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Copyright 2021 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
To Catherine, Nicholas, and Peter,
my other contributions to the next generation
Copyright 2021 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
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About
the Author
N. Gregory Mankiw is the Robert M. Beren Professor of
Economics at Harvard University. As a student, he stud-
ied economics at Princeton University and MIT. As a
teacher, he has taught macroeconomics, m
icroeconomics,
statistics, and principles of economics. He even spent
one summer long ago as a sailing instructor on Long
Beach Island.
Professor Mankiw is a prolific writer and a regular
participant in academic and policy debates. His work
has been published in scholarly journals, such as the
JORDI CABRÉ American Economic Review, Journal of Political Economy,
and Quarterly Journal of Economics, and in more popu-
lar forums, such as the New York Times and The Wall
Street Journal. He is also author of the best-selling
intermediate-level textbook Macroeconomics (Worth
Publishers).
In addition to his teaching, research, and writing,
Professor Mankiw has been a research associate of the
National Bureau of Economic Research, an adviser
to the Congressional Budget Office and the Federal
Reserve Banks of Boston and New York, a trustee of the
Urban Institute, and a member of the ETS test develop-
ment committee for the Advanced Placement exam in
economics. From 2003 to 2005, he served as chairman of
the President’s Council of Economic Advisers.
iv
Preface: To
the Instructor
D
uring my 20-year career as a student, the course that excited me most
was the two-semester sequence on the principles of economics that I took
during my freshman year in college. It is no exaggeration to say that it
changed my life.
I had grown up in a family that often discussed politics over the dinner table.
The pros and cons of various solutions to society’s problems generated fervent
debate. But in school, I had been drawn to the sciences. Whereas politics seemed
vague, rambling, and subjective, science was analytic, systematic, and objective.
While political debate continued without end, science made progress.
My freshman course on the principles of economics opened my eyes to a new
way of thinking. Economics combines the virtues of politics and science. It is, truly,
a social science. Its subject matter is society—how people choose to lead their lives
and how they interact with one another—but it approaches the subject with the
dispassion of a science. By bringing the methods of science to the questions of
politics, economics tries to make progress on the challenges that all societies face.
I was drawn to write this book in the hope that I could convey some of the
excitement about economics that I felt as a student in my first economics course.
Economics is a subject in which a little knowledge goes a long way. (The same
cannot be said, for instance, of the study of physics or the Chinese language.)
Economists have a unique way of viewing the world, much of which can be taught
in one or two semesters. My goal in this book is to transmit this way of thinking
to the widest possible audience and to convince readers that it illuminates much
about the world around them.
I believe that everyone should study the fundamental ideas that economics has
to offer. One purpose of general education is to inform people about the world and
thereby make them better citizens. The study of economics, as much as any disci-
pline, serves this goal. Writing an economics textbook is, therefore, a great honor
and a great responsibility. It is one way that economists can help promote better
government and a more prosperous future. As the great economist Paul Samuelson
put it, “I don’t care who writes a nation’s laws, or crafts its advanced treaties, if
I can write its economics textbooks.”
What’s New in the Ninth Edition?

Economics is fundamentally about understanding the world in which we live.
Most chapters of this book include Case Studies illustrating how the principles
of economics can be applied. In addition, In the News boxes offer excerpts from
newspapers, magazines, and online news sources showing how economic ideas
shed light on current issues facing society. After students finish their first course
in economics, they should think about news stories from a new perspective and
vi Preface: To the Instructor
with greater insight. To keep the study of economics fresh and relevant for each
new cohort of students, I update each edition of this text to keep pace with the
ever-changing world.
The new applications in this ninth edition are too numerous to list in their
entirety, but here is a sample of the topics covered (and the chapters in which they
appear):
• Technology companies are increasingly using economists to better run their

businesses. (Chapter 2)
• The hit Broadway show Hamilton has brought renewed attention to the issue
of ticket reselling. (Chapter 7)
• President Trump has taken a new and controversial approach to international
trade. (Chapter 9)
• A carbon tax and dividend plan has become a focal policy in the debate
about global climate change. (Chapter 10)
• Social media share many features, along with many of the problems,
associated with common resources. (Chapter 11)
• The Supreme Court hears a case about international price discrimination.
(Chapter 15)
• Amazon looks like it might be the next target for antitrust regulators.
(Chapter 17)
• The winners and losers from immigration have become a major issue in the
political debate. (Chapter 18)
• Research on tax data shows by how much the super-rich have gotten even
richer. (Chapter 20)
• Some economists suggest that, despite little change in the official poverty
rate, we are winning the war on poverty. (Chapter 20)
In addition to updating the book, I have refined its coverage and pedagogy with
input from many users of the previous edition. There are numerous changes, large
and small, aimed at making the book clearer and more student-friendly.
All the changes that I made, and the many others that I considered, were evalu-
ated in light of the benefits of brevity. Like most things that we study in economics,
a student’s time is a scarce resource. I always keep in mind a dictum from the great
novelist Robertson Davies: “One of the most important things about writing is to
boil it down and not bore the hell out of everybody.”
How Is This Book Organized?

The organization of this book was designed to make economics as student-friendly
as possible. What follows is a whirlwind tour of this text. The tour will, I hope, give
instructors some sense of how the pieces fit together.
Introductory Material
Chapter 1, “Ten Principles of Economics,” introduces students to the economist’s
view of the world. It previews some of the big ideas that recur throughout econom-
ics, such as opportunity cost, marginal decision making, the role of incentives, the
gains from trade, and the efficiency of market allocations. Throughout the book,
I refer regularly to the Ten Principles of Economics introduced in Chapter 1 to remind
students that these ideas are the foundation for all economics.
Preface: To the Instructor vii
Chapter 2, “Thinking Like an Economist,” examines how economists approach

their field of study. It discusses the role of assumptions in developing a theory and
introduces the concept of an economic model. It also explores the role of economists
in making policy. This chapter’s appendix offers a brief refresher course on how
graphs are used, as well as how they can be abused.
Chapter 3, “Interdependence and the Gains from Trade,” presents the theory
of comparative advantage. This theory explains why individuals trade with their
neighbors, as well as why nations trade with other nations. Much of economics is
about how market forces coordinate many individual production and consump-
tion decisions. As a starting point for this analysis, students see in this chapter why
specialization, interdependence, and trade can benefit everyone.
The Fundamental Tools of Supply and Demand

The next three chapters introduce the basic tools of supply and demand. Chapter 4,
“The Market Forces of Supply and Demand,” develops the supply curve, the
demand curve, and the notion of market equilibrium. Chapter 5, “Elasticity and
Its Application,” introduces the concept of elasticity and uses it to analyze events
in three different markets. Chapter 6, “Supply, Demand, and Government Policies,”
uses these tools to examine price controls, such as rent-control and minimum-wage
laws, and tax incidence.
Chapter 7, “Consumers, Producers, and the Efficiency of Markets,” extends the
analysis of supply and demand using the concepts of consumer surplus and pro-
ducer surplus. It begins by developing the link between consumers’ willingness
to pay and the demand curve and the link between producers’ costs of production
and the supply curve. It then shows that the market equilibrium maximizes the
sum of the producer and consumer surplus. Thus, students learn early about
the efficiency of market allocations.
The next two chapters apply the concepts of producer and consumer surplus to
questions of policy. Chapter 8, “Application: The Costs of Taxation,” shows why
taxation results in deadweight losses and what determines the size of those losses.
Chapter 9, “Application: International Trade,” considers who wins and who loses
from international trade and presents the debate over protectionist trade policies.
More Microeconomics
Having examined why market allocations are often desirable, the book then
considers how the government can sometimes improve on them. Chapter 10,
“Externalities,” explains how external effects such as pollution can render market
outcomes inefficient and discusses the possible public and private solutions to
those inefficiencies. Chapter 11, “Public Goods and Common Resources,” considers
the problems that arise when goods, such as national defense, have no market price.
Chapter 12, “The Design of the Tax System,” describes how the government raises
the revenue necessary to pay for public goods. It presents some institutional back-
ground about the U.S. tax system and then discusses how the goals of efficiency
and equity come into play when designing a tax system.
The next five chapters examine firm behavior and industrial organization.
Chapter 13, “The Costs of Production,” discusses what to include in a firm’s costs,
and it introduces cost curves. Chapter 14, “Firms in Competitive Markets,” ana-
lyzes the behavior of price-taking firms and derives the market supply curve.
Chapter 15, “Monopoly,” discusses the behavior of a firm that is the sole seller in
its market. It examines the inefficiency of monopoly pricing, the possible policy
viii Preface: To the Instructor
responses, and the attempts by monopolies to price discriminate. Chapter 16,

