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• Half Title
• Title Page
• Copyright Page
• Brief Contents
• Contents
• Part 1 The Scope of Economics
• Chapter 1 What Is Economics?
• A Definition of Economics
• Two Big Economic Questions
• What, How and For Whom?
• Do Choices Made in the Pursuit of Self-interest also Promote the Social Interest?
• The Economic Way of Thinking
• A Choice Is a Trade-Off
• Making a Rational Choice
• Benefit: What You Gain
• Cost: What You Must Give Up
• How Much? Choosing at the Margin
• Choices Respond to Incentives
• Economics as a Social Science and Policy Tool
• Economist as Social Scientist
• Economist as Policy Adviser
• Economics in the News The Internet for Everyone
• Summary (Key Points and Key Terms), a Worked Problem, Study Plan Problems and Applications, and Addi
• Chapter 1 Appendix: Graphs in Economics
• Graphing Data
• Scatter Diagrams
• Breaks in the Axes
• Misleading Graphs
• Correlation and Causation
• Graphs Used in Economic Models
• Variables That Move in the Same Direction
• Variables That Move in Opposite Directions
• Variables That Have a Maximum or a Minimum
• Variables That Are Unrelated
• Slope of a Relationship
• Slope of a Straight Line
• Slope of a Curved Line
• Graphing Relationships Among More Than Two Variables
• Ceteris Paribus
• When Other Things Change
• Mathematical Note Equations of Straight Lines
• Chapter 2 The Economic Problem
• Production Possibilities and Opportunity Cost
• Production Possibilities Frontier
• Production Efficiency
• Trade-Off Along the PPF
• Opportunity Cost
• Using Resources Efficiently
• The PPF and Marginal Cost
• Preferences and Marginal Benefit
• Efficient Use of Resources
• Economic Growth
• The Cost of Economic Growth
• Gains from Trade
• Comparative Advantage and Absolute Advantage
• Achieving the Gains from Trade
• Economic Coordination
• Firms
• Markets
• Property Rights
• Money
• Circular Flows Through Markets
• Coordinating Decisions
• Economics in the News Expanding Production Possibilities
• Part 2 How Markets Work
• Chapter 3 Demand and Supply
• Markets and Prices
• Competitive Market
• Demand
• The Law of Demand
• Demand Curve and Demand Schedule
• Change in Demand
• Change in the Quantity Demanded versus Change in Demand
• Supply
• The Law of Supply
• Supply Curve and Supply Schedule
• Change in Supply
• Change in the Quantity Supplied versus Change in Supply
• Market Equilibrium
• Price as a Regulator
• Price Adjustments
• Predicting Changes in Price and Quantity
• Increase in Demand
• Decrease in Demand
• Increase in Supply
• Decrease in Supply
• Changes in Both Demand and Supply
• Economics in the News Demand and Supply of Hand Sanitiser
• Mathematical Note Demand, Supply and Equilibrium
• Chapter 4 Elasticity
• Price Elasticity of Demand
• Calculating the Price Elasticity of Demand
• Inelastic and Elastic Demand
• Factors That Influence the Elasticity of Demand
• Elasticity Along a Linear Demand Curve
• Total Revenue and Elasticity
• Your Expenditure and Your Elasticity
• More Elasticities of Demand
• Income Elasticity of Demand
• Cross Elasticity of Demand
• Elasticity of Supply
• Calculating the Elasticity of Supply
• Factors That Influence the Elasticity of Supply
• Economics in the News The Elasticity of Supply of Face Masks
• Chapter 5 Efficiency and Equity
• Resource Allocation Methods
• Market Price
• Command
• Majority Rule
• Contest
• First-Come, First-Served
• Lottery
• Personal Characteristics
• Force
• Benefit, Cost and Surplus
• Demand, Willingness to Pay and Value
• Individual Demand and Market Demand
• Consumer Surplus
• Supply and Marginal Cost
• Supply, Cost and Minimum Supply-Price
• Individual Supply and Market Supply
• Producer Surplus
• Is the Competitive Market Efficient?
• Efficiency of Competitive Equilibrium
• Market Failure
• Sources of Market Failure
• Alternatives to the Market
• Is the Competitive Market Fair?
