Additional Information
Book Details
Abstract
Economics 4th edition is a concise introduction to the core principles of economics, aimed at students taking their first, and probably only, one semester course in Economics. These students may be taking a business related degree, or may be from other degree schemes in the university taking a service course in Introductory Economics.
There is a balanced split between the micro and macro economics section and the use of case studies and numerous examples makes this a lively little book for the reader. The real difference that this book offers the student is the amount and variety of questioning material that will really test their understanding.
Table of Contents
| Section Title | Page | Action | Price |
|---|---|---|---|
| Cover | Cover | ||
| Economics | i | ||
| Contents | v | ||
| Preface | xvii | ||
| Acknowledgements | xix | ||
| Publisher Acknowledgements | xx | ||
| The nature of economics | 1 | ||
| Learning objectives | 1 | ||
| Introduction | 1 | ||
| Defining economics | 2 | ||
| The ways in which an economist thinks | 2 | ||
| The use of tables and diagrams | 2 | ||
| The economic problem | 4 | ||
| Opportunity cost | 5 | ||
| The production possibility frontier (PPF) | 5 | ||
| The PPF and opportunity cost | 7 | ||
| Economic systems | 9 | ||
| The market economy | 10 | ||
| Advantages of the market economy | 11 | ||
| Disadvantages of the market economy | 11 | ||
| The planned economy | 13 | ||
| Advantages of the planned economy | 13 | ||
| Disadvantages of the planned economy | 13 | ||
| The mixed economy | 15 | ||
| Positive and normative economics | 15 | ||
| Micro- and macroeconomics | 16 | ||
| key points | 16 | ||
| Further reading | 17 | ||
| Web references | 17 | ||
| Progress and review questions | 17 | ||
| Part one microeconomics | 21 | ||
| Demand, supply and market equilibrium | 23 | ||
| Learning objectives | 23 | ||
| Introduction | 23 | ||
| The market | 23 | ||
| Demand | 24 | ||
| What is demand? | 24 | ||
| Factors influencing demand | 24 | ||
| ‘Movements along’ and ‘shifts in’ the demand curve | 29 | ||
| The derivation of market demand | 30 | ||
| Supply | 32 | ||
| What is supply? | 32 | ||
| Factors influencing supply | 32 | ||
| The derivation of market supply | 35 | ||
| ‘Movements along’ and ‘shifts in’ the supply curve | 36 | ||
| Market equilibrium | 36 | ||
| The equilibrium market price | 36 | ||
| Changes in the equilibrium market price | 37 | ||
| key points | 39 | ||
| Further reading | 39 | ||
| Web references | 40 | ||
| Progress and review questions | 40 | ||
| Elasticity | 45 | ||
| Learning objectives | 45 | ||
| Introduction | 45 | ||
| Price elasticity of demand (ped) | 45 | ||
| What is price elasticity of demand? | 45 | ||
| Price elasticity of demand and total revenue | 49 | ||
| Factors determining price elasticity of demand | 50 | ||
| Income elasticity of demand (yed) | 52 | ||
| What is income elasticity of demand? | 52 | ||
| Types of income elasticity of demand | 53 | ||
| Cross elasticity of demand (ced) | 55 | ||
| What is cross elasticity of demand? | 55 | ||
| Price elasticity of supply (pes) | 57 | ||
| What is price elasticity of supply? | 57 | ||
| Factors determining price elasticity of supply | 58 | ||
| The Importance of the elasticity concept | 60 | ||
| Applications of demand and supply | 60 | ||
| Key points | 63 | ||
| Further reading | 64 | ||
| Web references | 64 | ||
| Progress and review questions | 65 | ||
| Consumer theory | 69 | ||
| Learning objectives | 69 | ||
| Introduction | 69 | ||
| Marginal utility theory | 69 | ||
