Economics for business : competition, macro-stability, and globalisation

Cover......Page 1
Economics for business......Page 2
Brief contents......Page 6
Contents......Page 8
List of boxes......Page 15
Preface to the third edition......Page 18
Acknowledgements......Page 22
 Introduction......Page 24
 The economic policy consensus......Page 25
 Why policy changed......Page 28
 Implications for the future......Page 29
 Criticisms of the new consensus......Page 30
 Will the consensus last?......Page 32
 Questions for discussion......Page 34
 Further reading......Page 35
 Introduction......Page 36
 Trends in economic growth......Page 37
 Growth theories......Page 40
 Human welfare and sustainable growth......Page 49
 Policy prescriptions for growth......Page 56
 Conclusions......Page 59
 Summary......Page 60
 Questions for discussion......Page 61
 Exercises......Page 62
 Appendix 2.1 The economics of the new economy......Page 63
Part I: The market system and competition......Page 66
 Introduction to Part I......Page 67
  Introduction......Page 70
  The market system......Page 71
  The role of prices......Page 76
  Movements in demand and supply......Page 79
  The role of traders and arbitrage......Page 84
  The efficiency of the market system......Page 86
  The free market system in social context......Page 88
  Conclusions......Page 90
  Summary......Page 91
  Questions for discussion......Page 92
  Exercises......Page 93
  Further reading......Page 94
  What is a ‘rational’ consumer?......Page 95
  Elasticities of demand......Page 98
  Estimating the demand function......Page 105
  Price elasticities and the pricing decision......Page 111
  Conclusions......Page 113
  Summary......Page 114
  Questions for discussion......Page 115
  Exercises......Page 116
  Further reading......Page 117
  Introduction......Page 118
  Profit maximisation......Page 119
  Rules for maximising profit......Page 124
  Cost structure of the firm......Page 130
  The transaction costs approach......Page 138
  From cost structure to supply curve......Page 140
  Conclusions......Page 142
  Summary......Page 143
  Questions for discussion......Page 144
  Exercises......Page 145
  Further reading......Page 147
  Introduction......Page 148
  Firm size......Page 149
  The economics of market power......Page 156
  How to sustain monopoly power......Page 164
  Market power with few firms – the case of oligopoly......Page 165
  Conclusions......Page 169
  Summary......Page 170
  Questions for discussion......Page 171
  Exercises......Page 172
  Further reading......Page 173
  Case study 6.1 The diamond cartel......Page 174
  Introduction......Page 178
  The case for competition......Page 179
  Competition policy......Page 182
  Privatisation......Page 192
  Regulation......Page 194
  Conclusions......Page 198
  Summary......Page 199
  Exercises......Page 200
  Further reading......Page 202
  Introduction......Page 203
  Income distribution and the equity–efficiency trade-off......Page 205
  Market failures......Page 210
  Government intervention......Page 216
  Government failure......Page 221
  Conclusions......Page 225
  Summary......Page 226
  Questions for discussion......Page 227
  Further reading......Page 228
  Introduction......Page 229
  Economic growth and the environment......Page 231
  Environmental policies......Page 234
  Policy instruments: design and effects......Page 237
  Impact on business......Page 242
  Conclusions......Page 245
  Summary......Page 246
  Questions for discussion......Page 247
  Exercises......Page 248
  Further reading......Page 249
  The hiring decision......Page 250
  The investment decision......Page 255
  Conclusions......Page 261
  Questions for discussion......Page 262
  Exercises......Page 263
  Further reading......Page 264
Part II: The macroeconomic framework......Page 266
 Introduction to Part II......Page 267
  Introduction......Page 269
  How is gross domestic product (GDP) calculated?......Page 270
  parity (PPP)......Page 275
  The aggregate supply (AS) curve......Page 279
  Aggregate demand (AD) and money......Page 284
  Conclusions......Page 294
  Summary......Page 295
  Exercises......Page 296
  Appendix 11.1 The money supply process......Page 298
  Introduction......Page 299
  What is price stability?......Page 301
  Deviation from price stability 1: inflation......Page 303
