or wants after needs are satisfied). It concludes with a discussion of economic decision making, pointing out that consumers must make decisions based on scarce resources (time and money), opportunity costs (comparing to the next best alternative), and the use of rational choices that provide the most perceived value for the consumer.

Buying Principles or Strategies

This section focuses on what a consumer should do prior to making a purchase to ensure receiving satisfaction from the purchase. The first step is to gather information about the item that one is considering purchasing and to develop a good knowledge base. How much information is needed depends on the item being purchased. A higher priced item warrants more research time. The second step is to consult advertising wisely. Three types of advertising are defined and compared: competitive advertising, informative advertising, and deceptive advertising (the last of which is often used in bait-and-switch practices). The third step is to comparison shop, comparing not just prices from different vendors but also warranties and brand names versus generics.

Consumerism

This section addresses consumerism and the education of buyers. It begins with an analysis of consumer rights as articulated by John F. Kennedy and Richard Nixon. These rights include the right to safe products, to be informed, to choose, to be heard, and to receive satisfaction from a manufacturer for damages incurred by using its product. The author then discusses agencies and the places a consumer can go with complaints about a product or service purchased.

Americans and Credit

This section begins by defining credit—funds that are given to buy a good or service but must be paid back at a later date. The funds can either be received by the purchaser or go directly to the seller. Next is a brief discussion of principal and interest. The author emphasizes that anytime a person receives credit, that person is going into debt. The author then discusses why people use credit and how they choose what type of credit to use.

Sources of Loans and Credit

This section focuses on where credit can be acquired. It starts with descriptions of different types of financial institutions, including commercial banks, savings and loan associations, savings banks, credit unions, and finance companies. The author then compares types of charge accounts, such as regular charge accounts, revolving charge accounts, and installment charge accounts. This section continues with definitions of finance charges, dollars and cents, and annual percentage rates. The section ends with a description and brief history of debit cards.

Applying for Credit

Determining a person's credit worthiness through credit bureaus is the first topic in this section. Credit bureaus determine a credit rating by analyzing a person's capacity to pay related to income and debt. The lender will often look too at a person's character, which includes past spending habits. This section then compares collateral, secured loans, and unsecured loans. It concludes with a discussion of a borrower's financial responsibilities.

Government Regulation of Credit

This section deals with laws that government agencies have enacted to protect consumers from unfair credit practices. The laws described include The Truth in Landing Act, The Equal Credit Opportunity Act, and state usury laws that restrict interest rates. The final topic covered in this chapter is personal bankruptcy.

This chapter focuses on ways to be a smart shopper when buying necessities.

Shopping for Food

This section begins with a look at comparison shopping and the importance of comparing what to buy and where to shop. The author discusses the trade-offs a consumer makes when shopping at a club warehouse store, a supermarket, and a convenience store. Brand-name products versus private-label products are compared, as is the trade-off between quality, quantity, and price.

Clothing Choices

In this section, clothing values are compared. The author discusses the role that style, durability, and the cost of caring for clothes plays in determining the value of clothing. He then explores the possibilities of being able to buy more for less by paying attention to clothing sales. One of the figures in this section includes a checklist with five questions for determining clothing wants.

To Rent or to Buy

This section addresses decisions that consumers should make when deciding where to live. It starts with an analysis of how much someone should spend on a house, including points, closing costs, and mortgages. A chart shows advantages and disadvantages for renting and for home ownership, and another chart explains the five types of mortgages. The author then discusses the rights and responsibilities of being a renter or a landlord.

Buying and Operating a Vehicle

The author looks at the three major trade-offs made when deciding what vehicle to purchase: engine size versus fuel efficiency, new car versus old car, and smaller car versus larger car. He then discusses expenses related to car ownership such as registration, normal maintenance, major repairs, extended warranties, depreciation, and insurance. Included in the section is a checklist with twelve tips to consider when purchasing a vehicle and a list of six factors that affect car insurance.

Why Save?

The concept of saving is defined in this section. The author begins by describing why people save, the results of saving, and different places people can save money. Next a comparison of passbook savings accounts, statements savings accounts, and money market deposit accounts is provided. He then explains that time deposits, also known as certificates of deposit, are held for a set period of time. He concludes this section with a brief description of the Federal Deposit Insurance Corporation and that it insures the first $100,000 of an investor's savings.

