Includes indexes.

pt. I. Resource allocation decisions and the public sector. Introduction to microeconomic policy analysis ; An introduction to modeling, efficiency, and equity -- pt. II. Using models of individual choice making in policy analysis. The specification of individual choice models for the analysis of welfare programs ; Utility maximization and intergovernmental grants : analyzing equity consequences ; A fundamental test for relative efficiency : the compensation principle ; Uncertainty and public policy -- pt. 3. Policy aspects of production, cost, and organizational decision making. Technical possibilities and costs in policy analysis ; Private profit-making organizations : objectives, capabilities, and policy implications ; Public and nonprofit organizations : objectives, capabilities, and policy implications -- pt. 4. Policy effects on the interaction of supply and demand. General competitive analysis of market : organization, with application to taxation ; Market allocation in an imperfect world ; The control of prices to achieve equity in specific markets ; Distributional control with rations and vouchers ; Policy problems of allocating resources over time -- pt. 5. The frontiers of microeconomic policy analysis : organizational process and institutional choice. Designing governance structures for economic activities. .‎

This book shows, from start to finish, how microeconomics can and should be used in the analysis of public policy problems. It is an exciting new way to learn microeconomics, motivated by its application to important, real-world issues. Lee Friedman's modern replacement for his influential 1984 work not only brings the issues addressed into the present but develops all intermediate microeconomic theory to make this book accessible to a much wider audience. Friedman offers the microeconomic tools necessary to understand policy analysis of a wide range of matters of public concern--including the recent California electricity crisis, welfare reform, public school finance, global warming, health insurance, day care, tax policies, college loans, and mass transit pricing. These issues are scrutinized through microeconomic models that identify policy strengths, weaknesses, and ideas for improvements. Each chapter begins with explanations of several fundamental microeconomic principles and then develops models that use and probe them in analyzing specific public policies. The book has two primary and complementary goals. One is to develop skills of economic policy analysis: to design, predict the effects of, and evaluate public policies. The other is to develop a deep understanding of microeconomics as an analytic tool for application--its strengths and extensions into such advanced techniques as general equilibrium models and pricing methods for natural monopolies and its weaknesses, such as behavioral inconsistencies with utility-maximization models and its limits in comparing institutional alternatives. The result is an invaluable professional and academic reference, one whose clear explanation of principles and analytic techniques, and wealth of constructive applications, will ensure it a prominent place not only on the bookshelves but also on the desks of students and professionals alike