Economics: A Student's Guide

Economics......Page 1
Contents......Page 5
Preface......Page 15
Syllabus map......Page 16
About the authors......Page 18
Acknowledgements......Page 19
Publishers’ acknowledgements......Page 20
The market system......Page 21
  The subject matter of economics......Page 23
  Positive and normative statements......Page 25
  Scientific method......Page 26
  Different answers to the same questions......Page 28
  Conclusions......Page 31
  Questions......Page 32
  Data response B......Page 33
  The use and abuse of statistics......Page 36
  Indices......Page 39
  Statistics......Page 44
  Data response A......Page 46
  Data response C......Page 47
  Wants and needs......Page 49
  The factors of production......Page 50
  The division of labour......Page 52
  Economies of scale......Page 53
  New technology......Page 56
  Increasing costs and diminishing returns......Page 57
  The law of increasing costs......Page 58
  International trade......Page 62
  Data response A......Page 65
  Data response B......Page 66
  The price system......Page 67
  Demand......Page 68
  Supply......Page 71
  Equilibrium prices......Page 73
  Demand in detail......Page 76
  The price system assessed......Page 80
  Summary......Page 81
  Data response A......Page 82
  Data response B......Page 83
  Elasticity of demand......Page 84
  Price elasticity of demand and the firm’s decision making......Page 86
  The calculation of price elasticity of demand......Page 87
  Factors determining price elasticity of demand......Page 89
  Arc elasticity......Page 91
  Point elasticity......Page 92
  Income elasticity of demand......Page 93
  Cross elasticity of demand......Page 94
  Price elasticity of supply......Page 95
  Questions......Page 98
  Data response B......Page 99
  Some important ideas reviewed......Page 100
  Changes in market price......Page 101
  Government interference withequilibrium prices......Page 104
  Taxes and subsidies......Page 109
  Problems with demand and supplyanalysis......Page 112
  Questions......Page 115
  Data response B......Page 116
  Types of business organisation......Page 118
  Legal forms of firms......Page 120
  Costs of production......Page 123
  Profits......Page 128
  Summary......Page 130
  Data response B......Page 131
  Profit maximisation......Page 132
  Types of competition......Page 133
  Alternative objectives......Page 139
  Data response B......Page 140
Market failure andgovernment intervention......Page 143
  What is a mixed economy?......Page 145
  The origins of the mixed economy......Page 147
  The allocative role: provision of goods and services......Page 150
  The distributive role: transfer payments......Page 152
  Criteria for the allocation of resources......Page 153
  Summary......Page 155
  Data response A......Page 156
  Case study 10.1 the growth of public expenditure......Page 157
  Reasons for growth in public expenditure......Page 158
  Strategies for the control of public expenditure......Page 159
  Case study 10.2 reform of the NHS: technical efficiency and transactions costs......Page 160
  How to pay for the service?......Page 161
  Case study 10.3 markets in education: allocative efficiency......Page 164
  Case study 10.4 monopoly and privatised industries......Page 166
  Case study 10.5 regional problems......Page 167
  Summary......Page 171
Markets in operation......Page 173
  Case study 11.1 agricultural prices......Page 175
  Features of the agriculture industry......Page 177
  Recent developments in policy......Page 178
  A comparison of three policies......Page 179
  Case study 11.2 the housing market......Page 181
  The public sector......Page 183
  The owner occupied sector......Page 185
  Case study 11.3 minimum wage legislation......Page 190
  Summary......Page 192
  The meaning of leisure......Page 193
  Travel and tourism......Page 196
  Some economic aspects of the English Premier League......Page 197
  Summary......Page 199
  Data response A......Page 200
  An introduction to the environment......Page 202
  Policies to deal with the environment......Page 203
  Pollution characteristics......Page 205
  Case study 13.1 global warming......Page 207
  Policies......Page 209
  Case study 13.2 ozone depletion......Page 212
  ase study 13.3 rubbish and recycling......Page 213
  Policy......Page 214
  Questions......Page 215
  Case study 14.1 road congestion......Page 216
  Case study 14.2 privatising a loss-makingmonopoly......Page 220
  Privatisation......Page 222
  Alternative methods of privatisation......Page 223
  Case study 14.3 air transport......Page 224
  Case study 14.4 the channel crossing: intermodal competition......Page 227
  Summary......Page 228
The national economy......Page 229
  Pre-Keynesian attitudes......Page 231
  Macroeconomics......Page 232
  Questions......Page 234
  Data response A......Page 235
  The four macroeconomic policy targets......Page 236
  The circular flow of national income......Page 237
