David K.H. Begg, Gianluigi Vernasca-Economics-McGraw Hill Higher Education (2011)

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Review questions eventual price of oil in, say, 10 years' time? (b) Is it possible for oil prices to be substantially above $50/barrel for the next few years? ( c) Do higher oil prices in the short run increase or reduce the incentive to look for alternative energy technologies? 1 0 Essay question Two similar countries take the decision to try to increase the health of their poorest people. One country raises taxes on the rich and gives more money to the poor. The other country raises taxes on the rich and provides more health care, free to patients, through its national health service. Which country do you think is more likely to meet its objective? Why? For solutions to these questions contact your lecturer. 21
Learning Outcomes By the end of this chapter, you should understand: 0 why theories deliberately simplify reality f) time-series, cross-section and panel data 0 how to construct index numbers 0 nominal and real variables 0 how to build a simple theoretical model 0 how to plot data and interpret scatter diagrams 0 how to use 'other things equal' to ignore, but not forget, important influences It is more fun to play tennis if you know how to serve, and cutting trees is much easier with a chainsaw. Every activity or academic discipline has a basic set of tools. Tools may be tangible, like the dentist's drill, or intangible, like the ability to serve in tennis. This chapter is about the tools of the trade. To analyse economic issues we use both models and data. A model or theory makes assumptions from which it deduces how people will behave. It is a deliberate simplification of reality. Models or theories - we use these terms interchangeably - are frameworks to organize how we think about a problem. They simplify by omitting some details of the real world to concentrate on the essentials. From this manageable picture of reality we develop an analysis of how the economy works. An economist uses a model as a tourist uses a map. A map of Glasgow misses out many features of the real world - traffic lights, roundabouts, speed bumps - but with careful study you get a good idea of how the traffic flows and the best route to take. The simplified picture is easy to follow, but helps you understand actual behaviour when you must drive through the city in the rush hour. The data or facts interact with models in two ways. First, the data help us quantify the relationships to which our theoretical models draw attention. It is not enough to know that all bridges across the Clyde are likely to be congested. To choose the best route we need to know how long we have to queue at each bridge. We need some facts. The model is useful because it tells us which facts are likely to be the most important. 22
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• David Begg, Gianluigi Vernasca,
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Economics 10th Edition David Begg,
Page 7 and 8: Brief Table of Contents Preface xii
Page 9 and 10: 5 Consumer choice and demand decisi
Page 11 and 12: PART FOUR Macroeconomics l 5 Introd
Page 13 and 14: PART FIVE The world economy 28 Inte
Page 15 and 16: Changes to the tenth edition After
Page 17 and 18: Guided tour In addition to illustra
Page 19 and 20: Aiding Understanding Hy the end of
Page 21 and 22: Rent ceiling in Sweden* More on pri
Page 23 and 24: 13 General vs partial equilibrium:
Page 25 and 26: 26 Growth and competition* Case Neo
Page 27 and 28: Cl INSTRUCTORS ... Would you like y
Page 29 and 30: Additional technology to enhance le
Page 31 and 32: Custom Publishing Solutions • cre
Page 33 and 34: Acknowledgements for the tenth edit
Page 35 and 36: Finally, special thanks to the foll
Page 38: ---.. . - Introduction Economics is
Page 41 and 42: CHAPTER 1 Economics and the economy
Page 57: CHAPTER 1 Economics and the economy
Page 61 and 62: CHAPTER 2 Tools of economic analysi
Page 79 and 80: Learning Outcomes By the end of thi
Page 81 and 82: CHAPTER 3 Demand, supply and the ma
Page 102 and 103: Learning Outcomes By the end of thi
Page 104 and 105: 4.1 The price responsiveness of dem
Page 106 and 107: 4.1 The price responsiveness of dem
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4.1 The price responsiveness of dem
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4.2 Price, quantity demanded and to
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4.2 Price, quantity demanded and to
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4.4 Short run and long run simultan
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4.6 The effect of income on demand
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4.6 The effect of income on demand
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4.8 Elasticity of supply The elasti
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4.9 Who really pays the tax? S' - G
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Summary What are the effects of the
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Review questions 5 Common fallacies
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Learning Outcomes By the end of thi
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5.1 Demand by a single consumer is
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5.1 Demand by a single consumer Ill
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5.1 Demand by a single consumer QF
