Economics

Name: Economics
Price: 4580 ISK
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Author: John Sloman; Jon Guest; Dean Garratt
ISBN: 9781292481821

Höfundar: John Sloman; Jon Guest; Dean Garratt (Útgáfa: 12)

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Discover the exciting world of economics and learn to think like an economist, using key concepts and data to analyse solutions to real-world challenges – from international issues to a range of everyday problems that affect us all. Economics, 12th edition, by expert authors Sloman, Garratt and Guest is an essential resource for all students of economics, providing a thorough grounding in theory and practice and insight into the constantly-changing, often complex issues economists face.

Comprehensive yet accessible, this best-selling student text has been extensively revised to reflect developments shaping the global economy in the 2020s, including rising geopolitical tensions and financial instability, the impacts of the second Trump administration, a slowing move to net zero, the long-term legacy of post-Covid debt, the rise in social media misinformation, and more – developments that present both economic problems and opportunities.

Economics, 12th edition will help you: Apply economics to real-world issues – 170 case studies and applications show how concepts translate into policy and practice around the world. Develop critical thinking – questions throughout each chapter encourage you to reflect and engage at a deeper level, building confidence to understand and evaluate different economic policies. Enhance employability skills – learn to analyse problems, devise your own solutions, and think flexibly and critically, applying core ideas to new situations.

Keep up-to-date – follow the regularly updated news blog that accompanies this textbook for articles, videos, podcasts, and more. Pair this text with MyLab Economics MyLab is the teaching and learning platform available to support this title. By combining trusted author content with digital tools and a flexible learning experience, MyLab Economics personalises learning and assessment to help improve results.

MyLab Economics is not included with this title. If you would like to purchase both the physical textbook and MyLab (which also comes with the eBook), search for: 9781292481791 Economics + MyLab Economics (Package) which consists of: Print textbook eTextbook MyLab Economics Students, MyLab should only be purchased when required by an instructor. If MyLab is a recommended component of the course, please check with your instructor for the correct ISBN.

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Útgefandi: Pearson International Content

