Microeconomics

Citation

Acemoglu, D., Laibson, D., & List, J. A. (2018). Microeconomics (2nd ed., Global ed.). Pearson Education Limited.

Chapter Summary

Part I: Introduction to Economics

Chapter 1: The Principles and Practice of Economics

Introduces the three themes that organise the book: optimization, equilibrium and empiricism. It presents economics as a way of answering questions about the world with models and data.

Chapter 2: Economic Methods and Economic Questions

How economists build models and test them with data, including the distinction between correlation and causation.

Chapter 3: Optimization: Doing the Best You Can

Decision making as optimization under constraints, the idea that underlies later chapters on consumers and firms.

Chapter 4: Demand, Supply, and Equilibrium

The market model of demand and supply and the notion of equilibrium.

Part II: Foundations of Microeconomics

Chapters 5–6: Consumers and Incentives; Sellers and Incentives

Consumer choice and demand, then the behaviour of firms and the supply side, both built on incentives and trade-offs.

Chapter 7: Perfect Competition and the Invisible Hand

How competitive markets allocate resources and the efficiency properties associated with them.

Chapter 8: Trade

The gains from trade and how trade is organised between individuals and between countries.

Chapters 9–10: Externalities and Public Goods; The Government in the Economy: Taxation and Regulation

Cases in which markets fail to deliver efficient outcomes, and the use of taxation and regulation by government in response.

Chapter 11: Markets for Factors of Production

How the markets for labour, capital and other inputs work.

Part III: Market Structure

Chapters 12–14: Monopoly; Game Theory and Strategic Play; Oligopoly and Monopolistic Competition

Market power and monopoly pricing, an introduction to game theory, and the application of strategic reasoning to markets with a few firms or with differentiated products.

Part IV: Extending the Microeconomic Toolbox

Chapters 15–16: Trade-offs Involving Time and Risk; The Economics of Information

Decisions over time and under uncertainty, and the effects of asymmetric information, including moral hazard and adverse selection.

Chapters 17–18: Auctions and Bargaining; Social Economics

How auction formats and bargaining shape outcomes, and the role of social preferences such as fairness, trust and charity in economic decisions.

Key Concepts

Part I

• Optimization, equilibrium, empiricism: the three themes of the book.
• Correlation versus causation: the central problem in using data to test economic claims.
• Demand, supply and market equilibrium: the basic market model.

Part II

• Consumer and producer behaviour: choice driven by incentives and constraints.
• Perfect competition: the benchmark for efficient allocation.
• Externalities and public goods: sources of market failure.
• Taxation and regulation: government responses to market failure and to revenue needs.

Parts III–IV

• Monopoly and oligopoly: pricing with market power.
• Game theory: reasoning about strategic interaction.
• Time and risk: decisions over time and under uncertainty.
• Asymmetric information: moral hazard and adverse selection.
• Auctions, bargaining and social preferences: exchange and cooperation beyond the standard market.

Critical Analysis

Strengths

• An evidence-based framing. Pearson's description says each chapter begins with an empirical question relevant to students' lives, answered later with data in an Evidence-Based Economics feature. The empirical theme is thus built into the book's structure.
• Three unifying themes. Optimization, equilibrium and empiricism recur through the book, which gives the chapters a common logic.
• Modern topics at the end. Part IV covers time and risk, information, auctions and bargaining, and social economics. Game theory is placed in the market structure part, where it is applied to oligopoly.
• Clear four-part design. The path from method (Part I), to the competitive market and its failures (Part II), to imperfect competition (Part III), and to extensions (Part IV) is easy to follow and to assign in portions.

Limitations

• A microeconomics-only volume. The book covers no macroeconomics; the same authors' Economics covers both, and readers who need the whole subject need a second text.
• Introductory mathematical level. The publisher aims it at principles of microeconomics courses, so readers wanting calculus-based consumer and producer theory, general equilibrium or mathematical game theory will need a higher-level text.
• Edition and market. This is the 2018 Global Edition of the second edition; examples and data are tied to that edition and a third edition now exists.

Where It Fits in the Course

Among the principles of economics books, this is a data-driven microeconomics-only text. Mankiw's Principles of Economics presents micro and macro through a small set of organising principles in a plain, example-driven style. OpenStax's Principles of Economics is a free text covering both. Sloman, Garratt and Guest's Economics is a full-length UK-oriented text for first-year courses. The CORE team's The Economy 2.0: Microeconomics teaches through real-world problems such as inequality and climate change and is freely available. Samuel Bowles's Microeconomics: Behavior, Institutions, and Evolution is a graduate text, and it is a later step rather than a substitute.

Acemoglu, Laibson and List is a good alternative to Mankiw when the aim is an introduction that puts data and game theory early and includes behavioural and social topics.

How to Use This Book

The book is for first-year students and for self-learners with no background in economics and only basic algebra and graphs.

Read Parts I and II in order; Chapters 3, 4, 5, 6 and 7 are the core of the standard microeconomics course. Chapters 9 and 10 matter if the course emphasises policy. Part III can be taken after Chapter 7, with Chapter 13 (game theory) read before Chapter 14. Part IV chapters are independent, so choose by interest. Work through the Evidence-Based Economics sections to see how data answer each chapter's opening question.