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Chapter 1 Introduction to Economics1

1.1 Definitions of Economics2

1.1.1 Adam Smith4

1.1.2 Alfred Marshall5

1.1.3 John Maynard Keynes6

1.2 Ten Concepts of Economics7

1.2.1 Concept #1：Choice7

1.2.2 Concept #2：Opportunity Cost9

1.2.3 Concept #3：Marginal Analysis10

1.2.4 Concept #4：Incentive11

1.2.5 Concept #5：Trade14

1.2.6 Concept #6：Market16

1.2.7 Concept #7：Government17

1.2.8 Concept #8：Productivity20

1.2.9 Concept #9：Inflation21

1.2.10 Concept #10：Short-run vs.Long-run22

Key Concepts25

Questions for Review25

Supplementary Reading Nobel Prizes in Economics（1969—2000）26

Chapter 2 Economic Analysis Framework30

2.1 Microeconomics and Macroeconomics30

2.1.1 Microeconomics30

2.1.2 Macroeconomics31

2.2 Positive Economics and Normative Economics32

2.2.1 Positive Economics32

2.2.2 Normative Economics33

2.3 Goals of Economic Policy34

2.3.1 Economic Growth34

2.3.2 Full Employment44

2.4 Economic System46

2.4.1 Capitalism47

2.4.2 Socialism47

2.4.3 Mixed Economy48

2.4.4 Planned Economy49

2.4.5 Market Economy50

2.5 Economic Analysis51

2.5.1 General Equilibrium Analysis51

2.5.2 Partial Equilibrium Analysis57

Key Concepts61

Questions for Review61

Supplementary Reading New Method of Economic Analysis61

Chapter 3 Demand， Supply and Elasticity64

3.1 Demand64

3.1.1 Determinants of Demand64

3.1.2 Demand Curve66

3.1.3 Shifts in Demand Curve68

3.2 Supply70

3.2.1 Determinants of Supply70

3.2.2 Supply Curve71

3.2.3 Shifts in Supply Curve74

3.3 Market Equilibrium75

3.3.1 Equilibrium Price76

3.3.2 Changes in Equilibrium78

3.4 Elasticity82

3.4.1 Price Elasticity of Demand83

3.4.2 The Total Revenue88

3.4.3 Determinants of Demand Elasticity90

3.4.4 Other Demand Elasticity92

3.4.5 Price Elasticity of Supply92

3.4.6 Determinants of Price Elasticity of Supply95

Key Concepts96

Questions for Review96

Supplementary Reading How Does Policy Affect the Sale of Mooncakes？97

Chapter 4 Theory of the Consumer99

4.1 Utility99

4.1.1 Cardinal Utility and Marginal Utility Analysis99

4.1.2 The Rational Spending Rule103

4.1.3 The Income and Substitution Effects106

4.1.4 Ordinal Utility and Indifference Curve107

4.1.5 Budget Line Constraint109

4.1.6 Change of Consumer Choices110

4.2 Consumer Surplus114

4.3 Consumption in Uncertainty118

4.3.1 Uncertainty and Risk118

4.3.2 Expected Wealth and Its Utility119

4.3.3 Expected Utility120

4.3.4 Risk Attitude121

4.3.5 How to Reduce Risks？123

Key Concepts126

Questions for Review126

Supplementary Reading Paradox of Value127

Chapter 5 Theory of the Firm128

5.1 Production128

5.1.1 Factors of Production128

5.1.2 Types of Business129

5.2 Production Function130

5.2.1 Production Function with One Variable Factor131

5.2.2 Production Function with Two Variable Factors135

5.2.3 Equal-cost Line137

5.2.4 Optimal Production Point： Least-cost Tangency138

5.3 Costs of Production139

5.3.1 Opportunity Cost vs.Accounting Cost139

5.3.2 The Short-run Cost Function140

5.3.3 The Long-run Cost Curve143

5.4 Economies of Scale145

Key Concepts146

Questions for Review146

Supplementart Reading Huawei Technologies Co.，Ltd147

Chapter 6 Perfect Competition and Monopoly149

6.1 Perfect Competition149

6.1.1 Conditions of Perfect Competition149

6.1.2 Demand Curve in Perfect Competition Market150

6.1.3 Short-run Supply Curve in Perfect Competition Market151