ISBN: 9781292481821

Print ISBN: 9781292749709

Format: ePub

Útgáfa: 12

Höfundar: John Sloman; Jon Guest; Dean Garratt

Tungumál: English

Útgefið: 2026-07-20

Prent takmörkun á líftíma: 100

Prent takmörkun: 2

Afritunar takmörkun: 2

Kaflar

Cover
Prelims
Mission statement
Economics
Copyright
About the Authors
Supporting Resources
Preface: A note to the Students from the Authors
Preface: To Lecturers and Tutors
Companion Resources
Acknowledgements
Part A: Introduction: What is Economics?
Part A: Introduction: What is Economics?
1: Economics and Economies
Introduction: Economics and Economies
1.1 Economics and global issues
1.1 Economics and global issues
COVID-19 and its aftermath
Government choices
The environment and the global climate emergency
Box 1.1 Case studies and applications: What’s the latest economics news?
1.2 The core of economics
1.2 The core of economics
The problem of scarcity
Demand and supply
Dividing up the subject
Macroeconomics
Box 1.2 Case studies and applications: Looking at macroeconomic data
Microeconomics
Choice and opportunity cost
Threshold Concept 1: Thinking like an economist
Rational choices
Marginal costs and benefits
Box 1.3 Case studies and applications: The opportunity costs of studying
Microeconomic objectives
The social implications of choice
Box 1.4 Case studies and applications: Scarcity and abundance
Illustrating economic issues: the production possibility curve
Microeconomics and the production possibility curve
Macroeconomics and the production possibility curve
Illustrating economic issues: the circular flow of goods and incomes
Section summary
1.3 Different economic systems
1.3 Different economic systems
The command economy
Assessment of the command economy
Box 1.5 Case studies and applications: Command economies
The free-market economy
The effect of changes in demand and supply
The interdependence of markets
Assessment of the free-market economy
Threshold Concept 2: Thinking like an economist
Box 1.6 Exploring economics: Adam Smith (1723–1790)
Problems of the free market
The mixed economy
Threshold Concept 3: Thinking like an economist
Section summary
1.4 The nature of economic reasoning
1.4 The nature of economic reasoning
Box 1.7 Case studies and applications: Ceteris paribus
Economics as a social science
Economics and policy
Section summary
End of chapter questions
End of chapter questions
Online resources
Online resources
Websites relevant to this chapter
Websites relevant to this chapter
Part B: Foundations of Microeconomics
Part B: Foundations of Microeconomics
2: Supply and Demand
Introduction: Supply and Demand
2.1 Demand
2.1 Demand
The demand curve
Other determinants of demand
Movements along and shifts in the demand curve
The demand function
Section summary
2.2 Supply
2.2 Supply
The supply curve
Other determinants of supply
Movements along and shifts in the supply curve
The supply function
Section summary
2.3 Price and output determination
2.3 Price and output determination
Demand and supply curves
Threshold Concept 4: Thinking like an economist
Movement to a new equilibrium
Incentives in markets
Threshold Concept 5: Thinking like an economist
Representing demand and supply curves as equations
*Identifying the position of demand and supply curves
Box 2.1 Case studies and applications: UK house prices
Box 2.2 Case studies and applications: Stock market prices
Section summary
2.4 Elasticity
2.4 Elasticity
Measuring the price elasticity of demand
Interpreting the figure for elasticity
Determinants of price elasticity of demand
Price elasticity of demand and consumer expenditure
Special cases
Box 2.3 Exploring economics: Social media influencers and their effect on demand curves
The measurement of elasticity: arc elasticity
Box 2.4 Case studies and applications: Any more fares?
*The measurement of elasticity: point elasticity
Elasticity of a straight-line demand curve
*Box 2.5 Exploring economics: Using calculus to calculate the price elasticity of demand
Price elasticity of supply
The measurement of price elasticity of supply
Income elasticity of demand
Cross-price elasticity of demand
Threshold Concept 6: Thinking like an economist
Box 2.6 Exploring economics: Digital platforms
Section summary
2.5 The time dimension
2.5 The time dimension
Price expectations and speculation
Destabilising speculation
Dealing with uncertainty and risk
Box 2.7 Exploring economics: Short selling
Box 2.8 Exploring economics: Dealing in futures markets
Section summary
End of chapter questions
End of chapter questions
Online resources
Online resources
Websites relevant to this chapter
Websites relevant to this chapter
3: Government and the Market
Introduction: Government and the Market
3.1 The control of prices
3.1 The control of prices
Threshold Concept 7: Thinking like an economist
Setting a minimum (high) price
Setting a maximum (low) price
Box 3.1 Case studies and applications: A minimum unit price for alcohol
Box 3.2 Case studies and applications: The impact on prices of natural disasters or health crises
Box 3.3 Case studies and applications: How can ticket touts make so much money?
Section summary
3.2 Indirect taxes and subsidies
3.2 Indirect taxes and subsidies
Elasticity and the incidence of taxation
Box 3.4 Case studies and applications: Ashes to ashes?
The effect of subsidising products
Section summary
3.3 Government rejection of market allocation
3.3 Government rejection of market allocation
Changes in demand and supply
Prohibiting the sale of certain goods and services: the case of illegal drugs
A comparison of prohibition with taxing the product
Section summary
3.4 Agriculture and agricultural policy
3.4 Agriculture and agricultural policy
Causes of short-term price fluctuations
Causes of declining farm incomes
Box 3.5 Exploring economics: The fallacy of composition
Government intervention
Subsidies
High minimum prices
Reductions in supply
Basic support for farmers in the EU
Section summary
End of chapter questions
End of chapter questions
Online resources
Online resources
Websites relevant to this chapter
Websites relevant to this chapter
Part C: Microeconomic Theory
Part C: Microeconomic Theory
4: Background to Demand: the Rational Consumer
Introduction : Background to Demand: the Rational Consumer
4.1 Marginal utility theory
4.1 Marginal utility theory
Total and marginal utility curves
*Box 4.1 Exploring economics: Using calculus to derive a marginal utility function
The optimum level of consumption: the simplest case – one commodity
Threshold Concept 8: Thinking like an economist
Marginal utility and the demand curve for a good
The optimum combination of goods consumed
Box 4.2 Exploring economics: The marginal utility revolution: Jevons, Menger, Walras
The multi-commodity version of marginal utility and the demand curve
Box 4.3 Case studies and applications: Taking account of time
Section summary
4.2 The timing of costs and benefits
4.2 The timing of costs and benefits
Optimum consumption with intertemporal choice
Discounting: measuring impatience
Section summary
