
EBOOK: Microeconomics and Behaviour
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Content
- Intro
- MICROECONOMICS AND BEHAVIOUR
- DETAILED TABLE OF CONTENTS
- PART 1 Introduction
- Chapter 1 Thinking Like an Economist
- The Cost-Benefit Approach to Decisions
- Example 1.1: Should I turn down my stereo?
- The Role of Economic Theory
- Common Pitfalls in Decision Making
- Example 1.2: Should I go skiing today or work as a research assistant?
- Example 1.3: Should I go skiing today or wash dishes?
- Example 1.4: Should I work first or go to university first?
- Example 1.5: Should I drive to Berlin or take the train?
- Example 1.6: The pizza experiment
- Example 1.7a: Should you drive to the superstore to save ?10 on a ?20 clock radio?
- Example 1.7b: Should you drive to the superstore to save ?10 on a ?1000 television set?
- Example 1.8: Should Tom launch another boat?
- Example 1.9: How many boats should Tom launch?
- Using Marginal Benefit and Marginal Cost Graphically
- Example 1.10: How much should Susan talk to Hal each month?
- The Invisible Hand
- Example 1.11: Should I burn my leaves or haul them into the woods?
- Would Parents Want Their Daughter or Son to Marry Homo Economicus?
- The Economic Naturalist
- ECONOMIC NATURALIST 1.1: Why is airline food so bad?
- ECONOMIC NATURALIST 1.2: Why do manual transmissions have five forward speeds, automatics only four?
- Positive Questions and Normative Questions
- Microeconomics and Macroeconomics
- Summary
- Questions for Review
- Problems
- Answers to In-Chapter Exercises
- Chapter 2 Supply and Demand
- Chapter Preview
- Supply and Demand Curves
- Equilibrium Quantity and Price
- Adjustment to Equilibrium
- ECONOMIC NATURALIST 2.1: Why do people not haggle in supermarkets?
- Some Welfare Properties of Equilibrium
- Free Markets and the Poor
- Example 2.1: Denied boarding compensation
- Example 2.2: Rent controls
- Price Supports
- The Rationing and Allocative Functions of Prices
- Determinants of Supply and Demand
- Predicting and Explaining Changes in Price and Quantity
- ECONOMIC NATURALIST 2.2: Why do the prices of some goods, like apples, go down during the months of heaviest consumption while others, like beachfront cottages, go up?
- Example 2.3: How does a price support programme in the soybean market affect the equilibrium price and quantity of beef?
- The Algebra of Supply and Demand
- Summary
- Questions for Review
- Problems
- Answers to In-Chapter Exercises
- Appendix 2: How Do Taxes Affect Equilibrium Prices and Quantities?
- PART 2 The Theory of Consumer Behaviour
- Chapter 3 Rational Consumer Choice
- Chapter Preview
- The Opportunity Set or Budget Constraint
- Example 3.1: Quantity discount gives rise to a kinked budget constraint: graphing the budget constraint for a consumer's electric power
- Example 3.2: Budget constraints following theft of diesel or loss of cash: should Gowdy buy more diesel?
- Consumer Preferences
- The Best Affordable Bundle
- ECONOMIC NATURALIST 3.1: Why do people not consume most goods?
- Example 3.3: Equilibrium with perfect substitutes: Jolt cola versus Coca-Cola
- An Application of the Rational Choice Model
- Example 3.4: Is it better to give poor people cash or rent support?
- ECONOMIC NATURALIST 3.2: Why do people often give gifts in kind instead of cash?
- Theory of Choice and Household Production
- Summary
- Questions for Review
- Problems
- Answers to In-Chapter Exercises
- Appendix 3: The Utility Function Approach to the Consumer Budgeting Problem
- Chapter 4 Individual and Market Demand
- Chapter Preview
- The Effects of Changes in Price
- The Effects of Changes in Income
- The Income and Substitution Effects of a Price Change
- Example 4.1: Income and substitution effects for perfect complements: skis and bindings
- Example 4.2: Income and substitution effects for perfect substitutes: tea and coffee
- Consumer Responsiveness to Changes in Price
- Example 4.3: Deriving individual demand curves for perfect complements: car washes and petrol
- Market Demand: Aggregating Individual Demand Curves
- Example 4.4: The market demand curve: lamb chops in a Welsh town
- Example 4.5: The market demand curve: ten consumers
- Price Elasticity of Demand
- Example 4.6: Price elasticity of demand: should the bus system raise or lower bus fares?
- The Dependence of Market Demand on Income
- Example 4.7: How does income affect the market demand curve for food?
- ECONOMIC NATURALIST 4.1: Why have pubs become good at cooking food?
- Application: Forecasting Economic Trends
- Cross-Price Elasticities of Demand
- Summary
- Questions for Review
- Problems
- Answers to In-Chapter Exercises
- Appendix 4: Additional Topics in Demand Theory
- Chapter 5 Applications of Rational Choice and Demand Theories
- Chapter Preview
- Application: Financing of Private Schools
- The Income-Compensated Demand Curve
- Consumer Surplus
- Example 5.1: What is the loss in consumer surplus from an oil price increase?