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5.1 Demand by a single consumer whe
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5.1 Demand by a single consumer How
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5.2 Adjustment to income changes ou
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5.3 Adjustment to price changes and
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5.3 Adjustment to price changes Thi
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5.3 Adjustment to price changes imp
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5.3 Adjustment to price changes Q '
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5.5 Complements and substitutes it
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5.6 Transfers in kind that to the s
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Review questions • The market dem
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Our theory of consumer choice assum
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APPENDIX Consumer choice with measu
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6.2 A firm's accounts A sole trader
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6.2 A firm's accounts Inventories I
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6.2 A firm's accounts Earnings When
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6.4 Corporate finance and corporate
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6.5 The firm's supply decision Tabl
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6.6 Marginal cost and marginal reve
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6. 7 Marginal cost and marginal rev
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Review questions in total cost when
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7.2 Production in the short run: di
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7.2 Production in the short run: di
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7.3 Short-run costs As you can see
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7.3 Short-run costs 60 50 SMC - 40
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7.3 Short-run costs down average co
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7.4 A firm's output decision in the
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7.6 Long-run total, marginal and av
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7. 7 Returns to scale - "O 0 DI ..
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7. 7 Returns to scale Scale economi
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7. 7 Returns to scale Table 7.10 Mi
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--1-----1 7.8 The firm's long-run o
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Summary Summary • This chapter di
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Review questions 8 Suppose that fir
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8.1 Perfect competition Perfect com
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8.2 A perfectly competitive firm's
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8.2 A perfectly competitive firm's
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8.3 Industry supply curves In the s
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8.4 Comparative statics for a compe
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.. 8.6 Profit-maximizing output for
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8.6 Profit-maximizing output for a
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8. 7 Output and price under monopol
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8. 7 Output and price under monopol
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8.8 A monopoly has no supply curve
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8.9 Monopoly and technical change f
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8.10 Natural monopoly 'ti QI 0 :I P
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Review questions • Adding at each
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9 .1 Why market structures differ D
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9 .1 Why market structures differ T
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9.3 Oligopoly and interdependence A
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9.3 Oligopoly and interdependence T
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9.4 Game theory and interdependent
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9.5 Reaction functions demand curve
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9.5 Reaction functions Deriving the
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9.5 Reaction functions Mergers and
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9.5 Reaction functions The Stackelb
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9.7 Strategic entry deterrence Inno
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9.8 Summing up Barriers at the chec
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Review questions Review questions c
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I 0.1 The firm's demand for factors
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10.2 The firm's demand for labour i
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10.3 The industry demand curve for
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10.4 The supply of labour Table 10.