*4.3 Indifference analysis
*4.3 Indifference analysis
Indifference curves
An indifference map
The budget line
The optimum consumption point
The effect of changes in income
*Box 4.4 Case studies and applications: Cash vs. Vouchers
Effect of changes in price
Composite goods – extending the analysis to more than two goods
Deriving the individual’s demand curve
Income and substitution effects of a price change
*Box 4.5 Case studies and applications: Giffen goods vs. Giffen behaviour
Usefulness of indifference analysis
*Box 4.6 Exploring economics: Consumer theory: a further approach
Section summary
End of chapter questions
End of chapter questions
Online resources
Online resources
Websites relevant to this chapter
Websites relevant to this chapter
5: Consumer Behaviour in an Uncertain World
Introduction: Consumer Behaviour in an Uncertain World
5.1 Demand under conditions of risk and uncertainty
5.1 Demand under conditions of risk and uncertainty
Threshold Concept 9: Thinking like an economist
Attitudes towards risk and uncertainty
Diminishing marginal utility of income and attitudes towards risk taking
Insurance: a way of removing risks
Problems for unwary insurance companies
Tackling the problem of adverse selection
Potential problems caused by difficult-to-observe actions: moral hazard
Box 5.1 Case studies and applications: Dealing with moral hazard and adverse selection
Section summary
5.2 Behavioural economics
5.2 Behavioural economics
What is behavioural economics?
Evidence on human behaviour and the challenge to standard theory
Box 5.2 Exploring economics: Experimental economics
A lack of processing ability: bounded rationality
Types of heuristic
Reference-dependent preferences: coding outcomes as losses and gains
Prospect theory
Framing
Box 5.3 Exploring economics: The endowment effect
Present bias and self-control issues
Box 5.4 Exploring economics: The best-made plans
Caring about the pay-offs to others
Box 5.5 Case studies and applications: A simple experiment to test for social preferences
Implications for economic policy
Box 5.6 Exploring economics: Nudging people
Section summary
End of chapter questions
End of chapter questions
Online resources
Online resources
Websites relevant to chapters 4 and 5
Websites relevant to chapters 4 and 5
6: Background to Supply
Introduction: Background to Supply
6.1 Short-run theory of production
6.1 Short-run theory of production
Law of diminishing returns
Box 6.1 Exploring economics: Malthus and the dismal science of economics
Short-run production function: total physical product
Box 6.2 Case studies and applications: Diminishing returns in the bread shop
Short-run production function: average and marginal product
Box 6.3 Exploring economics: Relationship between averages and marginals
Box 6.4 Exploring economics: Relationship between TPP, MPP and APP
Section summary
6.2 Costs in the short run
6.2 Costs in the short run
Costs and inputs
Box 6.5 Exploring economics: Fallacy of using historic costs
Box 6.6 Exploring economics: Are fixed costs always the same as sunk costs?
Total cost
Average and marginal costs
Total, average and marginal cost functions
Box 6.7 Exploring economics: Cost curves in practice
Section summary
6.3 Long-run theory of production
6.3 Long-run theory of production
Scale of production: an application of elasticity
Economies of scale
Diseconomies of scale
Location
Size of the whole industry
Optimum combination of factors: the marginal product approach
Cobb–Douglas production function
Box 6.8 Exploring economics: The Cobb–Douglas production function
*Optimum combination of factors: the isoquant/isocost approach
Isocosts
Highest output for a given cost of production
Looking at the maths
Postscript: decision-making in different time periods
Box 6.9 Case studies and applications: Physical vs Intangible capital
Section summary
6.4 Costs in the long run
6.4 Costs in the long run
Long-run marginal costs
Relationship between long-run and short-run average cost curves
Long-run cost curves in practice
Box 6.10 Case studies and applications: Minimum efficient scale
*Derivation of long-run costs from an isoquant map
Section summary
6.5 Revenue
6.5 Revenue
Total, average and marginal revenue
Revenue curves when price is not affected by the firm’s output
Revenue curves when price varies with output
Expressing revenue curves algebraically
Shifts in revenue curves
Section summary
6.6 Profit maximisation
6.6 Profit maximisation
Short-run profit maximisation: using total curves
Short-run profit maximisation: using average and marginal curves
Algebraic form of profit maximisation
Box 6.11 Exploring economics: Using calculus to find the maximum profit output
Some qualifications
Box 6.12 Case studies and applications: The logic of logistics
Algebraic form of short- and long-run shutdown points
Section summary
End of chapter questions
End of chapter questions
Online resources
Online resources
Websites relevant to this chapter
Websites relevant to this chapter
7: Profit Maximising under Perfect Competition and Monopoly
Introduction: Profit Maximising under Perfect Competition and Monopoly
7.1 Alternative market structures
7.1 Alternative market structures
Box 7.1 Exploring economics: Concentration
7.2 Perfect competition
7.2 Perfect competition
Short run and the long run
Box 7.2 Exploring economics: Is perfect best?
Short-run equilibrium of the firm
The firm’s short-run supply curve
Long-run equilibrium of the firm
Long-run average cost curve
Firm’s long-run supply curve
Incompatibility of perfect competition and substantial economies of scale
Perfect competition and the public interest
Box 7.3 Case studies and applications: E-commerce and market structure
Section summary
7.3 Monopoly
7.3 Monopoly
Barriers to entry
Equilibrium price and output
Limit pricing
Looking at the maths
Monopoly and the public interest
Box 7.4 Case studies and applications: Google: A monopoly abusing its market power?
Box 7.5 Exploring economics: X inefficiency
Advantages of monopoly
Box 7.6 Case studies and applications: Cut-throat competition
Section summary
7.4 Theory of contestable markets
7.4 Theory of contestable markets
Importance of costless exit
Assessment of the theory
Box 7.7 Case studies and applications: Airline deregulation in the USA and Europe
Section summary
End of chapter questions
End of chapter questions
Online resources
Online resources
Websites relevant to this chapter
Websites relevant to this chapter
8: Profit Maximising under Imperfect Competition
Introduction: Profit Maximising under Imperfect Competition
8.1 Monopolistic competition
8.1 Monopolistic competition
Equilibrium of the firm
Limitations of the model
Box 8.1 Case studies and applications: Selling ice cream as a student
Non-price competition
Monopolistic competition and the public interest
Section summary
8.2 Oligopoly
8.2 Oligopoly
The two key features of oligopoly
Box 8.2 Case studies and applications: Declining levels of competition
Competition and collusion
Industry equilibrium under collusive oligopoly