- ECONOMIC NATURALIST 5.1: Why do many tennis clubs have an annual membership charge in addition to their hourly court fees?
- ECONOMIC NATURALIST 5.2: Why do some amusement parks charge only a fixed admission fee?
- Overall Welfare Comparisons
- Example 5.2: Price changes: was Jones better off this year or last year?
- Application: The Welfare Effects of Changes in Housing Prices
- Application: A Bias in the Consumer Price Index
- Using Price Elasticity of Demand
- Application: London Underground Fare Increases
- Application: The Price Elasticity of Demand for Alcohol
- The Intertemporal Choice Method
- Application: Monetary Policy
- Example 5.3: Will an increase in the interest rate cause you to save more?
- Application: The Permanent Income and Life-Cycle Hypotheses
- Summary
- Questions for Review
- Problems
- Answers to In-Chapter Exercises
- Chapter 6 Choice under Uncertainty and the Economics of Information
- Chapter Preview
- Choice under Uncertainty
- Example 6.1: Maximizing expected utility: Smith and gambling
- Example 6.2: Will you always accept a favourable bet?
- Example 6.3: The Lemons principle: in a certain country, what fraction of personal computers is defective?
- Example 6.4: Should Sarah become a teacher or an actress? What is the most she would pay for Smith's evaluation?
- Example 6.5: Should Smith sue the manufacturer?
- Expected Utility and the Rational Choice Model
- Insuring against Bad Outcomes
- ECONOMIC NATURALIST 6.1: Why is it more difficult to get flood protection than fire protection?
- Application: Always Self-Insure against Small Losses
- The Economics of Information
- Adverse Selection
- ECONOMIC NATURALIST 6.2: Why do 'almost new' used cars sell for so much less than brand new ones?
- ECONOMIC NATURALIST 6.3: Why should men pay more than women for car insurance?
- Moral Hazard
- Signalling
- ECONOMIC NATURALIST 6.4: Why is coyness often an attractive attribute?
- ECONOMIC NATURALIST 6.5: Why do residents of small towns spend less on their professional wardrobes than their counterparts in big cities?
- Summary
- Questions for Review
- Problems
- Answers to In-Chapter Exercises
- Appendix 6: Search Theory and the Winner's Curse
- Chapter 7 Explaining Tastes: The Importance of Altruism and Other Non-Egoistic Behaviour
- Chapter Preview
- Applications of the Present-Aim Standard
- Application: Voting in Elections
- Application: Giving Money to Friends (or Strangers)
- Example 7.1: A utility-maximizing altruist: should Smith give some of his wealth to Jones?
- Application: Concerns about Fairness
- Example 7.2: Will Hatfield and McCoy work together?
- ECONOMIC NATURALIST 7.1: Why are tickets for football matches so cheap?
- Evolution and Preferences
- The Commitment Problem
- Illustration: The Cheating Problem
- A Simple Thought Experiment
- Tastes Not Only Can Differ, They Must Differ
- The Importance of Tastes
- ECONOMIC NATURALIST 7.2: Why do so many people donate to charity?
- Summary
- Questions for Review
- Problems
- Answers to In-Chapter Exercises
- Chapter 8 Cognitive Limitations and Consumer Behaviour
- Chapter Preview
- Bounded Rationality
- The Difficulty of Actually Deciding
- ECONOMIC NATURALIST 8.1: Why do real estate agents show two houses that are nearly identical, even though one is cheaper and in better condition than the other?
- The Asymmetric Value Function
- ECONOMIC NATURALIST 8.2: Why does it pay to be careful with special offers?
- Sunk Costs and Out-of-Pocket Expenses
- Choice under Uncertainty
- Judgemental Bias and Heuristics
- ECONOMIC NATURALIST 8.3: Why does it not pay to work from home?
- Intertemporal Choice
- Summary
- Questions for Review
- Problems
- Answer to In-Chapter Exercise
- PART 3 The Theory of the Firm and Market Structure
- Chapter 9 Production
- Chapter Preview
- The Input-Output Relationship, or Production Function
- Production in the Short Run
- ECONOMIC NATURALIST 9.1: Why can't all the world's people be fed from the amount of grain grown in a single flowerpot?
- Example 9.1: Maximizing total output (I): should the allocation of boats of a fishing fleet be altered?
- Example 9.2: Maximizing total output (II): how should the allocation of the boats of a fishing fleet be altered?
- Example 9.3: What is the optimal amount of time to spend on each exam question?
- Production in the Long Run
- Returns to Scale
- ECONOMIC NATURALIST 9.2: Why do builders use prefabricated frames for roofs but not for walls?
