, Principles of Economics, including its two-volume version Principles of Macroeconomics and Principles of Microeconomics. Alan is also the co-author of the mass-market economics book, Seinfeld and Economics: Lessons on Everything from the Show about Nothing. He is currently writing a second mass-market economics book, Game Theory of Thrones.

Timothy Tregarthen University of Colorado Colorado Springs

Timothy Tregarthen (PhD University of California, Davis) is Professor Emeritus of Economics at the University of Colorado-Colorado Springs. There is one word that captures the essence of Tim Tregarthen—inspiring. Tim was first diagnosed with multiple sclerosis in 1975, yet, he continued a remarkable academic career of teaching and research which includes an autobiography recounting his experiences with multiple sclerosis titled Suffering, Faith, and Wildflowers. Tim was formerly on faculty at University of Colorado-Colorado Springs. 

Additions & Errata

4/6/23: Video in chapter 3.2 updated.


Section 7.5: 
In Concept Problem #14.6, the word “relatively” was added so that it now reads: "T/F: When Sheldon and Amy are maximizing their utility, Sheldon will be consuming relatively more ham than Amy, and Amy will be consuming more cheese than Sheldon."

Section 9.5:
In Numerical Problem #1, the word “graph” was changed to “table.”

Section 12.5:
In Numerical Problem #5, part “d” was removed because it asked for the same information that part “b” asked for.

Section 16.3: The subheading for “Tax and Transfer Policy” was fixed.

Section 17.2:
In “Case in Point: Hidden Figures—GDP Surprises in the COVID-19 Recession,” in the third paragraph, “nondurables” was corrected to “durables” in the following sentence: “Particularly telling was the behavior of consumer durables, which, after an initial decline, exploded to far beyond pre-pandemic levels.”

Section 17.4:
Learning objective #2 had the words “GNP or” removed so that it now reads: “Explain the use of per capita real GDP to compare economic performance across countries and discuss its limitations.”

Section 25.2:
Figure 25.7 and Figure 25.9 have been updated to show more context and some related stats were changed in the text.

Section 27.5:
The following was added for Numerical Problem #6: “Assume a 5% interest rate.”

Section 29.4:
Figure 29.10 title had the year corrected to “2020” so that it now reads: “M2 and Nominal GDP, 1980–2020.”


Section 19.3:
Fixed broken "Pop! Goes the Econ: Video Killed the Radio Star” link to:

Section 22.4:
Updated second bullet under Key Takeaways and added “Regime Shift at the Fed” box and attachment at the end of the chapter.


Section 11.2: Missing paragraph was added at the end of the "Case in Point: Craft Brewers—The Rebirth of a Monopolistically Competitive Industry" box.

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