Essentials of Economics, 8th Edition
- Length: 552 pages
- Edition: 8
- Language: English
- Publisher: Pearson
- Publication Date: 2018-12-04
- ISBN-10: 129223959X
- ISBN-13: 9781292239590
- Sales Rank: #7161260 (See Top 100 Books)
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Front Cover Half Title Page Title Page Copyright Page About the authors Brief contents Detailed contents Preface Student and lecturer resources Acknowledgements Part A INTRODUCTION Chapter 1 Economic issues 1.1 Engaging with Economics An island economy Economic puzzles and issues 1.2 The Economic Problem The problem of scarcity Demand and supply 1.3 Dividing Up the Subject Microeconomics Macroeconomics 1.4 Modelling Economic Relationships The production possibility curve The circular flow of goods and incomes Models and data 1.5 Economic Systems The command economy The free-market economy The price mechanism The mixed market economy Chapter 1 Boxes 1.1 The Opportunity Costs of Studying: What are you sacrificing? 1.2 Business Cycles: The inherent volatility of economies 1.3 Nominal and Real House Prices: Going through the roof 1.4 Command Economies: Rise and fall of planning in Russia Part B MICROECONOMICS Chapter 2 Markets, demand and supply 2.1 Demand The relationship between demand and price The demand curve Other determinants of demand Movements along and shifts in the demand curve 2.2 Supply Supply and price The supply curve Other determinants of supply Movements along and shifts in the supply curve 2.3 The Determination of Price Equilibrium price and output Movement to a new equilibrium 2.4 The Free-Market Economy Advantages of a free-market economy Problems with a free-market economy Chapter 2 Boxes 2.1 UK House Prices: Unearthing the foundations of house price patterns 2.2 Stock Market Prices: Taking stock of share prices 2.3 Commodity Prices: Riding the commodities Big Dipper Chapter 3 Markets in action 3.1 Price Elasticity of Demand The price elasticity of demand Measuring the price elasticity of demand Interpreting the figure for elasticity Determinants of price elasticity of demand 3.2 Price Elasticity of Demand and Consumer Expenditure 3.3 Price Elasticity of Supply (PES) The determinants of price elasticity of supply 3.4 Other Elasticities Income elasticity of demand Cross-price elasticity of demand 3.5 Markets and Adjustment over Time Short-run and long-run adjustment Price expectations and speculation 3.6 Markets Where Prices are Controlled Setting a minimum (high) price Setting a maximum (low) price Chapter 3 Boxes 3.1 The Measurement of Elasticity 3.2 Advertising and its Effect on Demand Curves: How to increase sales and price 3.3 Elasticities and Relationships: Where there’s a relationship, there’s an elasticity 3.4 Short Selling: Gambling on a fall in share prices 3.5 A Minimum Unit Price for Alcohol: A way of reducing alcohol consumption 3.6 UK Payday Loan Cap: Capping the cost of short-term credit 3.7 The Effect of Imposing Taxes on Goods: Who ends up paying? Chapter 4 The demand decision 4.1 Consumer Choice Utility and the rational consumer The rational consumer’s optimal combination of goods 4.2 The Timing of Costs and Benefits Intertemporal choices Maximising utility with intertemporal choices 4.3 Uncertainty and Risk Choice under risk and uncertainty Attitudes towards risk Insurance: a way of removing risks Choices under asymmetric information 4.4 Behavioural Economics What is behavioural economics? Processing limited information Taking other people into account Biased behaviour Implications for economic policy Chapter 4 Boxes 4.1 Satisfaction and Consumer Demand: Identifying the benefit drivers 4.2 Optimal Consumption Bundles: Equi-marginal principle in consumption 4.3 Intertemporal Decision Making and the Rational Consumer: Incorporating impatience into models of consumer choice 4.4 Futures Markets: A way of reducing uncertainty 4.5 Problems with Insurance Markets: Adverse selection and moral hazard 4.6 Nudging People: How to change behaviour without taking away choice Chapter 5 The supply decision 5.1 Production and Costs: Short Run Short-run and long-run changes in production Production in the short run: the law of diminishing returns Measuring costs of production Costs and output 5.2 Production and Costs: Long Run The scale of production Long-run average cost The relationship between long-run and short-run average cost curves Long-run cost curves in practice Postscript: decision- making in different time periods 5.3 Revenue Total, average and marginal revenue Average and marginal revenue curves when price is not affected by the firm’s output Average and marginal revenue curves when price varies with output Shifts in revenue curves 5.4 Profit Maximisation Some qualifications 5.5 