Tacit collusion: price leadership
Barometric firm price leadership
Tacit collusion: rules of thumb
Box 8.3 Case studies and applications: OPEC
Factors favouring collusion
Non-collusive oligopoly: the breakdown of collusion
Non-collusive oligopoly: assumptions about rivals’ behaviour
The Bertrand model: firms set prices and the market determines the quantity sold
The kinked demand curve assumption
Oligopoly and the public interest
Box 8.4 Case studies and applications: Buying power
Section summary
8.3 Game theory
8.3 Game theory
Simultaneous single-move games
More complex simultaneous single-move games
Box 8.5 Exploring economics: The prisoners’ dilemma
Repeated simultaneous-move games
Sequential-move games
Importance of threats and promises
Assessing the simple theory of games
Section summary
8.4 Price discrimination
8.4 Price discrimination
Box 8.6 Case studies and applications: What’s the train fare to London?
Conditions necessary for price discrimination to operate
Box 8.7 Exploring economics: Personalised pricing in digital markets
Advantages to the firm
Profit-maximising prices and output
Looking at the maths
Price discrimination and the public interest
Box 8.8 Case studies and applications: Just the ticket?
Section summary
End of chapter questions
End of chapter questions
Online resources
Online resources
Websites relevant to Chapters 7 and 8
Websites relevant to Chapters 7 and 8
9: The Behaviour of Firms
Introduction: The Behaviour of Firms
9.1 Problems with traditional theory
9.1 Problems with traditional theory
Alternative aims
Box 9.1 Exploring economics: What do you maximise?
Section summary
9.2 Behavioural economics of the firm
9.2 Behavioural economics of the firm
Managerial preferences for fairness
Box 9.2 Exploring economics: How firms increase profits by understanding ‘irrational’ consumers
Can firms make use of behavioural economics?
Box 9.3 Case studies and applications: Constraints on firms' pricing
Section summary
9.3 Alternative maximising theories
9.3 Alternative maximising theories
Box 9.4 Exploring economics: When is a theory not a theory?
Managerial utility maximisation
Sales revenue maximisation (short run)
Growth maximisation
Growth by internal expansion
Growth through diversification
Growth by merger
Mergers and the relationship between growth and profit
Box 9.5 Case studies and applications: Merger activity
Growth through strategic alliances
Growth through going global
Section summary
9.4 Asymmetric information and the principal–agent problem
9.4 Asymmetric information and the principal–agent problem
Section summary
9.5 Multiple aims
9.5 Multiple aims
Box 9.6 Exploring economics: Stakeholder power?
Organisational slack
Multiple goals: predictions of behaviour
Satisficing and the public interest
Section summary
9.6 Pricing in practice
9.6 Pricing in practice
Box 9.7 Case studies and applications: How do companies set prices?
Variations in the mark-up
Section summary
End of chapter questions
End of chapter questions
Online resources
Online resources
Websites relevant to this chapter
Websites relevant to this chapter
10: The Theory of Distribution of Income
Introduction: The Theory of Distribution of Income
10.1 Wage determination under perfect competition
10.1 Wage determination under perfect competition
Box 10.1 Exploring economics: Labour as a factor of production
Supply of labour
*Box 10.2 Exploring economics: Using indifference curve analysis to derive the individual’s supply curve of labour
Box 10.3 Case studies and applications: Controversy over levels of immigration
Demand for labour: the marginal productivity theory
Derivation of the firm’s demand curve for labour
*Looking at the maths
Elasticity of demand for labour
Wages and profits under perfect competition
Equality and inequality under perfect competition
Who are the poor? Who are the rich?
Section summary
10.2 Wage determination in imperfect markets
10.2 Wage determination in imperfect markets
Box 10.4 Case studies and applications: Life at the mill
Labour with market power (union monopoly or oligopoly)
Firms and labour with market power (bilateral monopoly)
Collective bargaining
Efficiency wage hypothesis
Other labour market imperfections
Box 10.5 Case studies and applications: The rise and decline of the labour movement in the UK
Box 10.6 Exploring economics: How useful is marginal productivity theory?
Box 10.7 Case studies and applications: The persistent gender pay gap?
Box 10.8 Case studies and applications: Flexible labour markets and the flexible firm
Discrimination
Box 10.9 Exploring economics: Behaviour at work
Who are the poor? Who are the rich?
Section summary
10.3 Capital and profit
10.3 Capital and profit
Demand for capital services
Supply of capital services
Determination of the price of capital services
Box 10.10 Exploring economics: Stocks and flows
*Demand for and supply of capital for purchase
Supply of capital
*Determination of the rate of interest
Capital and profit
Financing investment
Role of the stock market
Is the stock market efficient?
Section summary
10.4 Land and rent
10.4 Land and rent
Price of land
Box 10.11 Exploring economics: The economics of non-renewable resources
Who are the poor? Who are the rich?
Section summary
End of chapter questions
End of chapter questions
Online resources
Online resources
Websites relevant to this chapter
Websites relevant to this chapter
Part D: Microeconomic Policy
Part D: Microeconomic Policy
11: Inequality, Poverty and Policies to Redistribute Income
Introduction: Inequality, Poverty and Policies to Redistribute Income
11.1 Inequality and poverty
11.1 Inequality and poverty
Types of inequality
Size distribution of income in the UK
Measuring the size distribution of income
Ratios of the shares in national income of two quantile groups
Functional distribution of income in the UK
Other determinants of income inequality
Distribution of wealth
Causes of inequality
Box 11.1 Case studies and applications: Poverty in the past
Government attitudes towards inequality
Section summary
11.2 Taxes, benefits and redistribution of income
11.2 Taxes, benefits and redistribution of income
Requirements of a good tax system
Types of tax
Box 11.2 Case studies and applications: Minimum-wage legislation
Taxes as a means of redistributing income
Problems with using taxes to redistribute incomes
Economic costs of redistribution
Taxation and incentives
Box 11.3 Exploring economics: The Laffer curve
Benefits
*Box 11.4 Exploring economics: Tax cuts and incentives
Benefits and the redistribution of income
Tax/benefit system and the problem of disincentives: the poverty trap
Box 11.5 Case studies and applications: Replacing tax credits with universal credit
Box 11.6 Case studies and applications: What the future holds
Conclusions
Section summary
End of chapter questions
End of chapter questions
Online resources
Online resources
Websites relevant to chapters 10 and 11
Websites relevant to chapters 10 and 11
12: Markets, Efficiency and the Public Interest