| What is marginal utility theory? | 69 | ||
| Total utility | 70 | ||
| Marginal utility | 70 | ||
| The law of diminishing marginal utility | 70 | ||
| The consumer equilibrium | 72 | ||
| Derivation of the demand curve | 74 | ||
| Indifference curve analysis | 74 | ||
| What is indifference curve analysis? | 74 | ||
| Indifference curves | 75 | ||
| The budget line | 78 | ||
| The consumer equilibrium under indifference curve analysis | 80 | ||
| A change in income | 81 | ||
| A change in price | 81 | ||
| The substitution and income effect | 82 | ||
| Inferior product or good | 84 | ||
| Giffen good | 85 | ||
| Derivation of the demand curve | 85 | ||
| Key points | 86 | ||
| Further reading | 87 | ||
| Web references | 87 | ||
| Progress and review questions | 88 | ||
| Production and costs | 94 | ||
| Learning objectives | 94 | ||
| Introduction | 94 | ||
| Types of business enterprise | 95 | ||
| Sole trader | 95 | ||
| Partnership | 95 | ||
| Joint stock company | 95 | ||
| Public sector companies | 96 | ||
| The growth of firms | 96 | ||
| Why do firms wish to grow? | 96 | ||
| Internal growth | 98 | ||
| External growth | 98 | ||
| The factors of production | 100 | ||
| What are the factors of production? | 100 | ||
| Land | 100 | ||
| Labour | 100 | ||
| Capital | 100 | ||
| Production | 100 | ||
| Production function | 100 | ||
| Production in the short run: law of diminishing returns | 101 | ||
| The average and marginal concept | 102 | ||
| Production in the long run | 103 | ||
| Isoquants | 104 | ||
| Isocost | 106 | ||
| The least-cost process of production | 108 | ||
| The expansion path | 108 | ||
| Costs | 109 | ||
| What are costs? | 109 | ||
| Short-run and long-run costs | 110 | ||
| Total, average and marginal cost | 111 | ||
| Long-run average cost (LRAC) and economies of scale | 113 | ||
| Sources of economies of scale | 114 | ||
| Economies of scope | 116 | ||
| Diseconomies of scale | 116 | ||
| Key points | 117 | ||
| Further reading | 118 | ||
| Web references | 118 | ||
| Progress and review questions | 118 | ||
| Theory of the firm: perfect competition and monopoly | 123 | ||
| Learning objectives | 123 | ||
| Introduction | 123 | ||
| Revenue, costs and profit | 124 | ||
| Revenue | 124 | ||
| Profit maximisation | 127 | ||
| Perfect competition | 128 | ||
| What is perfect competition? | 128 | ||
| Short-run equilibrium in perfect competition | 129 | ||
| Long-run equilibrium in perfect competition | 131 | ||
| Allocative and productive efficiency | 132 | ||
| Contestable market theory | 133 | ||
| Monopoly | 134 | ||
| What is monopoly? | 134 | ||
| Barriers to entry | 135 | ||
| Advantages of a monopoly | 136 | ||
| Disadvantages of a monopoly | 137 | ||
| Price discrimination | 138 | ||
| Consumer surplus | 138 | ||
| First degree price discrimination | 139 | ||
| Second degree price discrimination | 140 | ||
| Third degree price discrimination | 140 | ||
| Key points | 142 | ||
| Further reading | 142 | ||
| Web references | 142 | ||
| Progress and review questions | 143 | ||
| Theory of the firm: monopolistic competition and oligopoly | 147 | ||
| Learning objectives | 147 | ||
| Introduction | 147 | ||
| Monopolistic competition | 147 | ||
| What is monopolistic competition? | 147 | ||
| Short-run equilibrium in monopolistic competition | 148 | ||
| Long-run equilibrium in monopolistic competition | 148 | ||
| Oligopoly: non-collusive | 150 | ||
| What is oligopoly? | 150 | ||
| The kinked demand curve and price rigidity | 150 | ||
| Other pricing strategies | 152 | ||
| Non-price competition | 152 | ||
| Oligopoly: collusion | 153 | ||