  The components of national income......Page 238
  National income accounts......Page 239
  Growth......Page 242
  Conclusion......Page 245
  Data response A......Page 246
  The aggregate demand and supply curve approach......Page 248
  The derivation of the aggregate supply curve......Page 251
  Conclusion......Page 254
  Questions......Page 255
  Data response A......Page 256
  The major objectives of government policy......Page 258
  1945 to the early 1970s......Page 259
  1974–1982......Page 261
  1982–1996......Page 269
  1997 onwards......Page 271
  International interdependence and ‘globalisation’......Page 272
  Questions......Page 274
  Data response A......Page 275
Business economics......Page 277
  The size of firms......Page 279
  The growth of firms......Page 280
  The continuation of the small business......Page 284
  Questions......Page 285
  Data response B......Page 286
  Average costs in the short run......Page 290
  Average costs in the long run......Page 292
  The mathematics of marginal cost......Page 295
  Conclusion......Page 296
  Summary......Page 297
  Data response B......Page 298
  The best profit output......Page 299
  The supply curve......Page 301
  The optimality of perfect competition......Page 302
  Data response A......Page 304
  Data response B......Page 305
  Perfect and imperfect competition......Page 306
  Profit-maximising techniques......Page 307
  The equilibrium of the monopolist......Page 312
  The equilibrium of the monopolistically competitive firm......Page 313
  Oligopolistic competition......Page 315
  Managerial and behavioural theories revisited......Page 318
  Contestable markets......Page 319
  Summary......Page 320
  Data response B......Page 321
  Governments and monopoly......Page 324
  Pricing problems......Page 328
  Discriminating monopoly......Page 329
  Monopoly assessed......Page 331
  Summary......Page 333
  Data response B......Page 334
  Introduction......Page 338
  Reasons for nationalisation......Page 339
  Case study 24.2 problems of nationalised industry control......Page 341
  Methods of privatisation......Page 345
  Vertical disintegration......Page 346
  Competition and new technology......Page 349
  Case study 24.5the regulation of privatised industries......Page 351
  Case study 24.6 is privatisation a success?......Page 353
  Summary......Page 355
Labour markets and thedistribution of income......Page 357
  Marginal distribution theory......Page 359
  Resources and costs......Page 365
  Production in the long run......Page 367
  Summary......Page 370
  Data response A......Page 371
  Data response B......Page 372
  The determination of the wage rate and level of employment......Page 374
  The supply of labour......Page 375
  Trade unions and wages......Page 378
  Monopsony in labour markets......Page 382
  Differentials and disequilibriums......Page 383
  Questions......Page 386
  Data response A......Page 387
  Data response B......Page 388
  Partial and general equilibrium......Page 391
  The Pareto criterion......Page 393
  Allocative efficiency......Page 394
  Efficiency and the free market......Page 395
  Pareto efficiency and perfect competition......Page 396
  The welfare significance of equilibrium in a perfect market......Page 398
  Imperfect competition......Page 401
  Externalities......Page 402
  Public goods......Page 406
  Public goods, efficiency and valuation......Page 407
  Summary......Page 409
  Questions......Page 410
  Data response A......Page 411
  The distribution of income and wealth......Page 412
  Understanding the tax–benefit system......Page 415
  Case study 28.1 what makes a good tax?......Page 419
  Case study 28.2 the shift to expenditure taxation......Page 420
  Case study 28.3 direct taxes: a disincentive to work?......Page 423
  Tax reform......Page 426
  Case study 28.4 local taxation and autonomy......Page 428
  Summary......Page 429
Macroeconomic analysis......Page 431
  The Keynesian revolution......Page 433
  Macroeconomics......Page 434
  The fundamental ideas of Keynes......Page 436
  Keynesian recession and depression......Page 437
  Questions......Page 441
  Data response B......Page 442
  Income and consumption......Page 443
  Determinants of consumption......Page 447
  Savings......Page 448
  Determinants of investment......Page 450
  Conclusion......Page 453
  Appendix: the accelerator......Page 455
  Data response A......Page 457
  Data response B......Page 458
  Goods and money......Page 459
  Withdrawals and injections......Page 460
  The ‘hydraulic’ Keynesian model – an overview......Page 461
  A model of the economy......Page 463
  Summary......Page 465
  Data response A......Page 466
 The multiplier......Page 468
  The operation of the multiplier......Page 469
  The multiplier formula......Page 470
  Equilibrium and the multiplier......Page 471
  Questions......Page 473
  Data response B......Page 474
  The aggregate demand and supply curve approach......Page 475