Introduction: Markets, Efficiency and the Public Interest
12.1 Efficiency under perfect competition
12.1 Efficiency under perfect competition
Allocative efficiency: ‘Pareto optimality’
Simple analysis of allocative efficiency: marginal benefit and marginal cost
Achieving allocative efficiency through the market
Threshold Concept 10: Thinking like an economist
Interdependence, efficiency and the ‘invisible hand’: the simple analysis of general equilibrium
Threshold Concept 11: Thinking like an economist
*Intermediate analysis of social efficiency: marginal benefit and marginal cost ratios
*Efficiency in the goods market (intermediate analysis)
*Efficiency in the factor market (intermediate analysis)
*Intermediate analysis of general equilibrium
Section summary
12.2 The case for government intervention
12.2 The case for government intervention
Externalities
External benefits of production (MSC < MPC) with no external costs /benefits of consumption
External costs of consumption (MSB < MPB) with no external costs/benefits of production (MSC = MPC)
Box 12.1 Case studies and applications: The market for vaccines
Public goods
The ease of excludability
Impure public goods
The efficient level of output for a pure public good
Box 12.2 Case studies and applications: The police as a public service
Market power
*Looking at the maths
Other market failures
Conclusions
Section summary
12.3 Forms of government intervention
12.3 Forms of government intervention
Box 12.3 Case studies and applications: Should health-care provision be left to the market?
Taxes and subsidies
Box 12.4 Exploring economics: Deadweight loss from taxes on goods and services
Taxes to correct for monopoly
Changes in property rights
Laws prohibiting or regulating undesirable structures or behaviour
Regulatory bodies
Price controls
Provision of information
Direct provision of goods and services
Public ownership
Section summary
*12.4 Cost-benefit analysis
*12.4 Cost-benefit analysis
Identifying the costs and benefits
Measuring the costs and benefits
*Box 12.5 Exploring economics: What price a human life?
Risk and uncertainty
*Box 12.6 Case studies and applications: HS2: Is it really worth it?
Discounting future costs and benefits
CBA and the distribution of costs and benefits
Section summary
12.5 Government failure and the case for the market
12.5 Government failure and the case for the market
Drawbacks of government intervention
Advantages of the free market
Should there be more or less intervention in the market?
Box 12.7 Exploring economics: Mises, Hayek and the Mont Pelerin Society
Section summary
End of chapter questions
End of chapter questions
Online resources
Online resources
Websites relevant to this chapter
Websites relevant to this chapter
13: Environmental Policy
Introduction: Environmental Policy
13.1 Economics of the environment
13.1 Economics of the environment
The environmental problem
An optimum use of the environment
Box 13.1 Case studies and applications: The economics of biodiversity
Market failures
Section summary
13.2 Policies to tackle pollution and its effects
13.2 Policies to tackle pollution and its effects
Box 13.2 Case studies and applications: Green taxes
Non-market-based policies
Tradable permits
Box 13.3 Case studies and applications: Placing a price on CO2 emissions
How much can we rely on governments?
Box 13.4 Case studies and applications: International co-ordination on climate change
Section summary
13.3 The economics of traffic congestion
13.3 The economics of traffic congestion
Existing system of allocating road space
Identifying an allocatively efficient level of road usage (short run)
Identifying a socially optimum level of road space (long run)
Section summary
13.4 Urban transport policies
13.4 Urban transport policies
Regulation and legislation
Changing market signals
Conclusions
Box 13.5 Case studies and applications: Road pricing in Singapore
Section summary
End of chapter questions
End of chapter questions
Online resources
Online resources
Websites relevant to this chapter
Websites relevant to this chapter
14: Government Policy towards Business
Introduction: Government Policy towards Business
14.1 Competition policy
14.1 Competition policy
Three broad areas of competition policy
Competition policy in the European Union
EU restrictive practices policy
Box 14.1 Case studies and applications: Expensive chips or are they?
EU merger policy
UK competition policy
Box 14.2 Case studies and applications: Relevant merger situations
Assessment of competition policy
Box 14.3 Case studies and applications: Digital Markets Act
Section summary
14.2 Privatisation and regulation
14.2 Privatisation and regulation
How desirable is privatisation?
Regulation: identifying the optimum price and output
Regulation in the UK
Increasing competition in the privatised industries
Box 14.4 Case studies and applications: Selling power to the people
Section summary
End of chapter questions
End of chapter questions
Online resources
Online resources
Websites relevant to Chapters 12–14
Websites relevant to Chapters 12–14
Part E: Foundations of Macroeconomics
Part E: Foundations of Macroeconomics
15: An Introduction to Macroeconomic Issues and Ideas
Introduction: An Introduction to Macroeconomic Issues and Ideas
15.1 Overview of key macroeconomic issues
15.1 Overview of key macroeconomic issues
Threshold concept 12: Thinking like an economist
Longer-term economic growth
Unemployment
Inflation
Foreign trade and global economic relationships
Government macroeconomic policy
Section summary
15.2 Measuring national income and output
15.2 Measuring national income and output
Taking account of inflation
Threshold concept 13: Thinking like an economist
Taking account of population: use of per capita measures
Taking account of exchange rates: use of PPP measures
Box 15.1 Case studies and applications: Which country is better off?
Do GDP statistics give a good indication of a country’s standard of living?
Box 15.2 Exploring economics: Can GDP measure national happiness?
Section summary
15.3 The business cycle
15.3 The business cycle
Distinction between actual and potential growth
Threshold concept 14: Thinking like an economist
Box 15.3 Exploring economics: Output gaps
Hypothetical business cycle
Business cycle in practice
International business cycle
Aggregate demand and the business cycle
Section summary
15.4 Circular flow of income
15.4 Circular flow of income
Relationship between withdrawals and injections
Equilibrium in the circular flow
Section summary
15.5 Unemployment
15.5 Unemployment
Composition of unemployment
Box 15.4 Exploring economics: Costs of unemployment
Duration of unemployment
Causes of unemployment
Section summary
15.6 Inflation
15.6 Inflation
Box 15.5 Exploring economics: The costs of inflation
Causes of inflation
Box 15.6 Exploring economics: The Phillips curve
Section summary
15.7 Open economy
15.7 Open economy
The financial account
Exchange rates
Determination of the rate of exchange in a free market
Exchange rates and the balance of payments