| Methods of collusion | 154 | ||
| Cartels | 154 | ||
| Price-leadership models | 156 | ||
| Game theory | 157 | ||
| Zero sum games | 157 | ||
| Non-zero sum games | 159 | ||
| Contestable markets | 160 | ||
| Key points | 161 | ||
| Further reading | 162 | ||
| Web references | 162 | ||
| Progress and review questions | 162 | ||
| Wages, rent and profit | 166 | ||
| Learning objectives | 166 | ||
| Introduction | 166 | ||
| Marginal productivity theory of wages | 166 | ||
| Perfectly competitive product and labour market | 167 | ||
| The firm’s demand curve for labour | 168 | ||
| The supply of labour | 169 | ||
| The labour market equilibrium | 170 | ||
| Labour demand and imperfect product markets | 172 | ||
| A monopsony market for labour | 173 | ||
| Trade unions and the market for labour | 175 | ||
| Impacts of trade unions | 175 | ||
| The bargaining strength of trade unions | 176 | ||
| Economic rent and transfer earnings | 178 | ||
| Economic rent | 178 | ||
| Transfer earnings | 178 | ||
| Economic rent versus transfer earnings | 178 | ||
| Profit | 180 | ||
| What is profit? | 180 | ||
| Profit as a cost of production | 181 | ||
| The function of profit | 181 | ||
| Determination of profit | 181 | ||
| Key points | 182 | ||
| Further reading | 182 | ||
| Web references | 182 | ||
| Progress and review questions | 183 | ||
| Regulation, deregulation and competition | 187 | ||
| Learning objectives | 187 | ||
| Introduction | 187 | ||
| Regulation | 187 | ||
| Types of regulation | 187 | ||
| Reasons for deregulation | 188 | ||
| Deregulation and public interest theory | 188 | ||
| Privatisation | 190 | ||
| The case for privatisation | 190 | ||
| The case against privatisation | 192 | ||
| 'Natural monopoly’ argument | 193 | ||
| Regulation of privatised companies | 194 | ||
| Objectives of regulators | 194 | ||
| Uk competition policy | 194 | ||
| The key institutions in UK merger policy | 194 | ||
| Restrictive practices legislation | 196 | ||
| Cartels in the UK | 197 | ||
| Eu competition policy | 197 | ||
| Eu restrictive practices and eu legislation | 199 | ||
| Key points | 200 | ||
| Further reading | 201 | ||
| Web references | 201 | ||
| Progress and review questions | 201 | ||
| The environment | 205 | ||
| Introduction | 205 | ||
| The economy and the environment | 205 | ||
| A model of pollution | 207 | ||
| Policy options | 208 | ||
| Bargaining and negotiation | 208 | ||
| Bargaining, game theory and the free-rider problem | 209 | ||
| Environmental taxes | 210 | ||
| Tradable permits | 211 | ||
| Environmental standards | 215 | ||
| Transport and the environment | 216 | ||
| The economic background | 217 | ||
| Possible policy options | 218 | ||
| key points | 222 | ||
| Further reading | 223 | ||
| Web references | 223 | ||
| Progress and review questions | 223 | ||
| Part two macroeconomics | 227 | ||
| National income and its determination | 229 | ||
| Learning objectives | 229 | ||
| Introduction | 229 | ||
| The circular flow of income | 230 | ||
| Circular flow of income: simplified | 230 | ||
| Circular flow of income: withdrawals and injections | 231 | ||
| National income: definitions and measurement | 233 | ||
| Using national income statistics | 239 | ||
| Comparing national living standards over time | 239 | ||
| Comparing living standards of different nations | 241 | ||
| National income determination | 242 | ||
| Equilibrium in the circular flow: W/J approach | 242 | ||
| Equilibrium in the circular flow: 45° diagram approach | 246 | ||
| Equivalence of the two approaches | 251 | ||
| Changes in national income | 252 | ||