• It’s Not Fair if the Result Isn’t Fair
• It’s Not Fair if the Rules Aren’t Fair
• Case Study: A Shortage of Hotel Rooms in a Natural Disaster
• Economics in the News Covid-19 Price Gouging
• Chapter 6 Government Actions in Markets
• A Housing Market with a Rent Ceiling
• A Housing Shortage
• Increased Search Activity
• A Black Market
• Inefficiency of Rent Ceilings
• Are Rent Ceilings Fair?
• Allocating Housing Among Demanders
• A Labour Market with a Minimum Wage
• Minimum Wage Brings Unemployment
• Is the Minimum Wage Fair?
• Inefficiency of a Minimum Wage
• Taxes
• Tax Incidence
• A Tax on Sellers
• A Tax on Buyers
• Equivalence of Tax on Buyers and Sellers
• Tax Incidence and Elasticity of Demand
• Tax Incidence and Elasticity of Supply
• Taxes and Efficiency
• Taxes and Fairness
• Production Quotas and Subsidies and Price Supports
• Production Quotas
• Production Subsidies
• Price Supports
• Markets for Illegal Goods
• Economics in the News Inefficient Rent Ceilings
• Chapter 7 Global Markets in Action
• How Global Markets Work
• International Trade Today
• What Drives International Trade?
• Why the UK Imports Cars
• Why the UK Exports Chemicals
• Winners, Losers and the Net Gain from Trade
• Gains and Losses from Imports
• Gains and Losses from Exports
• Gains for All
• International Trade Restrictions
• Tariffs
• Import Quotas
• Export Subsidies
• Other Import Barriers
• The Case Against Protection
• Helps an Infant Industry Grow
• Counteracts Dumping
• Saves Domestic Jobs
• Allows the UK to Compete with Cheap Foreign Labour
• Penalises Lax Environmental Standards
• Prevents Rich Countries from Exploiting Developing Countries
• Reduces Offshore Outsourcing that Sends Good UK Jobs Abroad
• Avoiding Trade Wars
• Why Is International Trade Restricted?
• Compensating Losers
• Economics in the News Brexit: Free Trade in Raw Sugar
• Part 3 Households, Firms and Markets
• Chapter 8 Households’ Choices
• Consumption Possibilities
• Budget Line
• Budget Equation
• Preferences and Indifference Curves
• Marginal Rate of Substitution
• Degree of Substitutability
• Predicting Consumer Behaviour
• Best Affordable Choice
• Price Effect
• Income Effect
• Substitution Effect and Income Effect
• New Ways of Explaining Household’s Choices
• Behavioural Economics
• Neuroeconomics
• Controversy
• Economics in the News Preferences and Choices
• Chapter 9 Organising Production
• The Firm and Its Economic Problem
• The Firm’s Goal
• Accounting Profit
• Economic Accounting
• Opportunity Cost of Production
• Economic Accounting: A Summary
• The Firm’s Decisions
• The Firm’s Constraints
• Technological and Economic Efficiency
• Technological Efficiency
• Economic Efficiency
• Information and Organisation
• Command Systems
• Incentive Systems
• The Principal-Agent Problem
• Coping with the Principal-Agent Problem
• Types of Business Organisations
• Pros and Cons of Different Types of Firms
• Markets and the Competitive Environment
• Identifying Market Structure
• UK Market Structures
• Produce or Outsource? Firms and Markets
• Firm Coordination
• Market Coordination
• Why Firms?
• Economics in the News Competition in Markets for Internet Advertising
• Chapter 10 Output and Costs
• Time Frames for Decisions
• Short Run
• Long Run
• Short-Run Technology Constraint
• Product Schedules and Curves
• Total Product Curve
• Marginal Product Curve
• Average Product Curve
• Short-Run Cost
• Total Cost
• Marginal Cost
• Average Cost
• Cost Curves and Product Curves
• Shifts in the Cost Curves
• Long-Run Cost
• Production Function
• Short-Run Cost and Long-Run Cost
• Long-Run Average Cost Curve
• Economies and Diseconomies of Scale
• Economics in the News Expanding Capacity at Amazon
• Chapter 10 Appendix: Producing at Least Cost
• Isoquants and Factor Substitution
• Isoquant Map
• Marginal Rate of Substitution
• Isocost Lines
• Isocost Equation
• Isocost Map
• The Effect of Factor Prices
• Least-Cost Technique
• Marginal Rate of Substitution and Marginal Products
• Marginal Cost
• Making Connections
• Chapter 11 Perfect Competition
• What Is Perfect Competition?
