Introduction to Economic Analysis

ISBN 160049000X


R. Preston McAfee

New Version Published! Don Dale has published a new version of IEA! The new version includes

  • Solutions to Exercises now included at end of text
  • Numbering system for figures and tables rationalized, compared to the Flat World pdf version
  • Improved typesetting and layout, particularly with regard to equations
  • Exercises edited
  • Many small edits for consistency of notation and for clarity

In 2006, I produced Introduction to Economic Analysis, a free, open sourced, creative-commons-licensed textbook spanning introductory and intermediate microeconomics. There were few adoptions. That there were several high profile adoptions like NYU and Harvard convinced me that the lack of adoptions was not due to the material itself, or even my exposition of the material, but instead to two factors. First, the book isn't traditional: it is aimed to be more like economists actually practice economics, analyzing interesting issues with models and a modicum of data. Second, there were no supplemental materials.

In 2007 I went to work for Yahoo! and ceased teaching. At this point progress on the project stalled. To address the lack of supplemental materials and to continue progress on the creation of low cost, high quality materials, I enlisted Tracy Lewis of the Fuqua School of Business at Duke University, to co-author a new text built on IEA, and joined with Flat World Knowledge. Flatworld has an "online free, modestly-priced printed" creative-commons model.

The second version is a substantial rewrite. The material is re-ordered and the 7 substantive chapters broken into 20 more manageable chapters. The material is rewritten to make it more accessible to a standard intermediate audience. There were many bug-fixes. Professors considering the text should choose likely prefer this version. Mathematically adept independent readers, especially engineers, wishing to learn about economics may prefer the 2006-7 version.

(Note: permanent link to most recent version is
Link to the word documents.

Most Recent


Help create a Chinese version of the free text here!


The Notes page.

A blurb about why this book is a good thing and open source considerations influencing the design.

Class Websites (Old Links no longer maintained!)
McAfee's Class Website and powerpoints.
Satyajit Bose's Course at Columbia.
Hsueh-Ling Huynh's Ec 1011a at Harvard.
Hao Li's course at U Toronto.
Simon Wilkie's Class Website.
Roy Radner's course syllabus at NYU.
Angelo Zago plans to use the text at Verona University.
Tom Andrews' course syllabus at West Chester U.
Nicolas Schmitt's course syllabus at Simon Fraser.
Michelle Goeree's course syllabus at Claremont McKenna.
Eduardo Zambrano's course at Cal Poly.


"Let me say that your creative commons Ec 11 text is awesome. Its so much better than anything else out there I've seen... better than MIT's open courseware, and basically every other 'intro to ec' book I've skimmed. It's the Ec book I wish I had... only in my later readings of more advanced books (like Kreps' Microeconomics and The Mathematical Structure of Economics) did I find the cool topics from your book (like auction theory, etc.). However, those either had tons of fluff (especially mathematical fluff) or were all theory without the interesting demographics."

      --Ryan McCorvie, fixed income strategist at a top investment bank


This book presents introductory economics ("principles") material using standard mathematical tools, including calculus. It is designed for a relatively sophisticated undergraduate who has not taken a basic university course in economics. It also contains the standard intermediate microeconomics material and some material that ought to be standard but is not. The book can easily serve as an intermediate microeconomics text. The focus of this book is on the conceptual tools and not on fluff. Most microeconomics texts are mostly fluff and the fluff market is exceedingly over-served by $100+ texts. In contrast, this book reflects the approach actually adopted by the majority of economists for understanding economic activity. There are lots of models and equations and no pictures of economists.

Fun and Useful Topics Not Covered In Most Alternative Texts

  • Using elasticities to quantify effects of supply and demand changes, taxes, etc.
  • US demographics and socio-economic data
  • Investment under uncertainty
  • Exploitation of a resource in fixed supply (price rises at the interest rate)
  • Maximization of a renewable resource (cut down trees when they grow at the interest rate...not quite)
  • Price path of collectibles
  • Central city land price gradients (based on transportation costs)
  • Dynamic choice
  • Arrow-Pratt risk aversion
  • Search theory
  • Price floors and ceilings with imperfect rationing
  • When does a competitive market fish to extinction?
  • Peak-load pricing
  • Akerlof's market for lemons
  • Myerson-Satterthwaite theorem
  • Signaling
  • Industry performance and entry in the Cournot model
  • Price dispersion
  • Spatial competition models, and overproliferation of products
  • Agency theory
  • Multi-tasking
  • Auctions
  • Antitrust
Free Introduction to Real Analysis by William F. Trench.

National Social Science Press bribing faculty to use their text! Horizon Textbook Publishing doing the same. Students should be very irate. Yet another example