Investing: Taking Risks With Your Savings

This section covers stocks, bonds, stock markets, bond markets, and government regulation. Stocks are sold by corporations to raise money. The stockholders can earn money from dividends paid on the stocks or from selling their shares. Bonds are issued by governments, and sometimes companies, to raise money. Local and state governments can sell tax-exempt bonds, which means that the purchasers will not be taxed on the interest earned from the bonds. The federal government sells savings bonds at half the face value. These bonds do not reach full value or mature for a designated period of time. The author then discusses stock and bond markets and describes what brokers, the stock exchange, over-the counter markets, bond markets, mutual funds, and money market funds are. This section ends with a description of state and federal regulations in relation to the stock market.

Special Savings Plans and Goals

In this section, the author opens with a discussion on investing for retirement, individual pension plans, and real estate as an investment. The section ends with advice on how much to save and invest, taking into consideration amount of risk, diversification, and an individual's values.

Demand

This section begins by explaining that "demand and supply" have special meaning in economics. Voluntary exchange is a key concept in a free-market economy because it allows people the opportunity to sell and buy what they want. This section then discusses the law of demand: "As prices go up, quantity demanded goes down. As price goes down, quantity demanded goes up." The author explains real income effect (that a person will only spend what his or her income allows) and substitution effect (if the price on one of two comparable items drops, most people will buy the lower-priced item). The section concludes with a discussion of diminishing marginal utility (the concept that purchasing more of the same thing will usually provide less satisfaction than the previous purchase).

The Demand Curve and Elasticity of Demand

This section begins with an explanation on how to calculate a demand schedule and subsequently graph a demand curve. The author then compares quantity demanded (specific point on a demand curve) with change in demand (when the entire demand curve moves up or down). Next the author explains how the following five factors can influence demand of a product: changes in population, changes in income, changes in tastes and preferences, substitutes, and complimentary goods. This section wraps up with a discussion of the price elasticity of demand, including elastic demand, inelastic demand, and what determines price elasticity of demand.

The Law of Supply and the Supply Curve

This section expands on the concept of supply. It first introduces the law of supply: "As the price rises for a good, the quantity supplied generally rises. As price falls, the quantity supplied also falls." The author then explains that greater profits serve as an incentive to sellers to supply more of a product. The author then teaches how to create a supply schedule and subsequent supply curve. He discusses four factors that help determine supply: price of inputs, number of firms in the industry, taxes, and technology. This section ends with a discussion of the law of diminishing returns (as units of production are increased outputs are increased at diminishing rates).

Putting Supply and Demand Together

This section introduces equilibrium price (the price where supply equals demand). The author explains how equilibrium price can shift and describes how prices serve as signals that indicate shortages, surpluses, and market forces. The section concludes with a discussion of price ceilings, government-set maximum prices, government-set minimum prices, and price floors.

Starting a Business

This section explains how entrepreneurs can start a business, get government help, and use the Internet for assistance. This is followed by a discussion of the four basic elements of every business: expenses, advertising, record keeping, and risk.

Sole Proprietorships and Partnerships

This section starts with a discussion of sole proprietorships (businesses owned by individual people). The most common type of business, sole proprietorships are usually the least expensive and easiest to start and run. The author explains that the biggest disadvantage of a sole proprietorship is that the owner has complete responsibility for all debts and damages. Alternatively, a partnership is a business started and run by two or more individuals. The author concludes this section with a comparison of regular partnerships, limited partnerships, and joint ventures.

The Corporate World and Franchises

This section begins with a discussion of corporations. A corporation has many shareholders, each owning a portion of the business through stocks. Despite its many owners, a corporation is treated as a single entity, and the stockholders are protected if a corporation is sued or goes bankrupt. The author then discusses the structure of a corporation. He explains how a corporation becomes registered, sells stock, and names a board of directors. A chart that explains the advantages and disadvantages of incorporating is included. This chapter concludes with a definition of franchises and a brief explanation of how they function.

Perfect Competition

This section opens with a discussion of how businesses are classified through market structure (the amount of competition a business faces). Five conditions must be met for perfect competition to exist: there must be a large market, a similar product, easy entry and exit to the market, easily obtainable information, and independence of sellers and buyers. The author presents agriculture as the closest example of perfect competition in the United States today. The section concludes with an analysis of how perfect competition benefits society.