  Deviation from price stability 2: deflation......Page 307
  Benefits of price stability......Page 309
  Central banks and institutional reform......Page 315
  Price stability and exchange rate anchors......Page 319
  Is inflation dead?......Page 323
  Summary......Page 325
  Questions for discussion......Page 326
  Further reading......Page 327
  Introduction......Page 328
  Which interest rate?......Page 329
  What determines interest rates?......Page 334
  Interest rates and economic activity......Page 338
  Monetary policy and interest rates......Page 341
  The design of monetary policy......Page 347
  Conclusions......Page 351
  Summary......Page 352
  Questions for discussion......Page 353
  Exercises......Page 354
  Further reading......Page 355
  Case study 13.1 Taylor’s rule for monetary policy......Page 357
  Introduction......Page 359
  Facts about unemployment......Page 361
  Supply-side approach and the market mechanism......Page 365
  Short-run versus long-run perspectives......Page 371
  The importance of demand......Page 375
  Technology, productivity and unemployment......Page 378
  Labour market policies......Page 380
  Conclusions......Page 383
  Summary......Page 386
  Exercises......Page 387
  Appendix 14.1 Unemployment and inflation – the Phillips curve......Page 388
  Introduction......Page 393
  Counter-cyclical fiscal policy......Page 394
  The limits of fiscal activism......Page 399
  Public debt and ‘crowding out’......Page 404
  Fiscal policy in Europe......Page 411
  Conclusions......Page 416
  Summary......Page 418
  Questions for discussion......Page 419
  Exercises......Page 420
  Appendix 15.1 The sustainability of debt......Page 421
  Introduction......Page 424
  Business fluctuations – the facts......Page 426
  What causes fluctuations?......Page 430
  Business fluctuations and growth......Page 434
  Forecasting the business cycle......Page 435
  Macro-forecasts and the firm......Page 439
  Conclusions......Page 440
  Summary......Page 441
  Further reading......Page 442
Part III: The global economy......Page 444
 Introduction to Part III......Page 445
  Introduction......Page 447
  Global trade and the WTO......Page 448
  Explaining the gains from international trade......Page 454
  Quantifying the gains from trade......Page 461
  Trade policy and protection......Page 465
  What determines comparative advantage?......Page 472
  Conclusions......Page 475
  Summary......Page 477
  Questions for discussion......Page 478
  Exercises......Page 479
  Further reading......Page 480
  Case study 17.1 China and the WTO:the effects of trade liberalisation......Page 481
  Introduction......Page 485
  Capital flows......Page 486
  Basic model......Page 488
  Foreign direct investment and multinationals......Page 494
  Effects of foreign investment......Page 502
  Conclusions......Page 507
  Summary......Page 508
  Exercises......Page 509
  Further reading......Page 510
  Introduction......Page 511
  Recent trends......Page 512
  Effects of migration – the basic model......Page 514
  Migration, public finances and jobs......Page 517
  Conclusions......Page 521
  Questions for discussion......Page 522
  Further reading......Page 523
  Introduction......Page 524
  What is the balance of payments?......Page 525
  Balance of payments problems......Page 532
  How to correct a balance of payments imbalance......Page 541
  Conclusions......Page 546
  Summary......Page 547
  Questions for discussion......Page 548
  Exercises......Page 549
  Further reading......Page 550
  Introduction......Page 551
  How exchange rates work......Page 552
  Exchange rate theory......Page 559
  Capital flows and exchange rate volatility......Page 565
  Strategies for coping with exchange rate risk......Page 571
  Conclusions......Page 577
  Questions for discussion......Page 579
  Exercises......Page 580
  Appendix 21.1 The global foreign exchange market......Page 581
  Introduction......Page 584
  The global exchange rate system......Page 586
  Floating exchange rates......Page 589
  Search for stability......Page 596
  Establishing a single currency – the euro......Page 603
  Conclusions......Page 609
  Summary......Page 610
  Questions for discussion......Page 611
  Further reading......Page 612
  Appendix 22.1 Exchange rate regimes – a brief history......Page 613
Index......Page 618