Box 15.7 Exploring economics: Dealing in foreign exchange
Section summary
Appendix: Calculating GDP
Appendix: Calculating GDP
Product method of measuring GDP
Income method of measuring GDP
Expenditure method of measuring GDP
From GDP to national income
Households’ disposable income
Section summary
End of chapter questions
End of chapter questions
Online resources
Online resources
Websites relevant to this chapter
Websites relevant to this chapter
16: The Development of Macroeconomic Thinking: a Historical Perspective
Introduction: The Development of Macroeconomic Thinking: a Historical Perspective
16.1 Macroeconomic environment and debates
16.1 Macroeconomic environment and debates
16.2 Classical macroeconomics
16.2 Classical macroeconomics
Classical analysis of prices and inflation
Classical response to the Great Depression
Classical Treasury view on unemployment
Box 16.1 Case studies and applications: Balance the budget at all costs
Box 16.2 Exploring economics: The crowding-out effect
Section summary
16.3 The Keynesian revolution
16.3 The Keynesian revolution
Box 16.3 Exploring economics: Will wage cuts cure unemployment?
Market for loanable funds
Keynes’ analysis of employment and inflation
Box 16.4 Exploring economics: The paradox of thrift
Keynesian policies of the 1950s and 1960s
Section summary
16.4 Rise of monetarist and new classical schools
16.4 Rise of monetarist and new classical schools
Monetarist counter-revolution
New classical school
Government policies
Section summary
16.5 The Keynesian response
16.5 The Keynesian response
Box 16.5 Exploring economics: Menu costs
Hysteresis
Section summary
16.6 Emerging consensus up to the crisis of 2008
16.6 Emerging consensus up to the crisis of 2008
Constrained policy discretion
Post-Keynesian and heterodox economics
Section summary
16.7 Policymaking in an era of global crises and uncertainty
16.7 Policymaking in an era of global crises and uncertainty
Monetary policy
Global health emergency
Inflation shock
Section summary
16.8 Areas of general agreement
16.8 Areas of general agreement
Section summary
End of chapter questions
End of chapter questions
Online resources
Online resources
Websites relevant to this chapter
Websites relevant to this chapter
Part F: Macroeconomic Models, Theories and Policy
Part F: Macroeconomic Models, Theories and Policy
17: Short-run Macroeconomic Equilibrium
Introduction: Short-run Macroeconomic Equilibrium
17.1 Background to the theory
17.1 Background to the theory
Introducing the Keynesian 45° line diagram
Consumption
Movements along and shifts in the consumption function
*Box 17.1 Exploring economics: Using calculus to derive the MPC
Withdrawals
Injections
Box 17.2 Case studies and applications: Confidence and spending
Section summary
17.2 Determination of national income
17.2 Determination of national income
The multiplier: withdrawals and injections approach
A shift in withdrawals
Threshold Concept 15: Thinking like an economist
The multiplier: income and expenditure approach
Box 17.3 Exploring economics: Deriving the multiplier formula
*The multiplier: some qualifications
Section summary
17.3 Simple Keynesian analysis of unemployment and inflation
17.3 Simple Keynesian analysis of unemployment and inflation
Inflationary gap
The multiplier and full-employment level of national income
The multiplier and inflation
Box 17.4 Exploring economics: Allowing for inflation in the 45° line diagram
Section summary
17.4 Keynesian analysis of the business cycle
17.4 Keynesian analysis of the business cycle
Instability of investment: the accelerator
The multiplier/accelerator interaction
Box 17.5 Case studies and applications: Has there been an accelerator effect in the UK?
Fluctuations in stocks
Fluctuations in borrowing and debt
Box 17.6 Case studies and applications: Balance sheets and the business cycle
Determinants of the business cycle
Section summary
End of chapter questions
End of chapter questions
Online resources
Online resources
Websites relevant to chapters 16 and 17
Websites relevant to chapters 16 and 17
18: Banking, Money and Interest Rates
Introduction: Banking, Money and Interest Rates
18.1 Meaning and functions of money
18.1 Meaning and functions of money
What should count as money?
Box 18.1 Exploring economics: Money supply, national income and national wealth
Box 18.2 Economics exploring: Cryptocurrency
Section summary
18.2 The financial system
18.2 The financial system
The banking system
Deposit-taking and lending
Assets
Profitability, liquidity and capital adequacy
Secondary marketing and securitisation
Box 18.3 Case studies and applications: The roots of the global financial crisis
Capital adequacy
Strengthening international regulation of capital adequacy and liquidity
The central bank
Operate the government’s monetary policy
Provide liquidity, as necessary, to banks
Money markets
Section summary
18.3 Supply of money
18.3 Supply of money
Box 18.4 Case studies and applications: UK and eurozone monetary aggregates
Creation of credit: the simplest case
Creation of credit: the real world
Broad money multiplier
*Box 18.5 Exploring Economics: Calculating the money multiplier
What causes money supply to rise?
Flow-of-funds equation
Relationship between money supply and the rate of interest
Section summary
18.4 Demand for money
18.4 Demand for money
Transactions-plus-precautionary demand for money: L1
Speculative (or assets) demand for money: L2
Total demand for money: L1 + L2
Section summary
18.5 Equilibrium
18.5 Equilibrium
Equilibrium in the foreign exchange market
Section summary
End of chapter questions
End of chapter questions
Online resources
Online resources
Websites relevant to this chapter
Websites relevant to this chapter
19: Relationship between the Money and Goods Markets
Introduction: Relationship between the Money and Goods Markets
19.1 Effects of monetary changes on national income
19.1 Effects of monetary changes on national income
Interest rate transmission mechanism
Problems with stage 1: the money–interest link
Problems with stage 2: the interest rate–investment link
Exchange rate transmission mechanism
Box 19.1 Exploring economics: Choosing the exchange rate or the money supply
Portfolio balance effect
How stable is the velocity of circulation?
Box 19.2 Exploring economics: Party games and the velocity of money
Box 19.3 Case studies and applications: Stability of the velocity of circulation
Section summary
19.2 Monetary effects of changes in the goods market
19.2 Monetary effects of changes in the goods market
Crowding out
Box 19.4 Exploring economics: Crowding out in an open economy
Is money supply exogenous or endogenous?
Section summary
19.3 Modelling interaction of monetary policy and goods market
19.3 Modelling interaction of monetary policy and goods market
The IS curve
The MP curve
Equilibrium
Full effect of changes in the goods and money markets
Section summary
19.4 Credit cycles and the goods market
19.4 Credit cycles and the goods market
Financial accelerator
Financial instability hypothesis