| Changes in injections (J) | 252 | ||
| Changes in withdrawals (W) | 253 | ||
| National income and employment multipliers | 254 | ||
| National income multiplier | 254 | ||
| Employment multiplier | 257 | ||
| Key points | 257 | ||
| Further reading | 258 | ||
| Web references | 258 | ||
| Economic models and simulation | 258 | ||
| Progress and review questions | 259 | ||
| Public expenditure, taxation and fiscal policy | 267 | ||
| Learning objectives | 267 | ||
| Introduction | 267 | ||
| Rationale for a public sector | 268 | ||
| Government expenditure | 270 | ||
| What is government expenditure? | 270 | ||
| Growth of public expenditure | 270 | ||
| Total managed expenditure (TME) | 271 | ||
| Fiscal ‘rules’ | 271 | ||
| Explanations of the growth in public expenditure | 271 | ||
| Planning, monitoring and control | 273 | ||
| Public Expenditure Survey (PES) | 273 | ||
| Control total (CT) | 274 | ||
| Reasons for the control of public expenditure | 274 | ||
| More freedom and choice | 274 | ||
| To control the money supply | 275 | ||
| Crowding out | 275 | ||
| Incentives to work, save and take risks | 275 | ||
| Taxation | 276 | ||
| Direct and indirect taxes | 277 | ||
| Specific and percentage taxes | 278 | ||
| Progressive and regressive taxes | 278 | ||
| Individual taxes | 279 | ||
| Income tax in the UK | 279 | ||
| Other direct taxes in the UK | 280 | ||
| Indirect taxes in the UK | 280 | ||
| Other taxes in the UK | 281 | ||
| Taxes and economic incentives | 281 | ||
| Taxes and incentives to work | 281 | ||
| Comparative tax rates | 283 | ||
| Direct versus indirect taxes | 284 | ||
| Macroeconomic management | 284 | ||
| Economic incentives | 285 | ||
| Economic welfare | 285 | ||
| Administrative costs | 285 | ||
| Poverty and unemployment ‘traps’ | 286 | ||
| Poverty trap | 286 | ||
| Unemployment trap | 287 | ||
| The black economy | 288 | ||
| Fiscal policy | 289 | ||
| The Budget | 289 | ||
| Budget terminology | 289 | ||
| Fiscal policy and stabilisation | 290 | ||
| Business cycle | 290 | ||
| Built-in stabilisation | 291 | ||
| Discretionary fiscal stabilisation | 291 | ||
| Fiscal policy and globalisation | 293 | ||
| Key points | 293 | ||
| Further reading | 294 | ||
| Web references | 294 | ||
| Progress and review questions | 296 | ||
| Money, financial institutions and monetary policy | 300 | ||
| Learning objectives | 300 | ||
| Introduction | 300 | ||
| The functions of money | 300 | ||
| A medium of exchange | 301 | ||
| A unit of account | 301 | ||
| A store of value | 301 | ||
| A standard of deferred payment | 301 | ||
| Money supply | 302 | ||
| What is money? | 302 | ||
| Near money | 302 | ||
| Measuring the money supply | 303 | ||
| Credit creation | 304 | ||
| Financial institutions | 306 | ||
| The role of the financial system | 306 | ||
| The role of financial intermediaries | 307 | ||
| Uk financial intermediaries | 309 | ||
| The UK banking financial intermediaries | 310 | ||
| UK non-bank financial intermediaries | 311 | ||
| The Bank of England | 313 | ||
| Money supply and the bank of england | 314 | ||
| Supply of money | 314 | ||
| Money demand and interest rates | 316 | ||
| What is interest? | 316 | ||
| Theories of money demand and interest rate determination | 316 | ||
| Monetary policy | 321 | ||
| Controlling the money supply | 321 | ||
| Rate of interest | 322 | ||
| Monetary policy and financial globalisation | 322 | ||
| Key points | 323 | ||
| Further reading | 324 | ||
| Web references | 324 | ||
| Progress and review questions | 325 | ||
| Exchange rates and the balance of payments | 329 | ||
| Learning objectives | 329 | ||