Problems with Traditional Theory Explaining actual producer behaviour Alternative aims Chapter 5 Boxes 5.1 Diminishing Returns in the Bread Shop: Is the baker using his loaf? 5.2 Malthus and the Dismal Science of Economics: Population growth + diminishing returns = starvation 5.3 The Relationship Between Averages and Marginals 5.4 Costs and the Economic Vulnerability of Firms: The behaviour of costs and firms’ financial well-being 5.5 The Optimum Combinations of Inputs: Equi-marginal principle in production 5.6 Minimum Efficient Scale: The extent of economies of scale in practice Chapter 6 Market structures 6.1 The Degree of Competition 6.2 Perfect Competition Assumptions The short-run equilibrium of the firm The short-run supply curve The long-run equilibrium of the firm 6.3 Monopoly What is a monopoly? Barriers to entry Equilibrium price and output Monopoly versus perfect competition: which best serves the public interest? Potential competition or potential monopoly? The theory of contestable markets 6.4 Monopolistic Competition Assumptions Equilibrium of the firm Non-price competition Monopolistic competition and the public interest 6.5 Oligopoly The two key features of oligopoly Competition and collusion Collusive oligopoly Non-collusive oligopoly: the breakdown of collusion Non-collusive oligopoly: assumptions about rivals’ behaviour Oligopoly and the consumer 6.6 Game Theory Simultaneous single-move games Repeated simultaneous-move games Sequential move games 6.7 Price Discrimination Advantages to the firm Price discrimination and the public interest Chapter 6 Boxes 6.1 E-Commerce: Has technology shifted market power? 6.2 Breaking Sky’s Monopoly on Live Premier League Football: The sky is the limit for the English Premier League 6.3 OPEC: The history of the world’s most famous cartel 6.4 Buying Power: What’s being served up by the UK grocery sector? 6.5 The Prisoners’ Dilemma: Choosing whether to deny or confess 6.6 Profit-Maximising Prices and Output For a Third-Degree Price Discriminating Firm: Identifying different prices in different markets Chapter 7 Wages and the distribution of income 7.1 Wage Determination in a Perfect Market Perfect labour markets The supply of labour The demand for labour: the marginal productivity theory Wages and profits under perfect competition 7.2 Wage Determination in Imperfect Markets Firms with power The role of trade unions Bilateral monopoly The efficiency wage hypothesis 7.3 Inequality Types of inequality Measuring the size distribution of income The functional distribution of income The distribution of wealth Causes of inequality 7.4 The Redistribution of Income Taxation Benefits The tax/benefit system and the problem of disincentives: the ‘poverty trap’ Chapter 7 Boxes 7.1 Labour Market Trends: Patterns in employment 7.2 Wages under Bilateral Monopoly: All to play for? 7.3 The Gender Pay Gap: Wage inequalities between men and women 7.4 Minimum Wage Legislation: A way of helping the poor? 7.5 Inequality and Economic Growth: Macroeconomic implications of income inequality 7.6 Uk Tax Credits: An escape from the poverty trap? Chapter 8 Market failures and government policy 8.1 Social Efficiency 8.2 Market Failures: Externalities and Public Goods Externalities Public goods 8.3 Market Failures: Monopoly Power Deadweight loss under monopoly Conclusions 8.4 Other Market Failures Imperfect information Immobility of factors and time lags in response Protecting people’s interests Other objectives How far can economists go in advising governments? 8.5 Government Intervention: Taxes and Subsidies The use of taxes and subsidies Assessing the use of taxes and subsidies 8.6 Government Intervention: Laws and Regulation Laws prohibiting or regulating undesirable structures or behaviour Regulatory bodies 8.7 Other Forms of Government Intervention Changes in property rights Provision of information The direct provision of goods and services Nationalisation and privatisation 8.8 More or Less Intervention? Drawbacks of government intervention Advantages of the free market Should there be more or less intervention in the market? 8.9 The Environment: A Case Study in Market Failure The environmental problem Market failures Policy alternatives How much can we rely on governments? Chapter 8 Boxes 8.1 The Tragedy of the Commons: The depletion of common resources 8.2 Should Health-Care Provision be Left to the Market?: A case of multiple market failures 8.3 Green Taxes: Are they the answer to the problem of pollution? 