Box 19.5 Exploring economics: Amplifiers and economic shocks
Section summary
*Appendix: the IS/LM model
*Appendix: the IS/LM model
Equilibrium
Full effects of changes in goods and money markets
Appendix summary
End of chapter questions
End of chapter questions
Online resources
Online resources
Websites relevant to chapters 18 and 19
Websites relevant to chapters 18 and 19
20: Aggregate Supply, Inflation and Unemployment
Introduction: Aggregate Supply, Inflation and Unemployment
20.1 The AD/AS model
20.1 The AD/AS model
Aggregate demand curve
Box 20.1 Exploring economics: The aggregate demand curve
Aggregate supply curve
Equilibrium
Section summary
20.2 AD/AS and inflation
20.2 AD/AS and inflation
Cost-push inflation
Box 20.2 Exploring economics: Cost-push inflation and supply shocks
Section summary
20.3 Aggregate demand and supply with inflation targeting: DAD/DAS model
20.3 Aggregate demand and supply with inflation targeting: DAD/DAS model
Response to changes in aggregate demand and supply
Box 20.3 Exploring economics: Applying the DAD/DAS model: cost-push inflation and central bank choices
Section summary
20.4 Labour market and aggregate supply
20.4 Labour market and aggregate supply
Equilibrium (or natural) unemployment
Classical model of labour markets and aggregate supply
Keynesian models of labour markets and aggregate supply
Section summary
20.5 AD/AS and macroeconomic controversies
20.5 AD/AS and macroeconomic controversies
Controversy 1: flexibility of prices and wages
Controversy 2: flexibility of aggregate supply
Controversy 3: role of expectations in the working of the market
Box 20.4 Exploring economics: Common ground between economists?
Section summary
End of chapter questions
End of chapter questions
Online resources
Online resources
Websites relevant to this chapter
Websites relevant to this chapter
21: Relationship between Inflation, Unemployment and Output
Introduction: Relationship between Inflation, Unemployment and Output
21.1 The EAPC and inflation–unemployment relationship
21.1 The EAPC and inflation–unemployment relationship
Expectations of inflation
*Box 21.1 Exploring economics: Basing expectations on the past
Short-run and long-run perspectives
Section summary
21.2 Inflation and unemployment: monetarist perspective
21.2 Inflation and unemployment: monetarist perspective
Accelerationist hypothesis
Box 21.2 Exploring economics: Accelerationist hypothesis
Stagflation and Phillips loops
Phillips loops and the political business cycle
Policy implications
Section summary
21.3 Inflation and unemployment: new classical position
21.3 Inflation and unemployment: new classical position
Box 21.3 Exploring economics: Rational expectations revolution
Surprise fluctuations in aggregate demand
Box 21.4 Case studies and applications: Forecasting the weather
Policy implications
Box 21.5 Exploring economics: The boy who cried ‘wolf’
Section summary
21.4 Inflation and unemployment: modern Keynesian position
21.4 Inflation and unemployment: modern Keynesian position
Changes in equilibrium unemployment
Persistence of demand-deficient unemployment
Incorporation of expectations
Keynesian criticism of non-intervention
Section summary
21.5 Central banks and inflation targeting
21.5 Central banks and inflation targeting
*Box 21.6 Exploring economics: A model of inflationary bias
EAPC/LRPC and DAD/DAS frameworks
Box 21.7 Case studies and applications: Inflation targeting
Central banks and a Taylor rule
Central banks and economic shocks
Section summary
21.6 Central banks, economic shocks and the macroeconomy: an integrated model
21.6 Central banks, economic shocks and the macroeconomy: an integrated model
Supply-side shocks
Section summary
End of chapter questions
End of chapter questions
Online resources
Online resources
Websites relevant to this chapter
Websites relevant to this chapter
22: Fiscal and Monetary Policy
Introduction: Fiscal and Monetary Policy
22.1 Fiscal policy and the public finances
22.1 Fiscal policy and the public finances
Government finances: some terminology
Box 22.1 Case studies and applications: Rethinking public-sector spending in the aftermath of major events such as wars and pandemics
Key fiscal indicators
Business cycle and public finances
Section summary
22.2 Use of fiscal policy
22.2 Use of fiscal policy
Automatic fiscal stabilisers
Discretionary fiscal policy
Box 22.2 Exploring economics: The fiscal impulse
Effectiveness of discretionary fiscal policy
Predicting the effect of changes in taxes
Problems of timing
Box 22.3 Exploring economics: Riding a switchback
Fiscal rules
Box 22.4 Case studies and applications: The evolution of the stability and growth pact
Section summary
22.3 Monetary policy
22.3 Monetary policy
Control of money supply over the medium and long term
Operation of monetary policy in the short term
Techniques to control money supply
Box 22.5 Case studies and applications: Operation of modern monetary policy
Difficulties in controlling money supply
Techniques to control interest rates
Box 22.6 Case studies and applications: Quantitative easing
Pass-through effect
Problems with controlling interest rates
Box 22.7 Exploring economics: Goodhart’s law
Box 22.8 Exploring economics: Using interest rates to control both aggregate demand and the exchange rate
Using monetary policy
Section summary
22.4 Policymaking environment: rules versus discretion
22.4 Policymaking environment: rules versus discretion
Case for discretion
Box 22.9 Case studies and applications: Central bank mandates and inflation targeting
Section summary
End of chapter questions
End of chapter questions
Online resources
Online resources
Websites relevant to this chapter and chapters 20 and 21
Websites relevant to this chapter and chapters 20 and 21
23: Long-term Economic Growth and Supply-side Policies
Introduction: Long-term Economic Growth and Supply-side Policies
23.1 Introduction to long-term economic growth
23.1 Introduction to long-term economic growth
Long-run growth and the DAD/DAS and IS/MP models
Growth over the decades
Causes of economic growth
Box 23.1 Case studies and applications: Accounting for labour productivity
Section summary
23.2 Economic growth without technological progress
23.2 Economic growth without technological progress
Box 23.2 Exploring economics: Getting intensive with capital
Simple model of economic growth
Neoclassical growth model
*Looking at the maths
Neoclassical growth model and the saving rate
Neoclassical growth model and growth of the workforce
Section summary
23.3 Economic growth with technological progress
23.3 Economic growth with technological progress
Endogenous growth theory
*Looking at the maths
Box 23.3 Exploring economics: UK human capital
Section summary
23.4 Approaches to supply-side policy
23.4 Approaches to supply-side policy
New classical approach
‘Third Way’ supply-side policies
Section summary
23.5 Supply-side policies in practice: market-orientated policies
23.5 Supply-side policies in practice: market-orientated policies