| Introduction | 329 | ||
| Exchange rate | 330 | ||
| Determination of exchange rates | 331 | ||
| Types of exchange rate | 332 | ||
| The terms of trade | 334 | ||
| The marshall–lerner elasticity condition | 335 | ||
| The j-curve | 337 | ||
| Diffusion path for price changes following a currency depreciation | 337 | ||
| Time lag in adjustment of consumer behaviour to price changes | 339 | ||
| Expenditure switching v expenditure reducing policy instruments | 339 | ||
| Exchange rate policy and financial globalisation | 340 | ||
| Exchange rate systems | 341 | ||
| Fixed exchange rates (gold standard) | 341 | ||
| Adjustable peg system (IMF) | 342 | ||
| The floating exchange rate system | 343 | ||
| Single currency (euro) | 343 | ||
| Advantages of single currency | 344 | ||
| Disadvantages of single currency | 345 | ||
| Developments in the eurozone | 346 | ||
| The ‘Growth and Stability Pact’ | 346 | ||
| Balance of payments | 347 | ||
| Current account | 347 | ||
| Capital account | 348 | ||
| Financial account | 348 | ||
| Balancing item | 348 | ||
| Oil prices and the global economy | 348 | ||
| Key points | 350 | ||
| Further reading | 351 | ||
| Web references | 351 | ||
| Progress and review questions | 352 | ||
| Unemployment and inflation | 358 | ||
| Learning objectives | 358 | ||
| Introduction | 358 | ||
| Aggregate demand and aggregate supply analysis | 358 | ||
| Aggregate demand schedule | 359 | ||
| Aggregate supply schedule | 360 | ||
| AD/AS and equilibrium national output | 362 | ||
| Unemployment and its characteristics | 363 | ||
| Definition of unemployment | 363 | ||
| Measuring unemployment | 363 | ||
| The costs of unemployment | 364 | ||
| The characteristics of unemployment | 364 | ||
| The causes and remedies of unemployment | 366 | ||
| Frictional unemployment | 366 | ||
| Structural unemployment | 367 | ||
| Demand deficient unemployment | 367 | ||
| Real wage unemployment | 368 | ||
| Regional unemployment | 370 | ||
| Technological unemployment | 371 | ||
| Natural rate of unemployment (NRU) | 372 | ||
| Unemployment and supply-side policies | 373 | ||
| Inflation | 373 | ||
| The Retail Price Index (RPI) | 374 | ||
| RPIX | 375 | ||
| RPIY | 375 | ||
| Consumer Price Index (CPI) | 376 | ||
| The effects of inflation | 376 | ||
| Perfectly anticipated inflation | 376 | ||
| Unanticipated inflation | 376 | ||
| Economic theory and inflation | 379 | ||
| The quantity theory of money | 379 | ||
| The Phillips curve and inflation | 379 | ||
| The expectations-augmented Phillips curve | 381 | ||
| Aggregate demand, aggregate supply and inflation | 382 | ||
| Demand-pull inflation | 382 | ||
| Cost-push inflation | 383 | ||
| Counter-inflationary policies | 385 | ||
| Fiscal policy | 385 | ||
| Monetary policy | 385 | ||
| Prices and incomes policy | 385 | ||
| Supply-side policies | 385 | ||
| Key points | 386 | ||
| Further reading | 387 | ||
| Web references | 387 | ||
| Progress and review questions | 388 | ||
| International trade, international institutions and globalisation | 392 | ||
| Learning objectives | 392 | ||
| Introduction | 392 | ||
| The gains from trade | 393 | ||
| Why trade internationally? | 393 | ||
| Absolute advantage | 393 | ||
| Comparative advantage | 394 | ||
| Comparative advantage and opportunity cost | 395 | ||
| Limitations of the theory of comparative advantage | 396 | ||
| National competitive advantage | 397 | ||
| The terms of trade | 399 | ||
| Free trade and economic welfare | 399 | ||
| Protectionism | 400 | ||
| Tariffs | 400 | ||
| Quotas | 402 | ||
| Exchange controls | 402 | ||