8.4 Trading our Way out of Climate Change: The EU carbon trading system 8.5 The Problem of Urban Traffic Congestion: Does Singapore have the answer? Part C MACROECONOMICS Chapter 9 Aggregate demand and the business cycle 9.1 Introduction to Macroeconomics Key macroeconomic issues Government macroeconomic policy 9.2 cEconomic Volatility and the Business Cycle The hypothetical business cycle The business cycle in practice Spending, output and the business cycle 9.3 The Circular Flow of Income Model The inner flow, withdrawals and injections The relationship between withdrawals and injections Equilibrium in the circular flow 9.4 Simple Keynesian Model of National Income Determination Showing equilibrium with a Keynesian diagram The withdrawals and injections approach The income and expenditure approach 9.5 The Multiplier The withdrawals and injections approach The income and expenditure approach The multiplier: a numerical illustration The multiplier and the full-employment level of national income 9.6 The Volatility of Private-Sector Spending Consumption cycles Instability of investment The role of the financial sector Why do booms and recessions come to an end? What determines the turning points? 9.7 Appendix Measuring National Income and Output The product method The income method The expenditure method From GDP to national income Households’ disposable income Taking account of inflation Chapter 9 Boxes 9.1 Output Gaps and the Business Cycle: An alternative measure of excess or deficient demand 9.2 The Consumption Function: The relationship between consumption and income 9.3 Sentiment and Spending: Does sentiment help to forecast spending? 9.4 Making Sense of Nominal and Real GDP: The interesting case of nominal and real Japanese GDP Chapter 10 Aggregate supply and economic growth 10.1 The AD/AS Model The aggregate demand curve The aggregate supply curve Equilibrium 10.2 Alternative Perspectives on Aggregate Supply The short-run aggregate supply curve The long-run aggregate supply curve Areas of general agreement 10.3 Introduction to Long-Term Economic Growth Long-run growth and the AD/AS model Comparing the growth performance of different countries The causes of economic growth 10.4 Economic Growth without Technological Progress Capital accumulation and capital deepening A simple model of growth The neoclassical growth model 10.5 Economic Growth with Technological Progress Technological progress and the neoclassical model Endogenous growth theory Chapter 10 Boxes 10.1 Short-run Aggregate Supply: The importance of micro foundations 10.2 Measuring Labour Productivity: Mind the UK productivity gap 10.3 Getting Intensive with Physical Capital: Capital intensity and labour productivity 10.4 UK Human Capital: Estimating the capabilities of the labour force Chapter 11 The financial system, money and interest rates 11.1 The Meaning and Functions of Money The functions of money What should count as money? 11.2 The Financial System The banking system Deposit taking and lending Profitability, liquidity and capital adequacy Strengthening international regulation of capital adequacy and liquidity The central bank The role of the money markets 11.3 The Supply of Money The creation of credit The creation of credit: the real world What causes money supply to rise? The flow of funds equation Credit cycles The relationship between money supply and the rate of interest 11.4 The Demand for Money What determines the size of the demand for money? 11.5 Equilibrium in the money market The link between the money and goods markets 11.6 The equation of exchange Money and aggregate demand Chapter 11 Boxes 11.1 Financial Intermediation: What is it that banks do? 11.2 The Growth of Banks’ Balance Sheets: The rise of wholesale funding 11.3 The Rise of Securitisation: Spreading the risk or promoting a crisis? 11.4 Minsky’s Financial Instability Hypothesis: Are credit cycles inevitable? Chapter 12 Output, unemployment and inflation 12.1 Unemployment Measuring unemployment Unemployment trends Unemployment and the labour market Types of disequilibrium unemployment Types of equilibrium unemployment (or natural unemployment) Long-term changes in unemployment 12.2 Inflation Introduction to the causes of inflation 12.3 The Relationship Between Output, Unemployment And Inflation: The Short Run The AD/AS model The Phillips curve 12.4 The Relationship Between Inflation and Unemployment: Introducing Expectations The expectations-augmented Phillips curve Natural rate hypothesis The accelerationist hypothesis New classical perspective Keynesian views 12.5 Inflation Rate Targeting Chapter 12 Boxes 12.1 The Costs of Unemployment: Is it just the unemployed who suffer? 12.2 The Duration of Unemployment: Taking a dip in the unemployment pool 12.3 The Costs of Inflation: Who loses and by how much? 12.4 Cost Push Illusion: When rising costs are not cost-push inflation 12.5 Mind the Gap: Do output gaps explain inflation? 