  A neo-classical view......Page 479
  Summary......Page 481
  Data response A......Page 482
  Data response B......Page 483
Managing the economy:issues and policies......Page 487
  Economic growth......Page 489
  Factors influencing growth......Page 491
  People and growth......Page 494
  The problems of the UK economy......Page 497
  Summary......Page 498
  Data response B......Page 499
  The development of money......Page 500
  Credit creation......Page 501
  The functions and attributes of money......Page 503
  Measuring the money supply......Page 506
  The quantity equation of money......Page 509
  The concept of the general price level......Page 511
  Alternative measures of inflation......Page 515
  International comparisons......Page 516
  Financial institutions......Page 517
  Commercial banks......Page 518
  Money markets......Page 522
  Central banking......Page 525
  Summary......Page 526
  Data response A......Page 528
  Fiscal policy......Page 530
  The development of monetary policy......Page 534
  The stages of monetary policy......Page 535
  The weapons of monetary policy......Page 536
  Problems of monetary policy......Page 539
  The independence of the Bank of England......Page 541
  Questions......Page 542
  Data response B......Page 543
  Monetarists and Keynesians......Page 547
  Money and national income......Page 549
  Liquidity preference......Page 552
  Monetarist theory of the demand for money......Page 555
  The determination of aggregate real income......Page 559
  Recession or the natural rate of unemployment?......Page 562
  Summary......Page 566
  Questions......Page 567
  Data response B......Page 568
  The costs of inflation......Page 570
  The Phillips curve......Page 571
  The causes of inflation......Page 575
  The control of inflation......Page 579
  Questions......Page 583
  Data response B......Page 584
  Employment and unemployment......Page 586
  Vacancies and unemployment......Page 589
  Types of unemployment......Page 590
  Regional unemployment......Page 592
  The control of unemployment: the supply side view......Page 597
  The control of unemployment: neo-Keynesian views......Page 600
  Summary......Page 601
  Data response B......Page 602
  The philosophy behind neo-classical economics......Page 605
  Demand and marginal utility......Page 606
  Case study 40.1 acid rain......Page 609
  Cost–benefit analysis......Page 612
  Appendix: Indifference curve analysis......Page 617
  Applications of indifference curve analysis......Page 620
  Revealed preference theory......Page 623
  Data response A......Page 624
  Data response B......Page 625
  The theory of comparative advantage......Page 626
  Comparative advantage: a model......Page 627
  Comparative advantage and exchange rates......Page 631
  Extending the theory......Page 632
  Limitations of comparative advantage......Page 634
  Protectionism considered......Page 636
  Conclusion......Page 638
  Questions......Page 639
  Data response A......Page 640
  The pattern of the UK’s overseas trade......Page 642
  The balance of payments......Page 645
  The problems of a surplus......Page 647
  Deficit problems......Page 648
  Exchange rates......Page 650
  The exchange rate debate......Page 652
  Fixed exchange rates......Page 653
  The equilibrium exchange rate......Page 654
  The Asian crisis......Page 655
  Recent UK developments......Page 656
  Data response A......Page 658
  Data response B......Page 659
  The lessons of history......Page 661
  Summary......Page 664
  Questions......Page 665
The EU and widerperspectives......Page 667
  The International Monetary Fund......Page 669
  The break-up of the Bretton Woods System......Page 671
  Eurocurrencies......Page 674
  The General Agreement on Tariffs and Trade (GATT) and its successor, the WorldTrade Organisation (WTO)......Page 675
  Other international institutions......Page 677
  Questions......Page 679
  Data response A......Page 680
  Websites......Page 681
  Introduction......Page 682
  The economics of integration......Page 683
  Economic and Monetary Union......Page 688
  Regional problems and policy in the EU......Page 698
  Employment and social policy in the EU......Page 701
  EU enlargement......Page 703
  Summary......Page 706
  Data response A......Page 707
  Websites......Page 711
  Development economics......Page 712
  Population and development......Page 714
  Technological issues......Page 716
  Trade issues......Page 717
  The debt problem of developing countries......Page 719
  What is necessary for development?......Page 721
  Conclusion......Page 722
  Data response A......Page 723
  Introduction......Page 725
  Political economy......Page 726
  The Austrian school......Page 727
  Post-Keynesian economics......Page 728
  Marxist economics......Page 729
  Where are we now?......Page 732
  Future issues......Page 733
  Questions......Page 735
  Data response B......Page 736
Index......Page 737