| Subsidies | 402 | ||
| Administrative barriers | 402 | ||
| Voluntary export restraints | 402 | ||
| Arguments for protection | 402 | ||
| Arguments against protection | 403 | ||
| International framework for trade | 404 | ||
| General Agreement on Tariffs and Trade (GATT) | 404 | ||
| World Trade Organisation (WTO) | 405 | ||
| Regional trading arrangements (rtas) | 407 | ||
| Types of regional trading arrangements | 407 | ||
| Globalisation | 408 | ||
| Characteristics of globalisation | 409 | ||
| Indicators of globalisation | 411 | ||
| Globalisation and the value chain | 414 | ||
| Relative unit labour costs (RULCs) | 414 | ||
| Key points | 416 | ||
| Further reading | 416 | ||
| Web references | 416 | ||
| Progress and review questions | 417 | ||
| Economic integration and the European Union | 422 | ||
| Learning objectives | 422 | ||
| Introduction | 422 | ||
| Customs unions: trade creation and trade diversion | 423 | ||
| Origins of the eu | 425 | ||
| Single European Act (SEA) | 426 | ||
| Maastricht Treaty | 426 | ||
| Eu laws and regulations | 426 | ||
| European Commission (EC) | 428 | ||
| European Parliament (EP) | 428 | ||
| European Court of Justice (ECJ) | 429 | ||
| Council of Ministers | 429 | ||
| European Council | 429 | ||
| Characteristics of the eu | 431 | ||
| Country-specific data on the original EU 15 | 431 | ||
| EU enlargement | 431 | ||
| Eu common agricultural policy (cap) | 431 | ||
| Common fisheries policy | 434 | ||
| Eu industrial policy | 436 | ||
| Eu social chapter | 438 | ||
| Main directives of the Social Chapter | 439 | ||
| Economic analysis of the Social Chapter | 440 | ||
| Failures of the competitive labour-market process | 443 | ||
| Eu competition policy | 443 | ||
| Cross-border mergers policy | 444 | ||
| New EU cross-border merger regulations | 445 | ||
| Restrictive practices and EU legislation | 445 | ||
| EU competition policy and economic efficiency | 447 | ||
| Key points | 448 | ||
| Further reading | 449 | ||
| Web references | 449 | ||
| Progress and review questions | 450 | ||
| Growth, sustainable development and the less developed countries | 454 | ||
| Learning objectives | 454 | ||
| Introduction | 454 | ||
| Theories of economic growth | 455 | ||
| Classical growth theory | 455 | ||
| Neo-classical growth theory | 456 | ||
| Modern growth theories | 459 | ||
| Sustainable development | 459 | ||
| Characteristics of sustainable development | 459 | ||
| Key conditions for sustainable development | 461 | ||
| Measuring sustainable development | 463 | ||
| Technical change and sustainability | 465 | ||
| GNP data, developed and developing countries | 466 | ||
| Human Development Index (HDI) classification | 467 | ||
| Major features of ldcs | 469 | ||
| International development targets | 473 | ||
| Urbanisation and developing economies | 474 | ||
| Impacts of urbanisation | 474 | ||
| Reasons for urbanisation | 476 | ||
| Aid, trade and development | 476 | ||
| Foreign aid and development | 476 | ||
| Trade and development | 478 | ||
| Debt and development | 479 | ||
| Reasons for LDC borrowing | 479 | ||
| Resolving the debt problem | 480 | ||
| The role of the imf and world bank | 480 | ||
| IMF ‘stabilisation programmes’ | 480 | ||
| World Bank ‘structural adjustment lending’ | 481 | ||
| Stabilisation | 481 | ||
| Structural adjustment | 482 | ||
| Criticisms of IMF action | 482 | ||
| Key points | 483 | ||
| Further reading | 483 | ||
| Web references | 483 | ||
| Progress and review questions | 484 | ||
| Answers to selected Mini Case Studies and Progress and Review Questions | 488 | ||
| Index | 528 |