Box 23.4 Case studies and applications: The state of the supply-side revolution
Government spending
Taxes and the labour market
Taxes, business and investment
Reducing the power of labour
Reducing welfare
Policies to encourage competition
Section summary
23.6 Supply-side policies in practice: interventionist policies
23.6 Supply-side policies in practice: interventionist policies
Examples of interventionist supply-side policy
Box 23.5 Exploring Economics: Modern approach to industrial policy: Return of activism in turbulent times?
Regional and urban policy
Section summary
End of chapter questions
End of chapter questions
Online resources
Online resources
Websites relevant to this chapter
Websites relevant to this chapter
Part G: The World Economy
Part G: The World Economy
24: International Trade
Introduction: International Trade
24.1 Advantages of trade
24.1 Advantages of trade
Trade volumes
Box 24.1 Case studies and applications: Trading places
Specialisation as the basis for trade
Law of comparative advantage
Box 24.2 Case studies and applications: Sharing out the jobs
Gains from trade based on comparative advantage
International trade and its effect on factor prices
Increasing opportunity costs and limits to specialisation and trade
Box 24.3 Exploring economics: Trade as exploitation?
Terms of trade
*Intermediate analysis of gains from trade
Other reasons for gains from trade
Competitive advantage of nations
Section summary
24.2 Arguments for restricting trade
24.2 Arguments for restricting trade
Box 24.4 Case studies and applications: Free trade and the environment
Arguments in favour of restricting trade
Box 24.5 Exploring economics: Strategic trade theory
Economic arguments with some validity for specific groups or countries
*Box 24.6 Exploring economics: The optimum tariff or export tax
Problems with protection
Box 24.7 Exploring economics: Giving trade a bad name
The World Trade Organization
Box 24.8 Case studies and applications: US Liberation day
Section summary
24.3 Preferential trading
24.3 Preferential trading
Direct effects of a customs union: trade creation and trade diversion
Longer-term effects of a customs union
Preferential trading in practice
Section summary
24.4 The European Union
24.4 The European Union
From customs union to common market
Box 24.9 Case studies and applications: Mutual recognition: the Cassis de Dijon case
Benefits and costs of the single market
Box 24.10 Case studies and applications: Features of the single market
Completing the internal market
Section summary
24.5 The UK and Brexit
24.5 The UK and Brexit
Overview of the Trade and Cooperation Agreement
Long-term growth, trade and Brexit
Section summary
End of chapter questions
End of chapter questions
Online resources
Online resources
Websites relevant to this chapter
Websites relevant to this chapter
25: The Balance of Payments and Exchange Rates
Introduction: The Balance of Payments and Exchange Rates
25.1 Alternative exchange rate regimes
25.1 Alternative exchange rate regimes
Box 25.1 Exploring economics: Balance of trade and public-sector budget balance
Nominal and real exchange rates
Box 25.2 Case studies and applications: The UK’s balance of payments deficit
Alternative exchange rate regimes
Correction under free-floating exchange rates
Intermediate exchange rate regimes
Section summary
25.2 Fixed exchange rates
25.2 Fixed exchange rates
Box 25.3 Exploring economics: Effectiveness of fiscal and monetary policies under fixed exchange rates
Causes of longer-term balance of payments problems under fixed exchange rates
Advantages of fixed exchange rates
Section summary
25.3 Free-floating exchange rates
25.3 Free-floating exchange rates
Box 25.4 Case studies and applications: The price of a Big Mac
Box 25.5 Case studies and applications: The euro/dollar seesaw
Speculation
Advantages of a free-floating exchange rate
Box 25.6 Exploring economics: Effectiveness of monetary and fiscal policies under floating exchange rates
Section summary
25.4 Exchange rate systems in practice
25.4 Exchange rate systems in practice
Managed floating
Volatility of exchange rates
Box 25.7 Case studies and applications: Sterling since the 1990s
Box 25.8 Exploring economics: Do inflation rates explain longer-term exchange rate movements?
Section summary
*Appendix: The open economy and IS/LM analysis
*Appendix: The open economy and IS/LM analysis
Fiscal policy under fixed exchange rates
Monetary policy under fixed exchange rates
Analysis under free-floating exchange rates
Monetary policy under floating exchange rates
Appendix summary
End of chapter questions
End of chapter questions
Online resources
Online resources
Websites relevant to this chapter
Websites relevant to this chapter
26: Economies in an Interdependent World
Introduction: Economies in an Interdependent World
26.1 Globalisation and the problem of instability
26.1 Globalisation and the problem of instability
Financial interdependence
Box 26.1 Case studies and applications: Economic and financial interdependencies: trade imbalance in the USA and China
International business cycles
Need for international policy co-ordination
International harmonisation of economic policies
Section summary
26.2 European economic and monetary union (EMU)
26.2 European economic and monetary union (EMU)
The Maastricht Treaty and the road to the single currency
Advantages of the single currency
Opposition to EMU
Box 26.2 Exploring economics: Optimal currency areas
Future of the euro
The euro and the fiscal framework
Section summary
26.3 Global inequality
26.3 Global inequality
Meaning of ‘development’
Using GNY to measure development
Box 26.3 Exploring economics: The human development index
Section summary
26.4 Trade and economic development
26.4 Trade and economic development
Exporting primaries: exploiting comparative advantage
Balance of payments problems: long term
Import-substituting industrialisation
Box 26.4 Case studies and applications: When driving and alcohol do mix
Exporting manufactures: a possible way forward?
Box 26.5 Case studies and applications: Evolving comparative advantage of China
Section summary
26.5 The problem of debt
26.5 The problem of debt
Box 26.6 Case studies and applications: A debt to the planet
Structural reform within lower-income countries
A new debt ‘pandemic’
Should all debt be cancelled and aid increased?
Section summary
End of chapter questions
End of chapter questions
Online resources
Online resources
Websites relevant to chapters 25 and 26
Websites relevant to chapters 25 and 26
Postscript: Reality Island
Postscript: Reality Island
Appendix 1: Some Techniques of Economic Analysis
Appendix 1: Some Techniques of Economic Analysis
Diagrams as pictures
Representing real-life statistics
Getting a true picture from the statistics
Index numbers
Functional relationships
*Elementary differentiation
*Box A1.1 Case studies and applications: When is good news really good?
Appendix summary
Appendix 2: Websites
Appendix 2: Websites
Threshold Concepts and Key Ideas
Threshold Concepts and Key Ideas
Footnotes
Glossary