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10.4 The supply of labour A reducti
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10.5 Industry labour market equilib
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10.5 Industry labour market equilib
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10.6 Transfer earnings and economic
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10. 7 Do labour markets clear? Mini
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10. 7 Do labour markets clear? How
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10.8 UK wages and employment Table
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Summary reducing demand for both fa
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Review questions In a graph with th
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APPENDIX Isoquants and the choice o
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11.2 Rentals, interest rates and as
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11.3 Saving, investment and the rea
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11. 5 The supply of capital service
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11.6 Equilibrium and adjustment in
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11.8 Land and rents supply of skill
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11.9 Income distribution in the UK
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Summary of average earnings. As liv
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Review questions the quantity of ca
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12.l Individual attitudes to risk S
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12.2 Insurance and risk Life assura
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12.3 Asymmetric information The uti
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12.3 Asymmetric information Executi
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12.4 Uncertainty and asset returns
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12.5 Portfolio selection We use the
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12.5 Portfolio selection Conversely
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12.6 Efficient asset markets Beta i
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12.6 Efficient asset markets II Beh
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12. 7 More on risk You own a copper
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12.8 E-products 100 80 60 - - - - -
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12.8 E-products If Britain had to s
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Summary Britannica shelved Serious
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Review questions 4 You set up a fir
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Welfa re economics Normative or wel
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CHAPTER 13 Welfare economics Welfar
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CHAPTER 13 Welfare economics Perfec
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CHAPTER 13 Welfare economics margin
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CHAPTER 13 Welfare economics II) E
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CHAPTER 13 Welfare economics have c
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CHAPTER 13 Welfare economics DD Wit
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CHAPTER 13 Welfare economics .. ;
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CHAPTER 13 Welfare economics 0 Firm
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CHAPTER 13 Welfare economics Was th
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CHAPTER 13 Welfare economics 0 u -
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CHAPTER 13 Welfare economics benefi
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CHAPTER 13 Welfare economics P' "i
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CHAPTER 13 Welfare economics • Di
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CHAPTER 13 Welfare economics Q MPC
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CHAPTER 14 Government spending and
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15.2 Some facts Annual real output
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15.3 An overview Since profits are
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15.4 National income accounting
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15.4 National income accounting Sav
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15.4 National income accounting phy
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15.4 National income accounting Hou
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15.5 What GNP measures Table l 5.3
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15.5 What GNP measures Table 15.4 N
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15.6 International comparisons Citi
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16. l Components of aggregate deman
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16.2 Aggregate demand S =-A + (1 -
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16.3 Equilibrium output C'I ·- c -
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16.4 Another approach: planned savi
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16. 5 A fall in aggregate demand A
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16.7 The paradox of thrift Table 16
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16.8 The role of confidence The cha
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Review questions 2 Suppose the MPC
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17 .2 Government and aggregate dema
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17.4 Deficits and the fiscal stance
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17.5 Automatic stabilizers and disc
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17 .6 The national debt and the def
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17. 7 Foreign trade and income dete
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17. 7 Foreign trade and income dete
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Summary and employment. In Figure 1
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Review questions 2 The government s
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18. 1 Money and its functions The m
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18.2 Modern banking M_o_d_er_n_ha
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18.3 How banks create money How did
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18.4 Financial crises However, ther
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18.4 Financial crises UK bank inter
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18.5 The traditional theory of mone
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18.6 UK money supply after the 2006
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18. 7 The demand for money flow and
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18. 7 The demand for money Table 18
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Review questions • Financial dere
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19.2 Traditional means of monetary
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19 .3 Lender of last resort Second,
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19.4 Equilibrium in financial marke
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19.5 Monetary control However, more
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19.5 Monetary control UK quantitati
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19. 7 The transmission mechanism AD
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19. 7 The transmission mechanism Wh
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19. 7 The transmission mechanism In
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19. 7 The transmission mechanism He
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Review questions • A higher inter
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20.2 The IS-LM model T_he_IS_-_L_
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20.2 The IS-LM model Until 2008 mon
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20.3 The IS-LM model in action Fisc
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20.4 Shocks to money demand Hence,
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20.5 The policy mix IS schedule, IS
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20.6 The effect of future taxes Que
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Summary helped explain positive UK
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Review questions IS-LM diagram, rec
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21. l Inflation and aggregate deman
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21.2 Aggregate supply demand. The A
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21.3 Equilibrium inflation AS0 AS,