• How Perfect Competition Arises
• Price Takers
• Economic Profit and Revenue
• The Firm’s Decisions
• The Firm’s Output Decision
• Marginal Analysis
• Temporary Shutdown Decision
• Firm’s Short-Run Supply Curve
• Output, Price and Profit in the Short Run
• Market Supply in the Short Run
• Short-Run Equilibrium
• Change in Demand
• Profits and Losses in the Short Run
• Output, Price and Profit in the Long Run
• Entry and Exit
• Closer Look at Entry
• Closer Look at Exit
• Long-Run Equilibrium
• Changes in Demand and Supply as Technology Advances
• Increase in Demand
• Decrease in Demand
• Technological Advances Change Supply
• Competition and Efficiency
• Efficient Use of Resources
• Choices, Equilibrium and Efficiency
• Economics in the News Perfect Competition in Hand Sanitiser
• Chapter 12 Monopoly
• Monopoly and How It Arises
• How Monopoly Arises
• Monopoly Price-Setting Strategies
• Single-Price Monopoly’s Output and Price Decision
• Price and Marginal Revenue
• Marginal Revenue and Elasticity
• Price and Output Decision
• Single-Price Monopoly and Competition Compared
• Comparing Price and Output
• Efficiency Comparison
• Redistribution of Surpluses
• Rent Seeking
• Rent-Seeking Equilibrium
• Price Discrimination
• Two Ways of Price Discriminating
• Increase Profit and Producer Surplus
• Profiting by Price Discriminating
• Perfect Price Discrimination
• Efficiency and Rent Seeking with Price Discrimination
• Monopoly Regulation
• Efficient Regulation of a Natural Monopoly
• Second-Best Regulation of a Natural Monopoly
• Economics in the News Is Google Misusing Monopoly Power?
• Chapter 13 Monopolistic Competition
• What Is Monopolistic Competition?
• Large Number of Firms
• Product Differentiation
• Competing on Quality, Price and Marketing
• Entry and Exit
• Examples of Monopolistic Competition
• Price and Output in Monopolistic Competition
• The Firm’s Short-Run Output and Price Decision
• Profit Maximising Might Be Loss Minimising
• Long Run: Zero Economic Profit
• Monopolistic Competition and Perfect Competition
• Is Monopolistic Competition Efficient?
• Product Development and Marketing
• Innovation and Product Development
• Advertising
• Using Advertising to Signal Quality
• Brand Names
• Efficiency of Advertising and Brand Names
• Economics in the News Product Differentiation in Robot Barista Coffee
• Chapter 14 Oligopoly
• What Is Oligopoly?
• Barriers to Entry
• Small Number of Firms
• Examples of Oligopoly
• Oligopoly Games
• What Is a Game?
• The Prisoners’ Dilemma
• An Oligopoly Price-Fixing Game
• Game of Chicken
• Repeated Games and Sequential Games
• Repeated Duopoly Game
• Sequential Entry Game in a Contestable Market
• Antitrust Law
• UK and EU Antitrust Laws
• Price Fixing Always Illegal
• Three Antitrust Policy Debates
• Mergers and Acquisitions
• Economics in the News Collusion in Airbags
• Part 4 Coping with Market Failure
• Chapter 15 Public Choices and Public Goods
• Public Choices
• Why Governments?
• Political Equilibrium
• What Is a Public Good?