Monopoly, Oligopoly, Monopolistic Competition

The author begins this section with an explanation of imperfect competition. Monopolies are the first type covered in detail. The four characteristics that describe a monopoly are the following: there is a single seller, no substitute, no entry for competition, and almost complete control of market price. Four types of monopolies are described in detail: natural, geographical, technological, and governmental. Oligopolies are the second type of business described in this section. An oligopoly must meet the following conditions: domination by a few sellers, barriers to entry, identical or slightly different products, nonprice competition, and interdependence. The author explains how product differentiation, interdependent behavior, and cartels affect oligopolies. The author concludes with a discussion of monopolistic competition, the most common form of business in the UnitedStates.

Government Policies Toward Competition

This section opens with a discussion of antitrust regulations, including the Sherman Antitrust Act and the Clayton Act. The author discuses how mergers must be regulated. Included is a chart that lists federal regulatory agencies and what each agency is responsible for monitoring.

Investing in the Free-Enterprise System

This section focuses on how a business can gain the financing needed for growth. The author includes a diagram that shows how a bank turns people's monetary savings into financing for businesses. The author then discusses options that a business should consider before pursuing outside financing. He explains why people are willing to invest financially in businesses and how businesses go about pursuing investment financing.

Types of Financing for Business Operations

This section discusses three kinds of financing and how business owners choose the right financing. The first type of financing discussed is short-term (money usually borrowed for less than a year.) The next type is intermediate-term financing and usually includes leases or loans that are for a period of one to ten years. The last type is long-term financing (funds usually borrowed for more than ten years). Long-term financing can be achieved through loans, bonds, stocks, or a combination of the three. When choosing the right financing method, a business must consider interest costs, the financial condition of the company, market climate, and how it will affect the control of the company.

The Production Process

This section starts with a discussion of the production process (turning resources into goods). The four main steps are the following: planning, purchasing, quality control, and inventory control. The planning process includes where a business will be located and how it will get products to consumers. Purchasing includes raw goods, equipment, and office supplies (among other expenses). This section concludes with a discussion of technology and production. Four types of technology are analyzed: mechanization, the assembly line, division of labor, and automation.

The Development of Marketing

This section begins by defining marketing as "all of the activities needed to move goods and services from producers to consumers." It then discusses the development of marketing as it focuses on production, sales, advertising, and the consumer. The section concludes with a discussion of market research, including when it should be done, market surveys, and testing of new products.

The Marketing Mix

In this section, the author focuses on the 4 "P"s of marketing. The first is product—the good or service to produce or offer. Product also includes packaging for an item. The second is price—how much to sell an item for. The third is place—where a business should sell its product. The fourth is promotion—advertising that informs potential customers about a product. The author explains the three factors that affect promotion: product, consumers, and money. This section concludes with a description of the product life cycle—a series of stages from the first availability of a product to its withdrawal from the market.

Distribution Channels

This section starts with a comparison of wholesalers and retailers. It then discusses how storage and transportation are a part of the distribution process and how related costs are added to the final price the consumer pays. The section ends with an examination of ways items are distributed. Two ways that are analyzed in detail are club warehouse stores and direct marketing.

Americans at Work

This section offers a thorough look at labor. The author begins with a discussion of the civilian labor force—people sixteen years or older who work or who are looking for work. He then compares the different categories of workers: blue-collar (laborers), white-collar (office and specially trained), and service workers (direct service to consumers). He also explains that jobs can be classified by skill levels: unskilled, semiskilled, skilled, and professional. The section concludes with an analysis of supply and demand in the labor market. This includes how wages can be affected by job location, type of job, and skill required.

Organized Labor

The author explains that labor unions are the basic group in organized labor. He describes how unions developed as a response to unfair treatment of workers. The American Labor Movement and the AFL-CIO are then discussed. Included in the section is a chart that presents some of the labor-management legislation that has been passed since 1932. The section concludes with a discussion of how unions are organized locally, nationally, and at the federation level (i.e., national and international unions working together).

Collective Bargaining

This section deals with collective bargaining agreements between unions and employers. The author explains that the first step is negotiation, which includes mediation by a neutral party and arbitration as needed. When contracts cannot be agreed upon, strikes sometimes occur against management. Strikes can include picketing/boycotts by employees or a lockout by management. Sometimes the government will mediate a labor dispute and order an injunction, thus forcing people back to work. This section ends with an explanation of what is causing the decline of unions in the United States.