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21.3 Equilibrium inflation It was c
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21.4 The labour market and wage beh
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21.6 The adjustment process The eco
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21. 7 Sluggish adjustment to shocks
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21.8 Trade-offs in monetary objecti
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21.8 Trade-offs in monetary objecti
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Review questions • In practice, w
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22. l Money and inflation rises wit
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22.2 Inflation and interest rates N
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22.3 Inflation, money and deficits
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22.4 Inflation, unemployment and ou
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22.5 The costs of inflation find th
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22.5 The costs of inflation You los
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22.6 Controlling inflation Without
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22. 7 The Monetary Policy Committee
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Summary 18 16 14 12 10 8 6 4 2 0 He
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Review questions Money growth (%) I
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23. l The labour market may simply
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23.2 Analysing unemployment The fig
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23.2 Analysing unemployment of an h
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23.3 Explaining changes in unemploy
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23.4 Cyclical fluctuations in unemp
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23.5 The cost of unemployment Count
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23.5 The cost of unemployment in th
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Review questions • Most European
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24.1 The foreign exchange market do
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24.2 Exchange rate regimes ... ii)
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24.3 The balance of payments statis
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24.4 The real exchange rate In row
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24.6 The financial account Table 24
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24.6 The financial account This sec
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24. 7 Internal and external balance
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24.8 The long-run equilibrium real
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Summary This figure is helpful in t
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25. l Fixed exchange rates So far,
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25. l Fixed exchange rates Gordon B
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25. l Fixed exchange rates A shock
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25.3 Devaluation 1 .., Devaluation
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25.3 Devaluation Table 25.1 The 196
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25.4 Floating exchange rates UK. Af
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25.5 Monetary and fiscal policy und
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25.5 Monetary and fiscal policy und
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Summary Summary • With a fixed ex
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Review questions 11 The following t
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26. 1 Economic growth Table 26.1 Re
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26.2 Growth: an overview In the lon
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26.3 Technical knowledge Learning b
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26.4 Growth and accumulation increa
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26.5 Growth through technical progr
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26.6 Growth in the OECD II : e!p ;:
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26.6 Growth in the OECD Within the
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26.6 Growth in the OECD Annual real
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26.8 The costs of growth rate g? If
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Review questions • Potential outp
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2 7 .1 Trend and cycle: statistics
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27.2 Theories of the business cycle
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27.2 Theories of the business cycle
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.. 27.2 Theories of the business cy
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27 .3 Real business cycles provides
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27.4 Towards a consensus: supply-si
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27.5 An international business cycl
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Review questions • Some swings in
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The world economy Part Five focuses
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CHAPTER 28 International trade Is t
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CHAPTER 28 International trade Tabl
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CHAPTER 28 International trade The
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CHAPTER 28 International trade Comp
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CHAPTER 28 International trade Conv
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CHAPTER 28 International trade Fanc
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CHAPTER 28 International trade The
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CHAPTER 28 International trade High
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CHAPTER 28 International trade thei
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CHAPTER 28 International trade Of c
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CHAPTER 28 International trade Conc
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CHAPTER 28 International trade SS
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CHAPTER 28 International trade 7 Wh
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CHAPTER 29 Exchange rate regimes Ta
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CHAPTER 29 Exchange rate regimes co
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CHAPTER 29 Exchange rate regimes re
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CHAPTER 29 Exchange rate regimes 0.
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CHAPTER 29 Exchange rate regimes It
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CHAPTER 29 Exchange rate regimes Ta
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CHAPTER 29 Exchange rate regimes 0
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CHAPTER 29 Exchange rate regimes th
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CHAPTER 29 Exchange rate regimes
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Activity 1.1 (a) (b) Activity 2.1 (
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Answers to activity questions Activ
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Answers to activity questions Activ
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Absolute advantage an individual, c
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Glossary Demand for money a demand
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Glossary Gross domestic product (GD
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Glossary Marginal product the margi
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Glossary Percentage change the abso
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Glossary Sole trader a business own
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A absolute advantage 11-12 internat
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Index commodity composition of trad
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Index elasticity of supply 82-4 ele
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Index happiness 594 new products 59
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Index Laffer curve supply-side econ
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Index exports 369 foreign countries
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Index reading diagrams 34-5 real bu
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Index future taxes effect 475-7 gov
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David K.H. Begg, Gianluigi Vernasca-Economics-McGraw Hill Higher Education (2011)

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