6.1.4 Short-run Equilibrium of Perfect Competition Market152

6.1.5 Long-run Equilibrium of Perfect Competition Market153

6.2 Monopoly155

6.2.1 Characteristics of Monopoly155

6.2.2 Price Discrimination156

6.2.3 Short-run and Long-run Equilibriums in Monopoly160

6.2.4 Marginal Revenue and Elasticity of Demand in Monopoly163

6.2.5 Monopoly and Efficiency165

6.2.6 Monopoly Regulation168

Key Concepts171

Questions for Review172

Supplementart Reading Examples of Price Discrimination172

Chapter 7 Monopolistic Competition and Oligopoly174

7.1 The Monopolistic Competition Market174

7.1.1 Characteristics of Monopolistic Competition175

7.1.2 Short-run Equilibrium178

7.1.3 Long-run Equilibrium179

7.1.4 Efficiency Analysis181

7.1.5 Model of Product Differentiation182

7.2 Oligopoly184

7.2.1 Characteristics of Oligopoly185

7.2.2 Cournot Model and Stackelberg Model187

7.2.3 Bertrand Model and Sweezy Model189

7.2.4 Public Policy Toward Oligopolies191

Key Concepts192

Questions for Review192

Supplementart Reading The OPEC193

Chapter 8 Game Theory and Information Economics195

8.1 Game Theory195

8.1.1 Game Representation197

8.1.2 Types of Games199

8.2 Information Economics209

8.2.1 Adverse Selection210

8.2.2 Moral Hazard212

8.2.3 Signaling Model214

8.2.4 Screening216

8.3 Incentive Compatibility217

Key Concepts217

Questions for Review218

Supplementary Reading John Forbes Nash，Jr218

Chapter 9 National Income224

9.1 An Economy Producing Consumption Goods224

9.2 The Measurement of Gross Domestic Product226

9.3 GDP Components227

9.4 How Does the Government Measure GDP？229

9.5 Real GDP and Nominal GDP229

9.6 The GDP Deflator231

9.7 What Does GDP Not Measure？232

9.8 Shortcomings of GDP as a Measure of Total Production233

9.9 Limitations of GDP When Measuring Living Standards234

9.10 The Income Approach to GDP Calculation235

Key Concepts239

Questions for Review239

Supplementart Reading China Income， China National Income and Underground Economy240

Chapter 10 Inflation and Unemployment246

10.1 Inflation246

10.1.1 Consumer Price Index246

10.1.2 CPI Construction247

10.1.3 Inflation Rate Computation248

10.1.4 CPI and Other Measures249

10.1.5 Producer Price Index251

10.1.6 Inflation Adjustment251

10.1.7 Real vs.Nominal Interest Rates252

10.1.8 The Costs of Inflation254

10.2 Unemployment257

10.2.1 Measuring Unemployment257

10.2.2 Problems with Measuring the Unemployment Rate258

10.2.3 The Cost of Unemployment258

10.2.4 The Duration of Unemployment259

10.2.5 Types of Unemployment260

10.3 Inflation and Unemployment261

10.3.1 Theoretical Phillips Curve261

10.3.2 Empirical Evidence behind Tradeoff262

10.3.3 The Breakdown of the Phillips Curve262

10.3.4 Conclusion on Phillips Curve263

Key Concepts264

Questions for Review264

Supplementart Reading China’s Inflation And Youth Unemployment Problem265

Chapter 11 Economic Growth270

11.1 Harrod-Domar Model270

11.2 The Neoclassical Growth Model271

11.2.1 Steady State and Steady-state Equilibrium274

11.2.2 Implications of Solow Growth Model274

11.2.3 Capital Accumulation275

11.2.4 Population Growth277

11.2.5 Technological Progress278

11.2.6 Factors Other than Capital and Labor279

11.2.7 Empirical Evidence of Neoclassical Growth Model and Criticisms280

11.3 Endogenous or New Growth Model281

Key Concepts283

Questions for Review283

Supplementart Reading Understanding Economic Growth： Review Article of Why Economies Grow284