“Monopolistic Competition,” looks at behavior in a market in which many sellers
offer similar but differentiated products. It also discusses the debate over the effects
of advertising. Chapter 17, “Oligopoly,” covers markets in which there are only
a few sellers, using the prisoners’ dilemma as the model for examining strategic
interaction.
The next three chapters present issues related to labor markets. Chapter 18, “The
Markets for the Factors of Production,” emphasizes the link between factor prices
and marginal productivity. Chapter 19, “Earnings and Discrimination,” discusses
the determinants of equilibrium wages, including compensating differentials,
human capital, and discrimination. Chapter 20, “Income Inequality and Poverty,”
examines the degree of inequality in U.S. society, alternative views about the gov-
ernment’s role in changing the distribution of income, and various policies aimed
at helping society’s poorest members.
The next two chapters present optional material. Chapter 21, “The Theory of
Consumer Choice,” analyzes individual decision making using budget constraints
and indifference curves. Chapter 22, “Frontiers of Microeconomics,” introduces
the topics of asymmetric information, political economy, and behavioral econom-
ics. Some instructors may skip all or some of this material, but these chapters are
useful in motivating and preparing students for future courses in microeconomics.
Instructors who cover these topics may assign these chapters earlier than they are
presented in the book, and I have written them to facilitate this flexibility.
Learning Tools
The purpose of this book is to help students learn the fundamental lessons of eco-
nomics and to show how they can apply these lessons to their lives and the world
in which they live. Toward that end, I have used various learning tools that recur
throughout the book.
Case Studies
Economic theory is useful and interesting only if it can be applied to understanding
actual events and policies. This book, therefore, contains numerous case studies
that apply the theory that has just been developed.
In the News Boxes

One benefit that students gain from studying economics is a new perspective and
greater understanding about news from around the world. To highlight this ben-
efit, I have included excerpts from many newspaper and magazine articles, some
of which are opinion columns written by prominent economists. These articles,
together with my brief introductions, show how basic economic theory can be
applied. Most of these boxes are new to this edition. And for the first time in this
edition, each news article ends with “Questions to Discuss,” which can be used to
start a dialogue in the classroom.
FYI Boxes
These boxes provide additional material “for your information.” Some of them
offer a glimpse into the history of economic thought. Others clarify technical issues.
Still others discuss supplementary topics that instructors might choose either to
discuss or skip in their lectures.
Preface: To the Instructor ix
Ask the Experts Boxes

This feature summarizes results from the IGM Economics Experts Panel, an
ongoing survey of several dozen prominent economists. Every few weeks,
these experts are offered a statement and then asked whether they agree with
it, disagree with it, or are uncertain about it. The survey results appear in the
chapters near the coverage of the relevant topic. They give students a sense of
when economists are united, when they are divided, and when they just don’t
know what to think.
Definitions of Key Concepts

When key concepts are introduced in the chapter, they are presented in bold type-
face. In addition, their definitions are placed in the margins. This treatment should
aid students in learning and reviewing the material.
Quick Quizzes
After each major section in a chapter, students are offered a brief multiple-choice
Quick Quiz to check their comprehension of what they have just learned. If stu-
dents cannot readily answer these quizzes, they should stop and review material
before continuing. The answers to all Quick Quizzes are available at the end of
each chapter.
Chapter in a Nutshell
Each chapter concludes with a brief summary that reminds students of the most
important lessons that they have learned. Later in their study, it offers an efficient
way to review for exams.
List of Key Concepts

A list of key concepts at the end of each chapter offers students a way to test their
understanding of the new terms that have been introduced. Page references are
included so that students can review the terms they do not understand.
Questions for Review

Located at the end of each chapter, questions for review cover the chapter’s pri-
mary lessons. Students can use these questions to check their comprehension and
prepare for exams.
Problems and Applications

Each chapter also contains a variety of problems and applications asking students
to apply the material that they have learned. Some instructors may use these ques-
tions for homework assignments. Others may use them as a starting point for class-
room discussions.
Alternative Versions of the Book

The book you are now holding is one of five versions of this text that are available
for introducing students to economics. Cengage and I offer this menu of books
because instructors differ in how much time they have and what topics they choose
to cover. Here is a brief description of each:
x Preface: To the Instructor
• Principles of Economics. This complete version of the book contains all

36 chapters. It is designed for two-semester introductory courses that cover
both microeconomics and macroeconomics.
• Principles of Microeconomics. This version contains 22 chapters and is designed
for one-semester courses in introductory microeconomics.
• Principles of Macroeconomics. This version contains 23 chapters and is
designed for one-semester courses in introductory macroeconomics. It con-
tains a full development of the theory of supply and demand.
• Brief Principles of Macroeconomics. This shortened macro version of 18 chapters
contains only one chapter on the basics of supply and demand. It is designed
for instructors who want to jump to the core topics of macroeconomics more
quickly.
• Essentials of Economics. This version of the book contains 24 chapters. It is
designed for one-semester survey courses that cover the basics of both micro-
economics and macroeconomics.
The accompanying table shows precisely which chapters are included in each book.
Instructors who want more information about these alternative versions should
contact their local Cengage representative.
Preface: To the Instructor xi
TABLE 1
The Five Versions of This Book
Brief
Principles of Principles of Principles of Essentials of
Principles of Economics Microeconomics Macroeconomics Macroeconomics Economics
1 Ten Principles of Economics X X X X
2 Thinking Like an Economist X X X X
3 Interdependence and the Gains from Trade X X X X
4 The Market Forces of Supply and Demand X X X X
5 Elasticity and Its Application X X X
6 Supply, Demand, and Government Policies X X X
7 Consumers, Producers, and the Efficiency of X X X
Markets
8 Application: The Costs of Taxation X X X
9 Application: International Trade X X X
10 Externalities X X
11 Public Goods and Common Resources X X
12 The Design of the Tax System X
13 The Costs of Production X X
14 Firms in Competitive Markets X X
15 Monopoly X X
16 Monopolistic Competition X
17 Oligopoly X
18 The Markets for the Factors of Production X
19 Earnings and Discrimination X
20 Income Inequality and Poverty X
21 The Theory of Consumer Choice X
22 Frontiers of Microeconomics X
23 Measuring a Nation’s Income X X X
24 Measuring the Cost of Living X X X
25 Production and Growth X X X
26 Saving, Investment, and the Financial System X X X
27 The Basic Tools of Finance X X X
28 Unemployment X X X
29 The Monetary System X X X
30 Money Growth and Inflation X X X
31 Open-Economy Macroeconomics: Basic Concepts X X
32 A Macroeconomic Theory of the Open Economy X X
33 Aggregate Demand and Aggregate Supply X X X
34 The Influence of Monetary and Fiscal Policy on X X X
Aggregate Demand
35 The Short-Run Trade-Off between Inflation and X X
Unemployment
36 Six Debates over Macroeconomic Policy X X
xii Preface: To the Instructor
Supplements
Cengage offers various supplements for instructors and students who use this
book. These resources make teaching the principles of economics easy for the
instructor and learning them easy for the student. David R. Hakes of the University
of Northern Iowa, a dedicated teacher and economist, supervised the development
of the supplements for this edition. A complete list of available supplements
follows this Preface.
Modules
I have written four modules, or mini-chapters, with optional material that instruc-
tors can include in their courses. For instructors using the digital version of the
book, these modules can be added with a few mouse clicks. As of now, there are
modules on The Economics of Healthcare, The European Union, The Keynesian
Cross, and How Economists Use Data. I expect to add more modules to the library
available to instructors in the years to come.
Translations and Adaptations