12.6 The Accelerationist Hypothesis: The race to outpace inflationary expectations Chapter 13 Macroeconomic policy 13.1 Fiscal Policy and the Public Finances Roles for fiscal policy Public-sector finances Sustainability of public finances The business cycle and the public finances The fiscal stance 13.2 The Use of Fiscal Policy The effectiveness of fiscal policy Problems of magnitude The problem of timing Fiscal rules 13.3 Monetary Policy The policy setting Control of the money supply over the medium and long term Short-term monetary measures Techniques to control the money supply Techniques to control interest rates Using monetary policy 13.4 Demand-Side Policy Attitudes towards demand management The case for rules and policy frameworks The case for discretion Central banks and a Taylor rule Conclusions 13.5 Supply-Side Policy Market-orientated supply-side policies Interventionist supply-side policies The link between demand-side and supply-side policies Chapter 13 Boxes 13.1 Primary Surpluses and Sustainable Public Finances: The fiscal arithmetic of government debt 13.2 The Financial Crisis and the UK Fiscal Policy Yo-Yo: Trying to find the balance between rules and discretion 13.3 Evolving Fiscal Frameworks in the European Union: Constraining the fiscal discretion of national governments 13.4 The Daily Operation of Monetary Policy: What goes on at Threadneedle Street? 13.5 Monetary Policy in the Eurozone: The role of the ECB 13.6 Quantitative Easing: Rethinking monetary policy in hard times 13.7 Public Funding of Apprenticeships: Reforms to apprenticeships in England Part D INTERNATIONAL ECONOMICS Chapter 14 Globalisation and international trade 14.1 Global Interdependence Interdependence through trade Financial interdependence International business cycles Global policy response 14.2 The Advantages of Trade Trading patterns Specialisation as the basis for trade The law of comparative advantage The gains from trade based on comparative advantage Other reasons for gains from trade The terms of trade 14.3 Arguments for Restricting Trade Arguments in favour of restricting trade Problems with protection 14.4 The World Trading System and the WTO 14.5 Trading Blocs Types of preferential trading arrangement The direct effects of a customs union: trade creation and trade diversion Longer-term effects of a customs union Preferential trading in practice 14.6 The European Union From customs union to common market The benefits and costs of the single market Completing the internal market The effect of the new member states 14.7 The UK and Brexit Alternative trading arrangements Long-term growth, trade and Brexit 14.8 Trade and Developing Countries The relationship between trade and development Trade strategies Approach 1: Exporting primaries – exploiting comparative advantage Approach 2: Import-substituting industrialisation (ISI) Approach 3: Exporting manufactures – a possible way forward? Chapter 14 Boxes 14.1 Trade Imbalance in the USA and China: An illustration of economic and financial interdependencies 14.2 Trading Places: Partners in trade 14.3 Do we Exploit Foreign Workers by Buying Cheap Foreign Imports? 14.4 The Doha Development Agenda: A new direction for the WTO? 14.5 Features of The Single Market 14.6 The Evolving Comparative Advantage of China: Riding the dragon Chapter 15 Balance of payments and exchange rates 15.1 The Balance of Payments Account The current account The capital account The financial account 15.2 Exchange Rates Determination of the rate of exchange in a free market 15.3 Exchange Rates and the Balance of Payments Exchange rates and the balance of payments: no government or central bank intervention Exchange rates and the balance of payments: with government or central bank intervention 15.4 Fixed Versus Floating Exchange Rates Advantages of fixed exchange rates Disadvantages of fixed exchange rates Advantages of a free-floating exchange rate Disadvantages of a free-floating exchange rate Exchange rates in practice 15.5 The Origins of the Euro The ERM The Maastricht Treaty and the road to the single currency 15.6 Economic and Monetary Union (EMU) in Europe Birth of the euro Advantages of the single currency Opposition to EMU Future of the euro 15.7 Debt and Developing Countries The oil shocks of the 1970s Dealing with the debt Chapter 15 Boxes 15.1 Nominal and Real Exchange Rates: Searching for a real advantage 15.2 Dealing in Foreign Currencies: A daily juggling act 15.3 The Importance of International Financial Movements: How a current account deficit can coincide with an appreciating exchange rate 15.4 The Euro/Dollar See-Saw: Ups and downs in the currency market 15.5 Optimal Currency Areas: When it pays to pay in the same currency Websites appendix Key ideas and glossary Index Back Cover
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