• A Fourfold Classification
• Mixed Goods
• Inefficiencies that Require Public Choices
• Providing Public Goods
• Free-Rider Problem
• Marginal Social Benefit from a Public Good
• Marginal Social Cost of a Public Good
• Efficient Quantity of a Public Good
• Inefficient Private Provision
• Efficient Public Provision
• Principle of Minimum Differentiation
• Inefficient Public Overprovision
• Positive Externalities: Education and Healthcare
• Positive Externalities
• Public Choices in Education
• Healthcare Services
• Economics in the News Developing a Covid-19 Vaccine
• Chapter 16 Economics of the Environment
• Negative Externalities: Pollution
• Negative Externalities
• Establish Property Rights
• Mandate Clean Technology
• Tax or Cap and Price Pollution
• Coping with Global Emissions
• The Tragedy of the Commons
• Unsustainable Use of a Common Resource
• Inefficient Use of a Common Resource
• Achieving an Efficient Outcome
• Economics in the News Onshore Wind Subsidies Boost the Move to Net Zero
• Part 5 Factor Markets, Inequality and Uncertainty
• Chapter 17 Markets for Factors of Production
• Anatomy of Factor Markets
• Markets for Labour Services
• Markets for Capital Services
• Markets for Land Services and Natural Resources
• Entrepreneurship
• Demand for a Factor of Production
• Value of Marginal Product
• Firm’s Demand for Labour
• Firm’s Demand for Labour Curve
• Changes in the Demand for Labour
• Labour Markets
• Competitive Labour Market
• Differences and Trends in Wage Rates
• Immigration and the Labour Market
• Labour Market with a Union
• Capital and Natural Resource Markets
• Capital Rental Markets
• Land Rental Markets
• Non-Renewable Natural Resource Markets
• Economics in the News Gig and Sharing Economy
• Mathematical Note Present Value and Discounting
• Chapter 18 Economic Inequality and Redistribution
• Economic Inequality in the UK
• Distribution of Income
• Income Lorenz Curve
• Distribution of Wealth
• Wealth or Income?
• Annual or Lifetime Income and Wealth?
• Trends in Inequality
• Poverty
• Inequality in the World Economy
• Income Distributions in Selected Countries
• Global Inequality and Its Trends
• Sources of Economic Inequality
• Human Capital
• Discrimination
• Contests Among Superstars
• Unequal Wealth
• Income Redistribution
• Income Taxes
• Benefit Payments
• Subsidised Welfare Services
• The Big Trade-Off
• Economics in the News Covid-19: Impact on Inequality
• Chapter 19 Uncertainty and Information
• Decisions in the Face of Uncertainty
• Expected Wealth
• Risk Aversion
• Utility of Wealth
• Expected Utility
• Making a Choice with Uncertainty
• Buying and Selling Risk
• Insurance Markets
• Graphical Analysis of Insurance
• Risk that Can’t Be Insured
• Private Information
• Asymmetric Information: Examples and Problems
• Market for Used Cars
• Market for Loans
• Market for Insurance
• Uncertainty, Information and the Invisible Hand
• Information as a Good
• Monopoly in Markets that Cope with Uncertainty
• Economics in the News Grades as Signals
• Part 6 Monitoring Macroeconomic Performance
• Chapter 20 Measuring GDP and Economic Growth
• Gross Domestic Product
• GDP Defined
• Circular Flow of Expenditure and Income
• Taxes, Market Price and Factor Cost
• Gross and Net
• Measuring UK GDP
• Expenditure Approach
• Income Approach
• Nominal GDP and Real GDP
• Calculating Real GDP
• Uses and Limitations of Real GDP
• Standard of Living Over Time
• Standard of Living Across Countries
• Limitations of Real GDP
• The Bottom Line
• Economics in the News Real GDP Through the Covid-19 Recession
• Chapter 20 Appendix: Graphs in Macroeconomics
• Time-Series Graph
• Making a Time-Series Graph
• Reading a Time-Series Graph
• Ratio Scale Reveals Trend
• A Time Series with a Trend
• Graph That Uses a Ratio Scale
• Mathematical Note Chain Volume Measure of Real GDP
• Chapter 21 Monitoring Jobs and Inflation
• Employment and Unemployment
• Why Unemployment Is a Problem
• Labour Force Survey
• Three Labour Market Indicators
• Other Definitions of Economic Inactivity and Unemployment
• Most Costly Unemployment
• Other Measures of Unemployment
• Unemployment and Full Employment
• Frictional Unemployment
• Structural Unemployment
• Cyclical Unemployment
• ‘Natural’ Unemployment
• Real GDP and Unemployment Over the Business Cycle
• Price Level, Inflation and Deflation
• Why Inflation and Deflation Are Problems
• Consumer Prices Index
• Reading the CPI Numbers
• Constructing the CPI
• Older Price Indexes
• Measuring the Inflation Rate
• Distinguishing High Inflation from a High Price Level
• Biased Price Indexes
• Magnitude of the Bias
• Some Consequences of Bias in the CPI
• Alternative Price Indexes
• The Alternatives Compared
• Real Variables in Macroeconomics
• Economics in the News Inflation in Lockdown
• Part 7 Macroeconomic Trends
• Chapter 22 Economic Growth
• Basics of Economic Growth
• Calculating Growth Rates
• Economic Growth versus Business Cycle Expansion
• Magic of Sustained Growth
• Applying the Rule of 70
• Long-Term Growth Trends
• Long-Term Growth in the UK Economy
• Real GDP Growth in the World Economy
• How Potential GDP Grows
• What Determines Potential GDP?