I am delighted that versions of this book are (or will soon be) available in many of
the world’s languages. Currently scheduled translations include Azeri, Chinese (in
both standard and simplified characters), Croatian, Czech, Dutch, French, Georgian,
German, Greek, Indonesian, Italian, Japanese, Korean, Macedonian, Montenegrin,
Portuguese, Romanian, Russian, Serbian, and Spanish. In addition, adaptations of
the book for Australian, Canadian, European, and New Zealand students are also
available. Instructors who would like more information about these books should
contact Cengage.
Acknowledgments
In writing this book, I benefited from the input of many talented people. Indeed, the
list of people who have contributed to this project is so long, and their contributions
so valuable, that it seems an injustice that only a single name appears on the cover.
Let me begin with my colleagues in the economics profession. The many editions
of this text and its supplemental materials have benefited enormously from their
input. In reviews and surveys, they have offered suggestions, identified challenges,
and shared ideas from their own classroom experience. I am indebted to them for
the perspectives they have brought to the text. Unfortunately, the list has become
too long to thank those who contributed to previous editions, even though students
reading the current edition are still benefiting from their insights.
Most important in this process has been David Hakes (University of Northern
Iowa). David has served as a reliable sounding board for ideas and a hardworking
partner with me in putting together the superb package of supplements. I am also
grateful to Stephanie Thomas (Cornell University), who helped in the planning
process for this new edition.
Preface: To the Instructor xiii
The following reviewers of the eighth edition provided suggestions for refining
the content, organization, and approach in the ninth.
Anil Aba, University of Utah Miren Ivankovic, Anderson Scott Niederjohn, Lakeland
Mark Abajian, San Diego Mesa University University
College Justin Jarvis, Truman State Carla Nietfeld, Francis Marion
Dorian Abreu, Hunter College University University
Goncalo Alves Pina, Santa Clara Aaron Johnson, Albany State John Nyhoff, Oakton Community
University University College
Bob Barnes, Loyola University Bonnie Johnson, Wayne State Andrew Paizis, New York
Chicago University University
James Bathgate, Western Nevada Rutherford Johnson, University of Jason Patalinghug,
College Minnesota Crookston Southern Connecticut State
Nicole Bissessar, Southern New Venoo Kakar, San Francisco State University
Hampshire University University Jodi Pelkowski, Wichita State
Joseph Brignone, Brigham Young Jennifer Klein, University of University
University Colorado Boulder Sougata Poddar, Chapman
William Byrd, Troy University Audrey Kline, University of University
Samantha Cakir, Macalester College Louisville Lana Podolak, Community College
John Carter, Modesto Junior College Fred Kolb, University of of Beaver County
Avik Chakrabarti, University of Wisconsin–Eau Claire Gyan Pradhan, Eastern Kentucky
Wisconsin–Milwaukee Janet Koscianski, Shippensburg University
Yong Chao, University of Louisville University Elena Prado, San Diego State
David Chaplin, Northwest Mikhail Kouliavtsev, University
Nazarene University Stephen F. Austin State John Reardon, Hamline
Mitch Charkiewicz, Central University University
Connecticut State University Nakul Kumar, Bloomsburg Ty Robbins, Manchester
LaPorchia Collins, Tulane University University
University Jim Leggette, Belhaven University Jason Rudbeck, University of
Andrew Crawley, University of David Lewis, Oregon State Georgia
Maine University Anthony Scardino, Felician
Maria DaCosta, University of Hank Lewis, Houston Community University
Wisconsin–Eau Claire College Helen Schneider, University of
Dennis Debrecht, Carroll Yan Li, University of Texas at Austin
University Wisconsin–Eau Claire Alex Shiu, McLennan Community
Amrita Dhar, University of Mary Zhen Li, Albion College College
Washington Dan Marburger, Arizona State Harmeet Singh, Texas A&M
Lynne Elkes, Loyola University University University–Kingsville
Maryland Jim McGibany, Marquette Catherine Skura, Sandhills
Elena Ermolenko, Oakton University Community College
Community College Steven McMullen, Hope College Gordon Smith, Anderson
Sarah Estelle, Hope College Meghan Mihal, St. Thomas University
John Flanders, Central Methodist Aquinas College Nathan Smith, University of
University Martin Milkman, Murray State Hartford
Gary Gray, Umpqua Community University Mario Solis-Garcia, Macalester
College Soonhong Min, University at College
Jessica Hennessey, Furman Albany Arjun Sondhi, Wayne State
University Phillip Mixon, Troy University University
Alexander Hill, Arizona State Chau Nguyen, Mesa Community Derek Stimel, University of
University College California, Davis
xiv Preface: To the Instructor
Paul Stock, University of Mary Phillip Tussing, Houston Jim Wollscheid, University of
Hardin Baylor Community College Arkansas–Fort Smith
Yang Su, University of William Walsh, University of Doyoun Won, University
Washington Alabama of Utah
Anna Terzyan, Loyola Marymount Beth Wheaton, Southern Methodist Kelvin Wong, Arizona State
University University University
Elsy Thomas, Bowling Green State Oxana Wieland, University of Fan Yang, University of
University Minnesota Crookston Washington
Kathryn Thwaites, Sandhills Christopher Wimer, Heidelberg Ying Yang, University of Rhode
Community College University Island
The team of editors who worked on this book improved it tremendously.

Jane Tufts, developmental editor, provided truly spectacular editing—as she always
does. Jason Fremder, economics Product Director, and Christopher Rader, Product
Manager, did a splendid job of overseeing the many people involved in such a
large project. Sarah Keeling, Senior Learning Designer, was crucial in assembling an
extensive and thoughtful group of reviewers to give me feedback on the previous
edition and shape up the new edition. Anita Verma, Senior Content Manager, was
crucial in putting together an excellent team to revise the supplements and with
Beth Asselin and Phil Scott, project managers at SPi Global, had the patience and
dedication necessary to turn my manuscript into this book. Bethany Bourgeois,
Senior Designer, gave this book its clean, friendly look. Irwin Zucker, copyeditor,
refined my prose, and Val Colligo, indexer, prepared a careful and thorough index.
John Carey, Executive Marketing Manager, worked long hours getting the word out
to potential users of this book. The rest of the Cengage team has, as always, been
consistently professional, enthusiastic, and dedicated.
We have a top team of veterans who have worked across multiple editions
producing the supplements that accompany this book. Working with those
at Cengage, the following have been relentless in making sure that the suite
of ancillary materials is unmatched in both quantity and quality. No other text
comes close.
PowerPoint: Andreea Chiritescu (Eastern Illinois University)
Test Bank: Shannon Aucoin, Eugenia Belova, Ethan Crist, Kasie Jean, and Brian
Rodriguez (in-house Subject Matter Experts)
Instructor manual: David Hakes (University of Northern Iowa)
I am grateful also to Rohan Shah and Rohit Goyal, two star undergraduates at
Harvard and Yale, respectively, who helped me refine the manuscript and check
the page proofs for this edition.
As always, I must thank my “in-house” editor Deborah Mankiw. As the first
reader of most things I write, she continued to offer just the right mix of criticism
and encouragement.
Finally, I should mention my three children Catherine, Nicholas, and Peter. Their
contribution to this book was putting up with a father spending too many hours
in his study. The four of us have much in common—not least of which is our love
of ice cream (which becomes apparent in Chapter 4).
N. Gregory Mankiw
May 2019
Brief Contents
PART I Introduction 1 PART V F
irm Behavior and the Organization of
1 Ten Principles of Economics 1 Industry 243
2 Thinking Like an Economist 17 13 The Costs of Production 243
3 Interdependence and the Gains from Trade 45 14 Firms in Competitive Markets 263
15 Monopoly 287
16 Monopolistic Competition 317
PART II How Markets Work 61 17 Oligopoly 335
4 The Market Forces of Supply and Demand 61
5 Elasticity and Its Application 87
6 Supply, Demand, and Government Policies 109 PART VI The Economics of Labor Markets 357
18 The Markets for the Factors of
Production 357
PART III Markets and Welfare 131 19 Earnings and Discrimination 379
7 Consumers, Producers, and the Efficiency of 20 Income Inequality and Poverty 397
Markets 131
8 Application: The Costs of Taxation 151
9 Application: International Trade 167 PART VII Topics for Further Study 419
21 The Theory of Consumer Choice 419
22 Frontiers of Microeconomics 447
PART IV The Economics of the Public Sector 187
10 Externalities 187
11 Public Goods and Common Resources 209
12 The Design of the Tax System 225
xv
Contents
Preface: To the Instructor v 2-1d Our First Model: The Circular-Flow Diagram 20
2-1e Our Second Model: The Production Possibilities
Preface: To the Student xxiii
Frontier 21
2-1f Microeconomics and Macroeconomics 24
2-2 The Economist as Policy Adviser 25
PART I Introduction 1 2-2a Positive versus Normative Analysis 25
IN THE NEWS: Why Tech Companies Hire Economists 26
CHAPTER 1 2-2b Economists in Washington 27
2-2c Why Economists’ Advice Is Not Always Followed 28
Ten Principles of Economics 1 2-3 Why Economists Disagree 29
1-1 How People Make Decisions 2 2-3a Differences in Scientific Judgments 29
1-1a Principle 1: People Face Trade-Offs 2 2-3b Differences in Values 30
1-1b Principle 2: The Cost of Something Is What You Give 2-3c Perception versus Reality 30
Up to Get It 3 ASK THE EXPERTS: Ticket Resale 32
1-1c Principle 3: Rational People Think at the Margin 4 2-4 Let’s Get Going 32
1-1d Principle 4: People Respond to Incentives 5 Chapter in a Nutshell 33
1-2 How People Interact 6 Key Concepts 33
1-2a Principle 5: Trade Can Make Everyone Better Off 7 Questions for Review 33
1-2b Principle 6: Markets Are Usually a Good Way to Problems and Applications 34
Organize Economic Activity 7 Quick Quiz Answers 34
FYI: Adam Smith and the Invisible Hand 8
APPENDIX Graphing: A Brief Review 35
CASE STUDY: Adam Smith Would Have Loved Uber 9
Graphs of a Single Variable 35
1-2c Principle 7: Governments Can Sometimes Improve
Graphs of Two Variables: The Coordinate System 36
Market Outcomes 9
Curves in the Coordinate System 37
1-3 How the Economy as a Whole Works 11 Slope 39
1-3a Principle 8: A Country’s Standard of Living Depends Cause and Effect 41
on Its Ability to Produce Goods and Services 11
1-3b Principle 9: Prices Rise When the Government Prints
Too Much Money 11 CHAPTER 3
1-3c Principle 10: Society Faces a Short-Run Trade-Off
between Inflation and Unemployment 12
Interdependence and the Gains
1-4 Conclusion 13
from Trade 45
Chapter in a Nutshell 14 3-1 A Parable for the Modern Economy 46
Key Concepts 14 3-1a Production Possibilities 46
Questions for Review 14 3-1b Specialization and Trade 48
Problems and Applications 14 3-2 Comparative Advantage: The Driving Force of
Quick Quiz Answers 15 Specialization 50
3-2a Absolute Advantage 50
CHAPTER 2 3-2b Opportunity Cost and Comparative Advantage 50
3-2c Comparative Advantage and Trade 52
Thinking Like an Economist 17 3-2d The Price of the Trade 52
FYI: The Legacy of Adam Smith and David Ricardo 53
2-1 The Economist as Scientist 18
2-1a The Scientific Method: Observation, Theory, and 3-3 Applications of Comparative Advantage 54
More Observation 18 3-3a Should LeBron James Mow His Own Lawn? 54
2-1b The Role of Assumptions 19 3-3b Should the United States Trade with Other
2-1c Economic Models 19 Countries? 54
xvi
CONTENTS xvii
3-4 Conclusion 55 FYI: A Few Elasticities from the Real World 91