Chapter 12 Aggregate Demand and Supply288

12.1 Aggregate Demand and Supply288

12.1.1 Aggregate Demand288

12.1.2 Aggregate Supply289

12.1.3 Equilibrium of Aggregate Supply and Demand291

12.1.4 Shifts in Aggregate Supply292

12.1.5 Shifts in Aggregate Demand292

12.1.6 Shifts in Aggregate Supply and Demand294

12.2 The Goods Market and the IS Curve294

12.2.1 Consumption and Marginal Propensity to Consume294

12.2.2 Investment and the Investment Rate295

12.2.3 Equilibrium of Goods Market and the IS Curve295

12.2.4 The Slope of the IS Curve and the Multiplier296

12.2.5 The Economic Impact and Implementation of Fiscal Policy297

12.3 The Money Market and the LM Curve297

12.3.1 The Demand for Money297

12.3.2 The Supply of Money298

12.3.3 Money Market Equilibrium and the LM Curve298

12.3.4 The Economic Impact and Implementation of Monetary Policy300

12.4 The Short-run Equilibrium of Goods and Money Markets300

12.4.1 Shift on IS Curve and Fiscal Policy301

12.4.2 Shift on LM Curve and Monetary Policy302

12.5 Aggregate Supply Models303

12.5.1 Sticky-wage Model303

12.5.2 Worker-misperception Model304

12.5.3 Imperfect-information Model304

12.5.4 Sticky-price Model305

Key Concepts306

Questions for Review306

Supplementary Reading Monetary Policy and Exchange Rate Pass-through309

Chapter 13 Short-run Economic Fluctuations315

13.1 How Do the Short Run and Long Run Differ？315

13.2 Fiscal and Monetary Policy317

13.2.1 Fiscal Policy317

13.2.2 Monetary Policy321

13.3 The Fiscal-monetary Mix325

13.4 The Macroeconomic Policy Debate326

13.4.1 Uncertainty and Policy326

13.4.2 Expectation and Policy327

13.4.3 Self-stabilization and Policy327

Key Concepts329

Questions for Review329

Supplementary Reading China’s Monetary Policy329

Chapter 14 China in the World Economy333

14.1 China：before 1949333

14.2 China：1949—1978336

14.2.1 Great Leap Forward338

14.2.2 The Great Proletarian Cultural Revolution340

14.3 China： since 1978343

14.3.1 Reform in the Rural Sector343

14.3.2 Reform in the Urban Sector344

14.3.3 Foreign Direct Investment346

14.4 Problems and Prospect348

Key Concepts351

Questions for Review352

Supplementary Reading China’s Achilles Heel：A Comparison with America Reveals a Deep Flaw in China’s Model ofGrowth352

Chapter 15 International Economics358

15.1 International Trade358

15.1.1 Free Trade Development359

15.1.2 Trade Development with Government Intervention363

15.1.3 Trade War368

15.1.4 Trade Policy371

15.1.5 Trade Research373

15.2 Economic Integration376

15.2.1 Seven Stages of Economic Integration376

15.2.2 Reasons for Economic Integration377

15.2.3 Theory of Economic Integration378

15.3 International Finance380

15.3.1 Global Financial System380

15.3.2 International Monetary Systems381

15.3.3 Balance of Payments385

15.3.4 Exchange Rates386

15.3.5 Foreign Direct investment390

15.3.6 International Financial Stability391

15.4 Globalization392

Key Concepts394

Questions for Review394

Supplementary Reading A Brief History of RMB395

参考文献397