• What Makes Potential GDP Grow?
• Why Labour Productivity Grows
• Preconditions for Labour Productivity Growth
• Physical Capital Growth
• Human Capital Growth
• Technological Advances
• Growth Theories, Evidence and Policies
• Classical Growth Theory
• Neoclassical Growth Theory
• New Growth Theory
• New Growth Theory versus Malthusian Theory
• Sorting Out the Theories
• Empirical Evidence on the Causes of Economic Growth
• Policies for Achieving Faster Growth
• Economics in the News UK Growth, Covid and Brexit
• Chapter 23 Finance, Saving and Investment
• Financial Institutions and Financial Markets
• Finance and Money
• Physical Capital and Financial Capital
• Capital and Investment
• Wealth and Saving
• Financial Capital Markets
• Financial Institutions
• Insolvency and Illiquidity
• Interest Rates and Asset Prices
• Funds that Finance Investment
• Real Interest Rate
• Loanable Funds Market
• Demand for Loanable Funds
• Supply of Loanable Funds
• Equilibrium in the Loanable Funds Market
• Changes in Demand and Supply
• Government in the Loanable Funds Market
• Government Budget Surplus
• Government Budget Deficit
• Economics in the News Lowering Borrowing Costs
• Chapter 24 Money, the Price Level and Inflation
• What Is Money?
• Medium of Exchange
• Unit of Account
• Store of Value
• Money in the UK Today
• Monetary Financial Institutions
• Types of Monetary Financial Institutions
• What Monetary Financial Institutions Do
• Economic Benefits Provided by Monetary Financial Institutions
• How Monetary Financial Institutions Are Regulated
• Financial Innovation
• Central Banking
• European Central Bank
• Bank of England
• Bank of England’s Balance Sheet
• Bank of England’s Policy Tools
• How Banks Create Money
• Creating Deposits by Making Loans
• Money Creation Process
• Money Multiplier
• Money Market
• Demand for Money
• Changes in the Demand for Money
• Supply of Money
• Quantity Theory of Money
• Economics in the News Covid Monetary Policy
• Mathematical Note Money Multiplier
• Chapter 25 International Finance
• Foreign Exchange Market
• Foreign Currencies
• Trading Currencies
• Exchange Rates
• An Exchange Rate is a Price
• Demand for One Money Is the Supply of Another Money
• Demand in the Foreign Exchange Market
• Law of Demand for Foreign Exchange
• Demand Curve for Pounds Sterling
• Supply in the Foreign Exchange Market
• Law of Supply of Foreign Exchange
• Supply Curve of Pounds Sterling
• Market Equilibrium
• Changes in the Demand for Pounds
• Changes in the Supply of Pounds
• Changes in the Exchange Rate
• Arbitrage, Speculation and Market Fundamentals
• Arbitrage
• Speculation
• Market Fundamentals
• Exchange Rate Policy
• Flexible Exchange Rate
• Fixed Exchange Rate
• Crawling Peg
• European Monetary Union
• Benefits of the Euro
• Economic Costs of the Euro
• Optimum Currency Area
• Financing International Trade
• Balance of Payments Accounts
• Borrowers and Lenders
• Global Loanable Funds Market
• Debtors and Creditors
• Is Net Borrowing a Problem?
• Current Account Balance
• Where Is the Exchange Rate?
• Economics in the News Will China’s Currency Keep Rising?