ASK THE EXPERTS: Trade between China and the 5-1e Total Revenue and the Price Elasticity of Demand 93
United States 55 5-1f Elasticity and Total Revenue along a Linear
IN THE NEWS: Economics within a Marriage 56 Demand Curve 94
Chapter in a Nutshell 56 5-1g Other Demand Elasticities 96
Key Concepts 57 5-2 The Elasticity of Supply 97
Questions for Review 57 5-2a The Price Elasticity of Supply and
Problems and Applications 58 Its Determinants 97
Quick Quiz Answers 59 5-2b Computing the Price Elasticity of Supply 98
5-2c The Variety of Supply Curves 98
5-3 Three Applications of Supply, Demand, and Elasticity 100
PART II How Markets Work 61 5-3a Can Good News for Farming Be Bad News
for Farmers? 101
CHAPTER 4 5-3b Why Did OPEC Fail to Keep the Price
of Oil High? 103
The Market Forces of Supply 5-3c Does Drug Interdiction Increase or Decrease
Drug-Related Crime? 104
and Demand 61
5-4 Conclusion 106
4-1 Markets and Competition 62 Chapter in a Nutshell 106
4-1a What Is a Market? 62
Key Concepts 107
4-1b What Is Competition? 62
Questions for Review 107
4-2 Demand 63 Problems and Applications 107
4-2a The Demand Curve: The Relationship between Quick Quiz Answers 108
Price and Quantity Demanded 63
4-2b Market Demand versus Individual Demand 64
4-2c Shifts in the Demand Curve 65 CHAPTER 6
CASE STUDY: Two Ways to Reduce Smoking 68
4-3 Supply 69
Supply, Demand, and Government
4-3a The Supply Curve: The Relationship between Policies 109
Price and Quantity Supplied 69 6-1 Controls on Prices 110
4-3b Market Supply versus Individual Supply 70 6-1a How Price Ceilings Affect Market Outcomes 110
4-3c Shifts in the Supply Curve 71 CASE STUDY: Lines at the Gas Pump 112
4-4 Supply and Demand Together 73 CASE STUDY: Rent Control in the Short Run and
4-4a Equilibrium 73 the Long Run 113
4-4b Three Steps to Analyzing Changes in Equilibrium 75 ASK THE EXPERTS: Rent Control 114
IN THE NEWS: Price Increases after Disasters 80 6-1b How Price Floors Affect Market Outcomes 114
CASE STUDY: The Minimum Wage 116
4-5 Conclusion: How Prices Allocate Resources 81
ASK THE EXPERTS: The Minimum Wage 117
ASK THE EXPERTS: Price Gouging 82
6-1c Evaluating Price Controls 118
Chapter in a Nutshell 82
6-2 Taxes 119
Key Concepts 83
6-2a How Taxes on Sellers Affect Market Outcomes 119
Questions for Review 83 IN THE NEWS: Should the Minimum Wage
Problems and Applications 84 Be $15 an Hour? 120
Quick Quiz Answers 85 6-2b How Taxes on Buyers Affect Market Outcomes 122
CASE STUDY: Can Congress Distribute the Burden of a
CHAPTER 5 Payroll Tax? 124
6-2c Elasticity and Tax Incidence 125
Elasticity and Its Application 87 CASE STUDY: Who Pays the Luxury Tax? 126
5-1 The Elasticity of Demand 88 6-3 Conclusion 127
5-1a The Price Elasticity of Demand and Its Determinants 88 Chapter in a Nutshell 127
5-1b Computing the Price Elasticity of Demand 89 Key Concepts 128
5-1c The Midpoint Method: A Better Way to Calculate Questions for Review 128
Percentage Changes and Elasticities 90 Problems and Applications 128
5-1d The Variety of Demand Curves 91 Quick Quiz Answers 130
xviii CONTENTS
PART III M
arkets and CHAPTER 9
Welfare 131 Application: International Trade 167
9-1 The Determinants of Trade 168
CHAPTER 7 9-1a The Equilibrium without Trade 168
9-1b The World Price and Comparative Advantage 169
Consumers, Producers, and the
9-2 The Winners and Losers from Trade 170
Efficiency of Markets 131 9-2a The Gains and Losses of an Exporting Country 170
7-1 Consumer Surplus 132 9-2b The Gains and Losses of an Importing Country 171
7-1a Willingness to Pay 132 9-2c The Effects of a Tariff 173
7-1b Using the Demand Curve to Measure FYI: Import Quotas: Another Way to Restrict Trade 175
Consumer Surplus 133 9-2d The Lessons for Trade Policy 175
7-1c How a Lower Price Raises Consumer Surplus 134 9-2e Other Benefits of International Trade 176
7-1d What Does Consumer Surplus Measure? 135 IN THE NEWS: Trade as a Tool for Economic
Development 178
7-2 Producer Surplus 137
7-2a Cost and the Willingness to Sell 137 9-3 The Arguments for Restricting Trade 178
7-2b Using the Supply Curve to Measure Producer 9-3a The Jobs Argument 178
Surplus 138 9-3b The National-Security Argument 179
7-2c How a Higher Price Raises Producer Surplus 140 9-3c The Infant-Industry Argument 180
9-3d The Unfair-Competition Argument 180
7-3 Market Efficiency 141
9-3e The Protection-as-a-Bargaining-Chip Argument 180
7-3a The Benevolent Social Planner 141
CASE STUDY: Trade Agreements and the World Trade
7-3b Evaluating the Market Equilibrium 142
Organization 181
CASE STUDY: Should There Be a Market
ASK THE EXPERTS: Tariffs and Trade Deals 181
for Organs? 145
IN THE NEWS: The Trade Policies of
ASK THE EXPERTS: Supplying Kidneys 145
President Trump 182
IN THE NEWS: How Ticket Resellers Help Allocate
Scarce Resources 146 9-4 Conclusion 183
7-4 Conclusion: Market Efficiency and Market Failure 147
Key Concepts 184
Key Concepts 148
Problems and Applications 185
Quick Quiz Answers 186
CHAPTER 8
PART IV T
he Economics of the
Application: The Costs of Taxation 151
Public Sector 187
8-1 The Deadweight Loss of Taxation 152
CHAPTER 10
8-1a How a Tax Affects Market Participants 152
8-1b Deadweight Losses and the Gains from Trade 155
Externalities 187
8-2 The Determinants of the Deadweight Loss 157 10-1 Externalities and Market Inefficiency 189
CASE STUDY: The Deadweight Loss Debate 158 10-1a Welfare Economics: A Recap 189
10-1b Negative Externalities 190
8-3 Deadweight Loss and Tax Revenue as Taxes Vary 160 10-1c Positive Externalities 191
CASE STUDY: The Laffer Curve and Supply-Side CASE STUDY: Technology Spillovers, Industrial Policy,
Economics 161 and Patent Protection 192
ASK THE EXPERTS: The Laffer Curve 162
10-2 Public Policies toward Externalities 193
8-4 Conclusion 163 10-2a Command-and-Control Policies: Regulation 193
Chapter in a Nutshell 163 ASK THE EXPERTS: Vaccines 194
Key Concept 164 10-2b Market-Based Policy 1: Corrective Taxes
Questions for Review 164 and Subsidies 194
Problems and Applications 164 CASE STUDY: Why Is Gasoline Taxed So Heavily? 195
Quick Quiz Answers 165 10-2c Market-Based Policy 2: Tradable Pollution Permits 197
CONTENTS xix
IN THE NEWS: What Should We Do about 12-2c Marginal Tax Rates versus Average Tax Rates 233
Climate Change? 198 12-2d Lump-Sum Taxes 233
ASK THE EXPERTS: Carbon Taxes 200 ASK THE EXPERTS: Top Marginal Tax Rates 233
10-2d Objections to the Economic Analysis
12-3 Taxes and Equity 234
of Pollution 200
12-3a The Benefits Principle 235
10-3 Private Solutions to Externalities 201 12-3b The Ability-to-Pay Principle 235
10-3a The Types of Private Solutions 201 CASE STUDY: How the Tax Burden Is Distributed 236
10-3b The Coase Theorem 202 12-3c Tax Incidence and Tax Equity 238
10-3c Why Private Solutions Do Not Always Work 203 CASE STUDY: Who Pays the Corporate
IN THE NEWS: The Coase Theorem in Action 204 Income Tax? 238
10-4 Conclusion 204 12-4 Conclusion: The Trade-Off between Equity
Chapter in a Nutshell 205 and Efficiency 239
Key Concepts 206 Chapter in a Nutshell 240
Questions for Review 206 Key Concepts 240
Problems and Applications 206 Questions for Review 240
Quick Quiz Answers 207 Problems and Applications 241
CHAPTER 11
Public Goods and Common
Resources 209 PART V F
irm Behavior and
11-1 The Different Kinds of Goods 210
the Organization of
11-2 Public Goods 212 Industry 243
11-2a The Free-Rider Problem 212
11-2b Some Important Public Goods 213 CHAPTER 13
CASE STUDY: Are Lighthouses Public Goods? 214
11-2c The Difficult Job of Cost–Benefit Analysis 215 The Costs of Production 243
CASE STUDY: How Much Is a Life Worth? 215 13-1 What Are Costs? 244
11-3 Common Resources 217 13-1a Total Revenue, Total Cost, and Profit 244
11-3a The Tragedy of the Commons 217 13-1b Costs as Opportunity Costs 244
11-3b Some Important Common Resources 218 13-1c The Cost of Capital as an Opportunity Cost 245
ASK THE EXPERTS: Congestion Pricing 218 13-1d Economic Profit versus Accounting Profit 246
CASE STUDY: Why the Cow Is Not Extinct 219
13-2 Production and Costs 247
IN THE NEWS: Social Media as a Common Resource 220
13-2a The Production Function 247
11-4 Conclusion: The Importance of Property Rights 221 13-2b From the Production Function to the
Chapter in a Nutshell 222 Total-Cost Curve 249
Key Concepts 222
13-3 The Various Measures of Cost 250
13-3a Fixed and Variable Costs 251
Problems and Applications 223 13-3b Average and Marginal Cost 251
Quick Quiz Answers 224 13-3c Cost Curves and Their Shapes 252
13-3d Typical Cost Curves 254
CHAPTER 12 13-4 Costs in the Short Run and in the Long Run 256
13-4a The Relationship between Short-Run and Long-Run
The Design of the Tax System 225 Average Total Cost 256
12-1 An Overview of U.S. Taxation 226 13-4b Economies and Diseconomies of Scale 257
12-1a Taxes Collected by the Federal Government 227 FYI: Lessons from a Pin Factory 258
12-1b Taxes Collected by State and Local Governments 229 13-5 Conclusion 258
12-2 Taxes and Efficiency 230 Chapter in a Nutshell 259
12-2a Deadweight Losses 231 Key Concepts 260
CASE STUDY: Should Income or Consumption Questions for Review 260
Be Taxed? 231 Problems and Applications 260
12-2b Administrative Burden 232 Quick Quiz Answers 262
xx CONTENTS
CHAPTER 14 15-4 Price Discrimination 302