Accounting

The author begins by explaining national income accounting—the measurement of the national economy's performance. He then describes the process for measuring gross domestic product (GDP): measuring value, measuring final goods and services, and computing GDP. He also explains some of the weaknesses within the calculations of GDP. The author then explains that net domestic product is gross domestic product adjusted for depreciation. He concludes this section by describing three other measurements of income: national income, personal income, and disposable personal income.

Correcting Statistics for Inflation

This section of the book discusses inflation as "the prolonged rise in the general price level of goods and services." The author starts by explaining how the purchasing power of money changes over time. He then explains different methods used for measuring inflation. These include the consumer price index, producer price index, and the GDP price deflator.

Aggregate Demand and Supply

This section begins by defining aggregate as "the summing up of all the individual parts in the economy." Aggregate demand is the amount people are willing to pay for everything they demand. This is shown on an aggregate demand curve, which is similar to the standard demand curve. The author then defines aggregate supply. The section ends with a diagram of an aggregate demand curve and an aggregate supply curve. How the two work together is analyzed.

Business Fluctuations

This section addresses the ups and downs of business and the business cycle. The ups are called peaks or booms, and the downs are called troughs. The author then explains what recession, depression, and expansion mean when related to the economy. The author includes a diagram that shows the ups and downs in the U.S. economy from 1880 through 2000.

Causes and Indicators of Business Fluctuations

This section begins with descriptions of some of the causes for businesses fluctuating. These include business investments and innovations, government activity, external factors, and psychological factors. The section ends with a discussion of economic indicators. The author includes a chart listing three specific indicators: leading, coincident, and lagging.

The Functions and Characteristics of Money

This section opens with a discussion of the role of money in the U.S. economy. Money functions in three ways: it serves as a medium of exchange (sellers accept it for goods and people accept it for labor they have performed), a unit of accounting (it allows values of items to be compared), and as a storage unit of value over a period of time. The author then discusses the characteristics of what makes an object good for serving as a unit of money. An object should be durable, portable, divisible, stable in value, scarce, and accepted. The author closes this section with a comparison of different types of money, including commodity, representative, and fiat money.

History of American Money and Banking

The author starts this section with a discussion of the history of American banking. He includes a two-page diagram that shows banking changes from 1780 through 2003. He then discusses banking services and defines overdraft checking. The section concludes with a discussion of electronic banking, including electronic fund transfers and ATMs.

Types of Money in the United States

This section begins with a discussion of money and "near money." Money includes currency, checking accounts, savings accounts, and investments. The author emphasizes that using credit cards for purchases is not considered using money but increasing debt. Some investments are not money but can quickly be converted to money. For example, stocks, bonds, and life insurance policies can easily be exchanged for money. This section ends with a discussion of money supply and two methods used to calculate how much money is circulating in the United States.

Organization and Functions of the Federal Reserve System

The author begins by explaining that the Federal Reserve System (Fed) was started in 1913 to reduce financial insecurity. He then explains how this system is organized through a board of governors, federal advisory council, federal open market committee, federal reserve banks, and member banks. He wraps up this section by explaining that the main function of the Fed is to protect consumers. He includes a chart that describes six ways that this is done.

Money Supply and the Economy

The author opens this section by explaining that the most important job of the Fed is control over the money supply's rate of growth. He then compares loose and tight money policies. He describes fractional reserve banking, banks are required to keep a portion of money in reserve in case any customers want to make large withdrawals, and money expansion, how banks can make more money by loaning what does not need to be held in reserve.

Regulating the Money Supply

This section discusses some of the methods the Fed uses to try to keep the economy growing. The first method the author explains is the Fed's ability to change reserve requirements. He has a chart that shows examples of how this works. The second method the author discusses is changing the discount rate, the amount the Fed charges it member banks. He explains how this impacts the prime rate and what the federal funds rate is. He then explains how an open-market operates. He concludes this section with a discussion on the difficulties of monetary policy.

Growth in the Size of the Government

This section begins with a discussion on how government has grown over the last seventy years. This growth has increased regulation and the percentage of people hired by the government. The author then discusses why government has grown as well as the true size of government. He concludes with a discussion on whether government growth has been good or bad for the economy.