• Part 8 Macroeconomic Fluctuations
• Chapter 26 Aggregate Supply and Aggregate Demand
• Aggregate Supply
• Quantity Supplied and Supply
• Aggregate Supply Time Frames
• Long-Run Aggregate Supply
• Short-Run Aggregate Supply
• Changes in Aggregate Supply
• Aggregate Demand
• Aggregate Demand Curve
• Changes in Aggregate Demand
• Explaining Macroeconomic Trends and Fluctuations
• Short-Run Macroeconomic Equilibrium
• Long-Run Macroeconomic Equilibrium
• Economic Growth and Inflation in the AS-AD Model
• The Business Cycle in the AS-AD Model
• Fluctuations in Aggregate Demand
• Fluctuations in Aggregate Supply
• Macroeconomic Schools of Thought
• Classical View
• Keynesian View
• Monetarist View
• The Way Ahead
• Economics in the News Aggregate Supply and Aggregate Demand Through Covid
• Chapter 27 Expenditure Multipliers
• Fixed Prices and Expenditure Plans
• Expenditure Plans
• Consumption and Saving Plans
• Marginal Propensities
• Slopes and Marginal Propensities
• Consumption and Real GDP
• Import Function
• Real GDP with a Fixed Price Level
• Aggregate Planned Expenditure
• Actual Expenditure, Planned Expenditure and Real GDP
• Equilibrium Expenditure
• Convergence to Equilibrium
• The Multiplier
• Basic Idea of the Multiplier
• Multiplier Effect
• Why Is the Multiplier Greater Than 1?
• Size of the Multiplier
• The Multiplier and the Slope of the AE Curve
• Imports and Income Taxes
• Multiplier Process
• Business Cycle Turning Points
• The Multiplier and the Price Level
• Adjusting Quantities and Prices
• Aggregate Expenditure and Aggregate Demand
• Deriving the Aggregate Demand Curve
• Changes in Aggregate Expenditure and Aggregate Demand
• Equilibrium Real GDP and the Price Level
• Economics in the News The Keynesian Model in Action
• Mathematical Note The Algebra of the Multiplier
• Chapter 28 The Business Cycle, Inflation and Deflation
• The Business Cycle
• Mainstream Business Cycle Theory
• Real Business Cycle Theory
• Inflation Cycles
• Demand-Pull Inflation
• Cost-Push Inflation
• Expected Inflation
• Forecasting Inflation
• Inflation and the Business Cycle
• Deflation
• What Causes Deflation?
• What Are the Consequences of Deflation?
• How Can Deflation Be Ended?
• The Phillips Curve
• Short-Run Phillips Curve
• Long-Run Phillips Curve
• Economics in the News Covid Recession and Recovery in the Eurozone
• Part 9 Macroeconomic Policy
• Chapter 29 Fiscal Policy
• Government Budgets
• Highlights of the UK Budget in 2021/22
• UK Budget in Historical Perspective
• UK and EU Budget Balances and Debt in a Global Perspective
• Supply-Side Effects of Fiscal Policy
• Full Employment and Potential GDP
• Effects of the Income Tax
• Taxes on Expenditure and the Tax Wedge
• Taxes and the Incentive to Save and Invest
• Tax Revenues and the Laffer Curve
• Supply-Side Debate
• Generational Effects of Fiscal Policy
• Generational Accounting and Present Value
• UK Welfare State and the Pensions Time Bomb
• Generational Imbalance
• International Debt
• Fiscal Stimulus
• Automatic Fiscal Policy and Cyclical and Structural Budget Balances
• Discretionary Fiscal Stimulus
• Economics in the News Fiscal Policy in the UK
• Chapter 30 Monetary Policy
• Monetary Policy Objectives and Framework
• Monetary Policy Objectives
• Remit for the Monetary Policy Committee
• Actual Inflation and the Inflation Target
• Conduct of Monetary Policy
• Monetary Policy Instruments
• Monetary Policy Decisions
• Implementing the Policy Decision
• Monetary Policy Transmission
• Quick Overview
• Interest Rate Changes
• Exchange Rate Fluctuations
• Money and Bank Loans
• Long-Term Real Interest Rate
• Expenditure Plans
• Change in Aggregate Demand, Real GDP and the Price Level
• The Bank Fights Recession
• The Bank Fights Inflation
• Loose Links and Long and Variable Lags
• Financial Crisis: Cure and Prevention
• Anatomy of the Financial Crisis
• The 2007–2008 Crisis
• Policy Actions
• Economics in the News Monetary Policy Dilemma
• Glossary
• Index
• Publisher’s Acknowledgements
• Back Cover