15-4a A Parable about Pricing 302
Firms in Competitive Markets 263 15-4b The Moral of the Story 303
15-4c The Analytics of Price Discrimination 304
14-1 What Is a Competitive Market? 264 15-4d Examples of Price Discrimination 305
14-1a The Meaning of Competition 264 IN THE NEWS: Price Discrimination Reaches
14-1b The Revenue of a Competitive Firm 264 the Supreme Court 306
14-2 Profit Maximization and the Competitive Firm’s 15-5 Public Policy toward Monopolies 308
Supply Curve 266 15-5a Increasing Competition with Antitrust Laws 308
14-2a A Simple Example of Profit Maximization 266 15-5b Regulation 309
14-2b The Marginal-Cost Curve and the Firm’s ASK THE EXPERTS: Mergers 310
Supply Decision 268 15-5c Public Ownership 310
14-2c The Firm’s Short-Run Decision to Shut Down 270 15-5d Doing Nothing 311
14-2d Spilt Milk and Other Sunk Costs 271
15-6 Conclusion: The Prevalence of Monopolies 311
CASE STUDY: Near-Empty Restaurants and Off-Season
Miniature Golf 272
14-2e The Firm’s Long-Run Decision to Exit or Enter Key Concepts 313
a Market 272 Questions for Review 313
14-2f Measuring Profit in Our Graph for the Problems and Applications 313
Competitive Firm 274 Quick Quiz Answers 316
14-2g A Brief Recap 275
14-3 The Supply Curve in a Competitive Market 276
14-3a The Short Run: Market Supply with a Fixed Number
CHAPTER 16
of Firms 276 Monopolistic Competition 317
14-3b The Long Run: Market Supply with Entry and Exit 276
14-3c Why Do Competitive Firms Stay in Business If They 16-1 Between Monopoly and Perfect Competition 318
Make Zero Profit? 278
16-2 Competition with Differentiated Products 320
14-3d A Shift in Demand in the Short Run and Long Run 279
16-2a The Monopolistically Competitive Firm in the
14-3e Why the Long-Run Supply Curve Might
Short Run 320
Slope Upward 279
16-2b The Long-Run Equilibrium 322
14-4 Conclusion: Behind the Supply Curve 281 16-2c Monopolistic versus Perfect Competition 323
Chapter in a Nutshell 282 16-2d Monopolistic Competition and the
Key Concepts 282 Welfare of Society 324
Questions for Review 282 16-3 Advertising 326
Problems and Applications 283 16-3a The Debate over Advertising 326
Quick Quiz Answers 285 CASE STUDY: How Advertising Affects Prices 327
16-3b Advertising as a Signal of Quality 328
16-3c Brand Names 329
CHAPTER 15
16-4 Conclusion 331
Monopoly 287 Chapter in a Nutshell 332
Key Concepts 332
15-1 Why Monopolies Arise 288
15-1a Monopoly Resources 289
15-1b Government-Created Monopolies 289
15-1c Natural Monopolies 290 Quick Quiz Answers 333
15-2 How Monopolies Make Production and Pricing

Decisions 291 CHAPTER 17
15-2a Monopoly versus Competition 291
15-2b A Monopoly’s Revenue 292 Oligopoly 335
15-2c Profit Maximization 294
17-1 Markets with Only a Few Sellers 336
15-2d A Monopoly’s Profit 296
17-1a A Duopoly Example 336
FYI: Why a Monopoly Does Not Have a Supply Curve 297
17-1b Competition, Monopolies, and Cartels 336
CASE STUDY: Monopoly Drugs versus Generic Drugs 297
17-1c The Equilibrium for an Oligopoly 338
15-3 The Welfare Cost of Monopolies 299 17-1d How the Size of an Oligopoly Affects the Market
15-3a The Deadweight Loss 299 Outcome 339
15-3b The Monopoly’s Profit: A Social Cost? 301 ASK THE EXPERTS: Market Share and Market Power 340
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Bristol and Bath; yours towards Brighthelmstone. All travelling the
same road, all engaged in the same errand. How glad will the truly
noble Countess be of the intended visit! How will the hearts both of
the visited and visitors be made to burn within them! She meets with
that, which all fond fathers and apostolic mothers in Israel must meet
with; I mean, rebuffs from her spiritual children. That monstrous
doctrine of sinless perfection, for a while turns some of its deluded
votaries into temporary monsters. Happy they who strive to be holy
as he who hath called them is holy, and yet are continually going out
of themselves, and relying only on the glorious, compleat, imputed
righteousness of Jesus Christ. This hath a certain happy pair
learned, and received Christ. Thus may they be helped continually
to walk in him! They will, they will. The meek, the humble, hungering
and thirsty soul will he guide in his ways. But what am I doing?
writing a parting letter? The Lord bless you and keep you; the Lord
make his face to shine upon you, and be gracious unto you; the
Lord lift up his countenance upon you, and give you peace. So
wishes, so prays, dear honoured and happy pair,
Yours, &c. &c. &c. in an unchangeable Jesus,
G. W.
LETTER MCCCXLIV.
To Mr. H――y.
Bath, June 12, 1766.
L AST night we lay at the Devizes. This morning we breakfasted at

Shaw-House, near Melksom, with Mr. C――n. In my way hither,
I called upon Mrs. E――n. Her account of Miss Winter’s decease,
was by no means unpleasant. She was taken suddenly, and though
speechless, continued to smile upon all in a very remarkable
manner, till the last gasp, which was with much struggle. Mr. P――s
is left executor of the will. Being weary with riding, I think to stay here
till after Sunday morning’s sermon, and then shall set off for Bristol.
The horse turns out exceeding well in every respect. I hope you, my
dear Sir, got safe to London. That you and all your dear relations,
and all dear friends in town, may, in the glorious Emmanuel’s due
time, arrive triumphant in heaven, earnestly prays, my very dear Sir,
Yours, &c. &c. in Jesus,
G. W.
LETTER MCCCXLV.
To Mr. K――n.
Cottam, near Bristol, June 19, 1766.
My dear Friend,
H ERE I am, in a large vacant country house, where Mrs.