The Functions of Government

In this section the author explains how the government protects individual rights, promotes economic activities, and policies that support its citizens. The first method the government uses is providing public goods and services. The author compares merit and demerit goods and how the government treats them. The second method the government uses is redistributing income. Some of the ways they accomplish this are through social insurance programs and public-assistance programs. The third method the government uses is regulating economic activity. The fourth method is ensuring economic stability. The author finishes this section with some of the arguments that critics of the government say about government involvement in the economy.

The Federal Budget and the National Debt

The author opens this section with two pie charts showing how the federal government and how state and local governments spend money. He then explains the budget-making process and how the federal budget works. He wraps up this section with a discussion on deficit spending and the national debt. This includes information on government borrowing, national debt, and budget surplus.

Taxation

This section opens with a discussion on the principles of taxation. It includes a chart explaining the ten major taxes that the federal government uses to raise money. The author concludes this section with a discussion on three forms of taxation: proportional (straight percentage across the the board), progressive (as income increases, percentage of taxes paid increases), and regressive (as income increases, percentage paid goes down).

Unemployment and Inflation

The author opens this section with a discussion on stabilization policies that the government implements to try to keep the economy healthy. Next the author discusses how the four types of unemployment are measured. He wraps up this section with a discussion on inflation and compares demand-pull inflation with cost-push inflation and stagflation.

The Fiscal Policy Approach to Stabilization

In this section, the author explains how the government uses tax rates and expenditures to help control the economy, also known as fiscal policy. He explains how fiscal policy was developed by John Maynard Keynes. The author then describes the circular flow of income: how cash and products flow between the government, consumers, banks, and businesses.  He concludes with a discussion on fiscal policy and unemployment and another on fiscal policy and inflation.

Monetarism and the Economy

The author begins this section by defining monetarism: the relationship between economic activity and the amount of money in circulation. He then explains that the theory of monetarism states that increases in the money supply must be steady to prevent inflation. Next he discusses government policy according to monetarists (those who believe that the government should not intervene when there is a slow economy and should not try to smooth the ups and downs). They feel that the government should try to maintain a smooth and consistent growth rate. He concludes this section with a discussion on monetarists' criticism of fiscal policy and mentions that due to time lags between when a bill is passed and it becomes active, it is often difficult to track just how much any specific policy helps the economy.

The Benefits of World Trade

The author begins this section by pointing out that twelve percent of the gross domestic product comes from imports. The author then discusses the benefits of trade, the global economy, and how different nations use different types and amounts of labor, capital, and natural resources. Absolute advantage (ability to produce a product at a lower absolute cost with everything else being the same) is then compared to comparative advantage (ability to produce at a lower opportunity cost) of international trade.

Financing World Trade

This section begins with a definition of exchange rate and explains that foreign exchange markets are required for international trade. The author explains that there were fixed exchange rates from 1945 to the early 1970s. The author explains how this system worked and why it became impractical. In 1971, the United States and several other nations changed to a flexible exchange rate system. The author explains how this system works and what are the driving forces within the system. This section concludes with a discussion on balance of trade and whether trade deficits are good or bad.

Restrictions of World Trade

The author introduces this section with three ways to restrict imports. These include tariffs, quotas, and embargoes. Tariffs include revenue and protective tariffs. He then discusses some of the arguments against free trade including job security, national economic security, and infant industries. After this he discusses some of the arguments for free trade including improved products, export industries, and specialization and comparative advantage. He wraps up this section with a discussion on trade agreements, both worldwide (World Trade Organization) and regional (North American Free Trade Agreement and the European Union).

Comparing Capitalism and Socialism

The author begins this section with a chart that lists the characteristics of pure capitalism and pure socialism. He explains that pure market capitalism operates on prices, profits, and private property. In pure socialism there is little private property and the government owns almost all businesses. The author then discusses the Marxian view of socialism and how socialism has changed since Marx. He wraps up this section with a discussion on the benefits of capitalism and how all economies are planned.

Changing Authoritarian Socialism-The Case of China

In this section the author describes the development of China's economic system following World War II. They implemented five-year plans and modified their plans based on how the previous five years worked. They started as a socialist country and are transitioning toward a mixed economy. The author ends this section with a discussion on prospects for China's economic future and the role China may play worldwide after their admittance to the World Trade Organization in 2000.