Wollaston was last Summer. She hath got the start of me; but
my turn must come by and by. As my feverish heat continues, and
the weather is too wet to travel, I have complied with the advice of
friends, and have commenced an hot-well water drinker twice a day.
However, twice this week, at six in the morning, I have been enabled
to call thirsty souls to come and drink of the water of life freely. To-
morrow evening, God willing, the call is to be repeated, and again on
Sunday. By that time, perhaps, the cloud may point to some
particular corner. Dear Mr. H――y shall know in due time. Good
seasons at Bath. Good seasons here. Large auditories. Grace!
grace! I hope that my wife, and yours, and all dear friends, are well.
Cordial love awaits them and dear Mr. E――s, and all who are so
kind as to enquire after, and pray for, my dear friend,
Yours, &c. in Jesus,
G. W.
LETTER MCCCXLVI.
To W―― P――, Esq.
London, November 1, 1766.
Happy Heirs of the Grace of Life,
B Y your giving young Mr. R―― H―― hints about a proper

direction, I have inferred, that a line, though from one who is
less than the least of all, would not be altogether unacceptable. I am
sure my poor prayers are continually ascending to the throne of
grace in your behalf. I want to have you great, yea very great in the
kingdom of heaven. Have you not found, by your heart’s being
warmed with the conversation of gospel ministers, that your heaven
is begun on earth? Dear Mr. F――er is become a scandalous
Tottenham-Court preacher. I trust he will come down into your parts,
baptized with the Holy Ghost as with fire. Dear Mr. R――n hath been
much owned in good Lady H――n’s chapel. Ill and hell-deserving I,
am to go thither next week. Dear Mr. M――n is detained at
Aldwinckle, by his children having the small-pox in town. The shout
of a king is yet heard in the Methodist camp. The glorious cry, “What
shall I do to be saved,” is frequently sounding in our ears. Had we
more reproach, and were we more scandalous, more good would be
done. Several promise well. Some say shibboleth with a good grace,
and very proper accent; others, as yet, can only say sibboleth: but I
have heard of one who can teach the tongue of the stammerer to
speak plain. Good Lady H――n is an excellent school mistress in
this way. The writer of the letter on the other side, seems to be an
apt scholar. The person referred to, keeps house where dear Mr.
S――t constantly expounds. He is in a consumption. What a mercy
that such a confessor should be sent to prison! I want all the
followers of the Lamb in general, and a certain gospel happy pair in
particular, to grow higher and richer every day towards God. Time is
short; eternity is endless; the Judge and judgment are at the door.
We soon shall hear th’ archangel’s voice;
The trump of God shall sound, Rejoice!
Amen! Hallelujah!
But I must have done. A dear company of ministerial cast-outs are

coming to breakfast under my despised roof. It stinks too much for
worldlings. If you would be so good as to let dear Mr. Hill see the
Oxonian letter, it may be of service. Next Tuesday, God willing, I
shall read an account of his servant’s death. May the last end of
every christian master be like his! But I cannot die: cold bathing, and
cool weather, brace up my tottering tabernacle. I hope that both to
whom I am writing, enjoy thriving souls in healthy bodies. That they
may increase with all the increase of God, earnestly prays,
Their, &c. &c. &c. in a once crucified, but now exalted

Jesus,
G. W.
LETTER MCCCXLVII.
To Mr. R―― K――n.
Bath, November 12, 1766.
My dear Friend,
T HROUGH mercy I slept at Mr. C――’s, as proposed, but have
been low ever since my coming here. Bath air, I believe, will
never agree with me long. However, if good is done, all will be well.
They tell me, that Sunday and last night were seasons of power.
Some we trust were made willing. I hope you enjoy much of God in
town. Surely London is the Jerusalem of England. Happy they who
know the day of their visitation! Mr. Whitaker writes me word, that he
is to be at Exeter the 18th instant: but I have no heart to draw with,
or act for him, till the trust is settled in a proper manner. Besides, I
see no opening here: and Mr. S――t writes me word, that the door is
shut at Oxford. As I am so poorly, I question whether I shall go to
Bristol at all. God help us to look up, and look out, and our path will
be made plain before us. Remember me to all at Tabernacle, &c. &c.
I hope to write to Mr. F――r to-morrow or next day, and also to Mr.
H――y. I am just now obliged to go out, and have only time to
entreat the continuance of your prayers in behalf of, my dear friend,
Yours, &c. in an unchangeable Jesus,
G. W.
LETTER MCCCXLVIII.
To the Same.
Bath, November 20, 1766.
My dear Friend,
O N Tuesday evening I preached at Bristol to a very crouded

auditory, though the weather was very foul. Last night I
administered the sacrament there also. We used near eight bottles
of wine. I trust some tasted of the new wine of the kingdom. This
morning, upon my arrival here, your kind letter gave me great
comfort. I want just one week more to settle Bristol affairs; and have,
therefore, written to dear Mr. J――e to stay two or three weeks at
London: Mr. D――s, who they say is expected here next week, may
then officiate for that space of time at Bath, and at Mr. J――e’s
leaving London, may go up to town. Satan hath had leave to give
Captain J――s a fine parting blow. Mr. C―― may be dismissed
immediately; and I beg that Captain J――s would go through with
the Tabernacle work, and stick to it with his whole heart. I hear
nothing as yet of the Americans. Letters may be reserved till my
return. I hope at farthest to be in London by next Tuesday se’nnight,
and to preach at Tabernacle the following evening. I was afraid my
wife would get cold by her late excursions, as at other times she is
so confined. My hearty love awaits you all. Be pleased to shew her
this. I am afraid that in my next to her, she will hear of the death of
J―― S――. He is now ill of the present dangerous fever. O for a
heart broken with a sense of sin! Then shall we look to Him whom
we have pierced, and mourn. May this be our habitual frame! God
bless you all.
Ever yours, &c. in Jesus,
G. W.
LETTER MCCCXLIX.
To the Same.
Bristol, November 23, 1766.
Dear Sir,
S UCH a numerous brilliant assembly of the mighty and noble, I

never saw attend before at Bath. Every thing is so promising,
that I was constrained to give notice of preaching next Sunday. I
hope the Redeemer will give us a blessed sabbath. I trust already
the arm of the Lord hath been revealed. Congregations have been
very large and very solemn. O what Bethels hath Jesus given to us!
We were filled as with new wine! O that God would make my way
into every town in England! Methinks I long to break up fresh ground,
and to begin to begin to do something for Jesus. I am just come
here weary, but am going to speak a few words. This prevents my
enlarging; but I could not refrain writing to one I so dearly love, and
to whom I am so greatly obliged. God bless you! God bless you and
yours! Accept most unfeigned love and acknowledgments, and still
add to my innumerable obligations, by praying for, my very dear Sir,
Yours, &c. in our glorious Head,
G. W.
LETTER MCCCL.
To W―― P――, Esq.
At my Tottenham-Court Bethel, Six in the

Morning, December 30, 1766.
My very dear Sir,
T HE Christmas holiday season hath prevented my sending an

immediate answer to your last kind letter. The order therein
given shall be readily complied with, and the love therein expressed,
returned, by praying for the writer’s whole self, and the honourable,
christian, and ministerial circle with which they are at present happily
surrounded with, four Methodist parsons. Honourable title! so long as
attended with the cross. When fashionable, (and blessed be God
there is not much danger of that) we will drop it. Four Methodist
parsons! enough (when Jesus says, Loose them and let them go) to
set a whole kingdom on fire for God. I wish them prosperity in the
name of the Lord. I pre sequar etsi non passibus æquis. Fy upon
me, fy upon me, fifty-two years old last Saturday; and yet, O loving,
ever-loving, altogether lovely Jesus, how little, yea how very little
have I done and suffered for thee! Indeed and indeed, my dear and
honoured friends, I am ashamed of myself: I blush and am
confounded. To-morrow, God willing, and Thursday also, with many
hundreds more, I intend to take the sacrament upon it, that I will
begin to begin to be a christian. Though I long to go to heaven to see
my glorious Master, what a poor figure shall I make among the
saints, confessors, and martyrs, that surround his throne, without
some deeper signatures of his divine impress, without more fears of
christian honour. Our truly noble mother in Israel, is come to London
full of them. Crescit sub pondere virtus. She is come out of her cell,
with her face shining again. Happy they who have the honour of her
acquaintance! Highly honoured are those ministers, who have the
honour of preaching for and serving her. Good and honest and
dearly beloved Sir C――s, and all your happy circle, male and
female, I am persuaded are of my mind. O this single eye, this
disinterested spirit, this freedom from worldly hopes and worldly
fears, this flaming zeal, this daring to be singularly good, this holy
laudable ambition to lead the van; O it is, what? an heaven upon
earth! O for a plerophory of faith! To be filled with the Holy Ghost.
This is the grand point. God be praised that you have it in view! All
our lukewarmness, all our timidity, all our backwardness to do good,
to spend and be spent for God, is all owing to our want of more of
that faith, which is the inward, heart-felt, self-evident demonstration
of things not seen. But whither am I going? Pardon me, good Sir: I
keep you from better company. Praying that all (if you live to be fifty-
two) may not be such dwarfs in the divine life as I am, I hasten to
subscribe myself, most honoured friends,
Yours, &c. &c. &c. in Jesus,
G. W.
LETTER MCCCLI.
To Mr. and Mrs. D――n.
London, March 4, 1767.
My very dear Friends,
T HANK God that you have been so providentially detained on

your side the water. Indeed you would find it hard to live here. I
would fain have you see Bethesda put on its college dress. That
hour, I humbly hope, is now not very far off. What if we should have
one more interview here below? Happy Mrs. S――k, that is fled to
her mansions above. Blessed be God, that there are mansions
prepared for us also!
O glorious King,
Us thither bring
To see thy face.
He will, he will, he will. He is faithful who hath promised; he also will

do it. May faith and patience have their perfect work! Adieu, for the
present. My feeble hands are full of work. The shout of the King of
kings is yet amongst us, and hath been all the last Winter. Grace!
grace! To this almighty, never-failing grace, I most humbly commit
you; and with repeated thanks for your steady, disinterested
services, beg leave to subscribe myself, my very dear friends,
Ever yours, &c. &c. in Jesus of Nazareth,
G. W.
LETTER MCCCLII.
Norwich, April 11, 1767.
My dear Friend,
S TILL I serve a God whose mercy endureth for ever. Mr. D――n
received us most gladly. As sweet a gospel excursion as at any
time. The Cambridge interview, I trust, was of God. I met, within
three miles of Norwich, with another clergyman of the establishment,
who promises well. He heard me last night. It was a night of power: a
large congregation. It will be too large, I fear, to-morrow, though the
place will hold some thousands. I expect to preach twice in my way
to town, which I hope to reach by Thursday evening. But I fear my
Spring and Summer inward fever is returning. If so, my large
intended plan of operations will be much contracted. But future
things belong to Him who orders all things well. Remember me
before his throne. Salute dear Mr. H――y, D――s, and E――s (if
come to town) and all enquiring friends, and accept the same for
your whole self, from, my dear friend,
Yours, &c. &c. in our glorious Head,
G. W.
LETTER MCCCLIII.
To the Same.
Rodborough, May 13, 1767.

My dear Friend,
M Y new horse failed the first night; but, through mercy, we got
here yesterday about seven in the evening. I was regaled with
the company of some simple-hearted, first-rate old Methodists, of
near thirty years standing. God willing, I am to preach to-morrow
morning, and to have a general sacrament on Friday evening.
Perhaps I may move after Sunday towards Wales; but must be
obliged, I fear, to take post-horses. I care not, so that I can ride post
to heaven. Hearty love to all that are posting thither, hoping myself to
arrive first. This tabernacle often groans under the weight of my
feeble labours. O when shall I be uncloathed! When, O my God,
shall I be cloathed upon! But I am a coward, and want to be housed
before the storm. It is nearer and nearer. Happy they who have fled
to Christ for refuge! I could enlarge, but have only time to send you
my most unfeigned thanks and most cordial love, as being, my very
dear Sir,
Yours, &c. in our glorious Head,
G. W.
LETTER MCCCLIV.
To Mrs. M――h.
Gloucester, May 20, 1767.
Dear Mrs. M――h,
A ND is the right hand at last cut off? How long, how painful the
operation! How aukward, how uneasy ♦ to be without it! But
hush, nature: it is the Lord’s doing. His own right arm shall bring
salvation; his presence shall alleviate the pain. Perhaps the loss of
the hand, even of such a right hand, may, through the powerful
influences of the blessed Spirit, give strength to their feet, and
quicken them in their motion heavenward. The right hand of the
Lord can, and I trust will bring this mighty thing to pass. Only say,
“Abba, Father, be it unto me even as thou wilt;” the answer will be,
“This is my will, even thy sanctification.” But,
Wheels encircling wheels must run,
Each in course to bring it on.
Want of time forbids enlarging. I hope your daughter will be now a

wise virgin indeed. We have had good seasons at Rodborough. I
have been out twice in the fields. Lady H――n hath been
wonderfully delighted. She and her company lay at Rodborough
house. Dear Mr. A――s is going to be married to a good christian
nurse. He is sickly in body, but healthy in soul. That you may enjoy a
thriving soul in a healthy body, earnestly prays, dear Mrs. M――h,
Your sympathizing friend and servant for Christ’s sake,
G. W.
♦ removed duplicate “to”
LETTER MCCCLV.
To Mr. and Mrs. S――n.

URELY your many favours demand a speedy return of thanks. They
S are all put down in his book, who is not so unrighteous as to

forget any work of faith, or labour that proceedeth of love. This
is the principle from which, I am persuaded, you act: and a
blessed principle it is. It comes from above, and leads to above. Had
I more of this, and bodily strength proportionable, how would I wing
my way! How would I preach for my God! How would I
Strive to sing as loud as they,
Who shine above in brighter day!
Blessed be God, we have reason to praise him whose mercy

endureth for ever. I have preached twice in the open air: thousands
and thousands attended. I am going to preach here this morning in
my native city. On Sunday I hope to take to Rodborough wood again.
Good Lady H――n, &c. were wonderfully delighted. They honoured
dear Mr. A――s’s house with their presence. He is but poorly, and
wants a nurse. Perhaps before next Sunday he may be married to a
simple-hearted, plain, good creature, that hath waited upon him and
the preachers near twenty years. She hath no fortune, but is one
who, I think, will take care of, and be obedient to him for Christ’s
sake. You may let Betty W――d see the contents of this, upon
condition that you with her cease not to pray for, my very dear
friends,
Yours, &c. &c. &c. in our common Lord,
G. W.
LETTER MCCCLVI.
My dear Friend,
I AM just setting out in a post-chaise for Haverford-west; and have,

therefore, drawn upon you in favour of Mr. ――, for twenty
pounds. This is expensive. But it is for one, who hath promised not to
send us a warfare on our own charges. We had a most blessed
season yesterday. Thousands and thousands, I trust, heard, saw,
and felt. Mr. Adams preached in the evening on, “The Lord is my
portion, therefore will I trust in him.” A good text for a new-married
man. I have advised him to preach next on these words, “The Lord’s
portion is his people:” he is now here. I expected a line. Be pleased
to direct to Haverford-west. I beseech you follow me with your
prayers. O that the Lord may be my strength. O that he may
quicken my tardy pace, and make me all alive for his glorious
interest! I could enlarge, but must away. My tender love awaits you
and yours. The Lord Jesus bless you, and fill you with all his
fulness. Thus prays, my dear steady friend,
Yours in our common Lord,
G. W.
LETTER MCCCLVII.
Haverford-west, May 31, 1767.
My dear dear Friend,
Y OUR spiritual mind medley was very agreeable. I could wish for
a second dose, but know not what direction to give about
sending it. My rout is not yet fixed. I am just come from my field
throne. Thousands and thousands attended by eight in the morning.
Life and light seemed to fly all around. On Tuesday, God willing, I
am to preach at Woodstock; on Friday, at Pembroke; here again
next Sunday by eight, and then for England. I wish dear Mr. H――y
present, to see the people:—but,—and there are so many other buts
in the way, that I would not press him. Mr. D――s is returned in
safety. I hope Mr. B――dge will not miss of his expected preferment.
Joab’s hand is in the G――h scheme. Rooms are not so lofty or
large, prospects not so pleasant, bedsteads not so easy, in these
parts, as in some places in or near London, but all good enough for
young and old pilgrims that have got good breath. Tender love to all.
Let all join in prayer for us. I have been pushing on dear sick Mr.
D――s, to go out and preach six miles off. He is gone finely
mounted, and I am persuaded will return in high spirits. Who knows,
who knows but preaching may be our grand catholicon again? This
is the good methodistical, thirty year old medicine. That you may live
to see it revived, and tried a thousand and a thousand times over, is
the hearty prayer of, my dear dear friend,
Ever yours, &c. &c. &c.
G. W.
LETTER MCCCLVIII.
To Mr. and Mrs. D――n.
Haverford-west, June 1, 1767.
Y OU will be so kind as to shew all manner of Bethesda civilities to

the bearer, Mr. Edward E――n. I trust, he hath been truly
moved by the Holy Ghost, to enter into the ministry. With him I hoped
to have sent the charter, or rather brought it; but the hour is not yet
come. You will be glad to hear, that I have strength to preach in the
fields. They are yet white ready unto harvest. Hoping to put forth the
gospel sickle again in my beloved America, and wishing you all to
increase with all the increase of God, with ten thousand thanks for
all your works of faith, and labours of unfeigned love, I hasten to
subscribe myself, my very dear friends,
Ever yours, &c. &c. &c. in the best bonds,
G. W.
LETTER MCCCLIX.
Gloucester, June 10, 1767.
My very dear Friend,
B LESSED be God, I am got on this side the Welsh mountains!