Nations Move Toward the Market System

This section starts with a discussion of privatization in Russia. Privatization is when previously government-run businesses become run by private individuals or corporations. The discussion includes reasons for resistance to privatization, reforming the price system, and challenges that still remain in Russia. The author then discusses changes in Sweden's economy from a welfare-state (blend of capitalism and socialism) to a more free market system. He wraps up this section with a discussion on changes in Latin America and how privatization is impacting that area of the world.

Characteristics of Developing Nations

The author begins this section by explaining that even the poorest families in the United States are often better off than many people in other countries. He then compares developed and developing countries. Five economic characteristics of developing countries are eventually described. These include low GDP, an agricultural economy, poor health conditions, low literacy rate, and a rapid population growth. He concludes this section with a discussion on weak property rights.

The Process of Economic Development

This section begins by describing the three stages of economic development: agriculture, manufacturing, and then service-oriented.  The author then discusses ways that developing nations can finance economic development. They can do this through foreign investments and/or through foreign aid. Foreign aid can be supplied by many developed countries. The author compares some of the types of aid and how it is sent to developing countries. He concludes this section by explaining some of the reasons for giving foreign aid.

Obstacles to Growth in Developing Nations

In this section the author describes four obstacles to economic growth. These obstacles include attitudes and beliefs, continued rapid population growth, misuse of resources, and trade restrictions. The author wraps up this section with a case study of Indonesia, explaining why they struggled after billions of dollars of aid were given to the country after World War II.

Industrialization and the Future

In the Industrialization and Future section, the author explains some of the problems following rapid industrialization. These include unwise investments, not adapting to change, using inappropriate technology, and rushing through the stages of development. He then discusses major factors that influence economic development. He ends this section by explaining that increased information accessed through the Internet is leading to increased cooperation among developing nations.

Reasons for and Results of Global Integration

The author begins this section with a discussion on the role improved telecommunications have made on the worldwide economy. He explains that, through global integration, countries have become more dependent on each other. Viewers in foreign countries are now more aware of, and desire, what is available in other countries. He concludes this section with a discussion on the globalization of financial markets with international banks increasing and worldwide currency and commodity markets. He includes a discussion on some of the problems with the worldwide stock market.

Direct Foreign Investment—Should We Be Worried?

This section starts with a discussion on foreign investment from the late 1800s through the time this book was published. The author talks about foreign control of American companies and people's concerns about whether or not this can impact the way American companies or the United States government run. The author concludes with a discussion about Americans investing within America and abroad and addresses some people's fair that Americans will take over the world economically.

Multinationals and Economic Competition

The author opens this section with a definition of multinationals (companies that do business in more than one country). He explains that many people were afraid that these companies would take control of the world, but these fears have been disproven. The author then talks about the size and number of multinationals. He includes a chart showing the twenty-five largest American multinationals as of July 2001. He then talks about regional cross-border investments and alliances that are formed between businesses in different countries. He concludes with a discussion on the global village and the importance of tolerance for people of other races and nationalities.

The Growth of E-Commerce

The author begins this section with an explanation of how microchips have changed the marketplace and people's lives. He then defines cybernomics as "economics driven by a huge digital machine, the Internet." He continues with a discussion on how how people do business on the Internet and exactly what e-commerce is. He explains that the consumer always wins in an e-commerce environment. He warps up this section with a discussion on how cybernomics have changed marketing and by describing what cybercommunities are.

A New Economy?

This section opens with a discussion on how the Industrial Revolution and telecommunications have changed the world. He then compares this with the current information age. He defines two other terms that have recently been developed to describe the economy now. They are knowledge economy and weightless economy. Next he explains what knowledge products and waves of innovation are. He concludes with a discussion on Schumpter Cycles. He includes a diagram that shows five waves of innovative changes that have impacted the economy from 1785 through the date the book was published.

Issues in Cybernomics

The author opens this section with a discussion on ensuring safe Internet trade and day trading. He explains how protecting intellectual property has become much more difficult and what some artists, musicians, and others are doing to try to protect their rights. He talks about how the government has had to react new laws to protect consumer privacy as computers are able to track more information about individuals than ever before. He concludes this section with a discussion on how the information revolution is affecting developing nations.