Blessed be God, I have been on the other side. What a scene
last Sunday! What a cry for more of the bread of life! But I was quite
worn down. Blessed be God, I am now better than could be
expected. To-morrow evening, God willing, my wife shall know what
rout. I hope all are well. I expect dear Mr. H――y is gone, therefore I
do not write to him. How it shall please the Lord to deal with me in
my next remove, you shall hear. I count it my privilege to let you
know all good news, because I know it puts gladness into your heart.
It is food, it is physic, it is every thing to a soul that lives near to
Jesus. O when shall I begin to live to Him, as I would! I want to be a
flame of fire. I know, my very dear Sir, you will pray for me. I can
never forget you or yours. I am, my very dear friend,
Yours most affectionately in our glorious Jesus,

G. W.
LETTER MCCCLX.
London, July 21, 1767.
My dear Sir,
I HOPE, ere this comes to hand, you will have taken your second
degree. A good degree indeed: to be a preacher, a young
preacher, a mobbed, perhaps a stoned preacher—O what an
honour! How many prayers will you get when I read your letter at
Tabernacle; and the prayers of so many dear children of God will do
you no hurt, I assure you. When we are fighting with Amalek below, it
is good to have a Joshua praying for us above. Jesus is our Joshua,
Jesus is our intercessor; he liveth, he ever liveth to make
intercession, especially for his young soldiers. Yonder, yonder he
sits: whilst praying he reaches out a crown: at this distance you may
see written in capital letters, Vincenti dabo. All a gift, a free gift,
though purchased by his precious blood. Tell churchmen, tell
meetingers, tell the wounded, tell all of this: tell them when you are
young; you may not live to be old: tell them whilst you are an under
graduate; you may be dead, buried, glorified, before you take a
college degree: tell those who would have you spare yourself, that
time is short, that eternity is endless, that the Judge is before the
door: but I can no more,—the thought overwhelms: but with what?
with joy, joy unspeakable and full of glory. Good night! I long to hear
particulars from ――. If you send me word that young ―― is there, I
will answer his letter that hath lain by me some time. My poor
prayers await you all. God bless you! God bless you!
Yours, &c. &c. in Jesus,
G. W.
LETTER MCCCLXI.
London, August 6, 1767.
My dear Sir,
I T is late; but I must answer your request. The inclosed made me

pity, smile, and rejoice: smile at the writer’s worn-out sarcasms,
pity his ignorance, and rejoice that you are thus called to be a martyr,
a living martyr for our common Lord. Fear not, only go forwards;
you know Jesus, and by preaching will know more. To him that hath
shall be given.
For this let men despise your name,
You’ll shun no cross, you’ll fear no shame.
All hail reproach!
If you write with all deference, let him know that Jesus hath revealed
himself not only to you by his word, but in you by his spirit: that you
look upon those whom he is pleased to term deluded and fanatics,
as the excellent ones upon the earth; and that you choose rather to
suffer reproach with them, than to enjoy all the pleasures of sense,
and all the preferments in the world. But why do I dictate? I trust you
to the teachings of that Jesus who hath said, “It shall be given you in
that hour what you shall say.” Where doth this ―― live? What is the
―― he mentions? God grant it may be a nursery for what he calls
fanatics so long as one stone is left upon another. One letter more I
imagine will rid you of further trouble from this quarter; expect then
attacks from another: but look to Jesus; he will make you more than
conqueror. I thank thee, holy Father, Lord of heaven and earth, that
thou hast hid these things from the wise and prudent, and revealed
them unto babes. Even so, Father, for so it seemeth good in thy
sight. Why me, Lord? why me? A sense of this distinguishing love
will make you laugh at all that men or devils can say of or do unto
you. Good night. I must away and pray for you. To-morrow Mr. ――,
&c. breakfast with me. God bless you! Be of good courage: give no
way, no not for a moment.
Ever yours, &c. &c. in an almighty Jesus,
G. W.
LETTER MCCCLXII.
To Mr. A――s.
My very dear Tommy,
I AM sorry to hear you have been sick. This hath been my case.
Blessed be God, I am better. Who knows but I may be
strengthened to take a trip to Scotland. This itch after itinerating, I
hope will never be cured till we come to heaven. Though laymen
occupy both the pulpits, at Tottenham-Court chapel and tabernacle,
congregations increase. “Not by might or by power, but by my spirit,
saith the Lord.” No weapon formed against Sion, shall or can
prosper. Our Thursday morning six o’clock tabernacle lecture is
crouded. I am looking for, and putting together old letters. Have you
any dated January or February 1743? Could you send to Mr. E――s
of Ebly, and enquire how Mrs. L――e may be directed to? Her
husband had many letters from me. How are dear Mrs. R――ts, and
Mrs. A――re? I never forget them in the midst of all my loves. I hope
you are surrounded with warm friends, a most kind and affectionate
nurse, and what is all in all, an infinitely compassionate never-failing
Jesus. To his unchangeable love I most earnestly commend your
whole self, and all dear never to be forgotten friends. How is poor Mr.
C――e? What an hospital is the church! Blessed be God, there are
no incurables in it however. Ere long, we shall be where the
inhabitants shall no more say, “I am sick.” Hallelujah. I am, my very
dear Tommy,
Yours, &c. &c. &c. in Him,
G. W.
LETTER MCCCLXIII.
My dear Sir,
M R. ―― hath just now been with me, and shewed me your letter,
expecting also a sight of mine. But my letters are brought late,
and to-morrow I go to preach at Lady F――y S――y’s. I therefore,
though quite ill, must send you a few lines now. Go to Jesus; learn to
pray of the threatened apostles, viz. “And now, Lord, behold their
threatenings, &c. &c.” I am afraid they will only threaten. If an
expulsion should be permitted, it will take place, I believe, only for a
little time, and soon be repented of. Thousands of prayers were put
up for you last Monday, at tabernacle letter-day. The verses were
these:
Give him thy strength, O God of pow’r,
Then let men rage and devils roar;
Thy faithful witness he shall be;
’Tis fix’d, he can do all through Thee.
Adieu.—

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Principles of Economics, 10e 10th Edition N. Gregory

What’s New in the Ninth Edition?

• Technology companies are increasingly using economists to better run their

How Is This Book Organized?

Chapter 2, “Thinking Like an Economist,” examines how economists approach

The Fundamental Tools of Supply and Demand

responses, and the attempts by monopolies to price discriminate. Chapter 16,

In the News Boxes

Ask the Experts Boxes

Definitions of Key Concepts

List of Key Concepts

Questions for Review

Problems and Applications

Alternative Versions of the Book

• Principles of Economics. This complete version of the book contains all

Translations and Adaptations

The team of editors who worked on this book improved it tremendously.

3-4 Conclusion 55 FYI: A Few Elasticities from the Real World 91

CHAPTER 14 15-4 Price Discrimination 302

15-2 How Monopolies Make Production and Pricing

Yours, &c. &c. &c. in an unchangeable Jesus,

Bath, June 12, 1766.

L AST night we lay at the Devizes. This morning we breakfasted at

Yours, &c. &c. in Jesus,

Cottam, near Bristol, June 19, 1766.

H ERE I am, in a large vacant country house, where Mrs.

London, November 1, 1766.

Happy Heirs of the Grace of Life,

B Y your giving young Mr. R―― H―― hints about a proper

We soon shall hear th’ archangel’s voice;

The trump of God shall sound, Rejoice!

But I must have done. A dear company of ministerial cast-outs are

Their, &c. &c. &c. in a once crucified, but now exalted

Bath, November 12, 1766.

Yours, &c. in an unchangeable Jesus,

Bath, November 20, 1766.

O N Tuesday evening I preached at Bristol to a very crouded

Ever yours, &c. in Jesus,

Bristol, November 23, 1766.

S UCH a numerous brilliant assembly of the mighty and noble, I

Yours, &c. in our glorious Head,

At my Tottenham-Court Bethel, Six in the

My very dear Sir,

T HE Christmas holiday season hath prevented my sending an

Yours, &c. &c. &c. in Jesus,

London, March 4, 1767.

My very dear Friends,

T HANK God that you have been so providentially detained on

To see thy face.

He will, he will, he will. He is faithful who hath promised; he also will

Ever yours, &c. &c. in Jesus of Nazareth,

Norwich, April 11, 1767.

Yours, &c. &c. in our glorious Head,

Rodborough, May 13, 1767.