- Summary
- Questions for Review
- Problems
- Answers to In-Chapter Exercises
- Appendix 9: Mathematical Extensions of Production Theory
- Chapter 10 Costs
- Chapter Preview
- Costs in the Short Run
- Example 10.1: Graphing the total, variable and fixed cost curves 313
- Example 10.2: Graphing the average fixed, average variable, average total and marginal costs
- Example 10.3: Graphing the average total cost, average variable cost, average fixed cost and marginal cost curves
- Allocating Production between Two Processes
- Example 10.4: What is the least costly way to produce a total of 32 units of output?
- The Relationship between MP, AP, MC and AVC
- Costs in the Long Run
- ECONOMIC NATURALIST 10.1: Why is gravel made by hand in Nepal but by machine in Europe?
- ECONOMIC NATURALIST 10.2: Why do unions support minimum wage laws so strongly?
- ECONOMIC NATURALIST 10.3: Why would a bathroom equipment manager bake the image of a housefly onto the centre of its ceramic urinals?
- Long-Run Costs and the Structure of Industry
- The Relationship between Long-Run and Short-Run Cost Curves
- Summary
- Questions for Review
- Problems
- Answers to In-Chapter Exercises
- Appendix 10: Mathematical Extensions of the Theory of Costs
- Chapter 11 Perfect Competition
- Chapter Preview
- The Goal of Profit Maximization
- Example 11.1: Should the owner of Margate's miniature golf course move the operation to London?
- The Four Conditions for Perfect Competition
- The Short-Run Condition for Profit Maximization
- The Short-Run Competitive Industry Supply
- Example 11.2: What is the industry supply curve for an industry with 200 firms?
- Short-Run Competitive Equilibrium
- The Efficiency of Short-Run Competitive Equilibrium
- Producer Surplus
- Example 11.3: Should the legislature ban fireworks?
- Adjustments in the Long Run
- The Invisible Hand
- ECONOMIC NATURALIST 11.1: Why does an airline ticket from London to Frankfurt cost only ?10?
- Application: The Cost of Extraordinary Inputs
- The Long-Run Competitive Industry Supply Curve
- The Elasticity of Supply
- Applying the Competitive Model
- ECONOMIC NATURALIST 11.2: Is there not a better way to support family farms?
- ECONOMIC NATURALIST 11.3: Why did 18-wheel cargo trucks suddenly begin using airfoils in the mid-1970s?
- Summary
- Questions for Review
- Problems
- Answers to In-Chapter Exercises
- Chapter 12 Monopoly
- Chapter Preview
- Defining Monopoly
- Five Sources of Monopoly
- ECONOMIC NATURALIST 12.1: What is a just reward for designing the iPhone or finding a treatment for cancer?
- The Profit-Maximizing Monopolist
- Example 12.1: Finding a marginal revenue curve for a given demand curve
- Example 12.2: What is a monopolist's profit-maximizing price, and how much economic profit is earned?
- A Monopolist Has No Supply Curve
- Adjustments in the Long Run
- Price Discrimination
- Example 12.3: Finding and graphing the monopolist's quantity and price in the home market
- ECONOMIC NATURALIST 12.2: Why do some doctors and lawyers offer discounts to people with low incomes?
- ECONOMIC NATURALIST 12.3: Why do cinema owners offer student discounts on admission tickets but not on popcorn?
- Example 12.4: Finding and graphing the optimal fees for a student and a professor
- Example 12.5: Distinguishing between rich and poor customers
- The Efficiency Loss from Monopoly
- Public Policy toward Natural Monopoly
- ECONOMIC NATURALIST 12.4: Why are British railways so bad compared to European railways?
- ECONOMIC NATURALIST 12.5: Is the EU powerless against Microsoft?
- Example 12.6: Will the monopolist introduce a new light bulb that lasts 10,000 hours?
- Summary
- Questions for Review
- Problems
- Answers to In-Chapter Exercises
- Chapter 13 Imperfect Competition: A Game-Theoretic Approach
- Chapter Preview
- Monopolistic Competition
- A Spatial Interpretation of Monopolistic Competition
- ECONOMIC NATURALIST 13.1: Why are there fewer grocery stores in most cities now than there were in 1930? And why do residential neighbourhoods in Paris have more grocery stores than residential neighbourhoods in Los Angeles?
- Historical Note: Hotelling's Hot Dog Vendors
- Some Specific Oligopoly Models
- Example 13.1: Deriving the reaction functions for Cournot duopolists
- Example 13.2: Finding the equilibrium price and quantity for Bertrand duopolists
- ECONOMIC NATURALIST 13.2: Why are house prices so high and mortgage rates so low?
- Example 13.3: Finding the equilibrium price and quantity for a Stackelberg leader and follower
- An Introduction to the Theory of Games
- ECONOMIC NATURALIST 13.3: Why do so many firms offer price matching?
- Advertising
- ECONOMIC NATURALIST 13.4: Why did a ban on cigarette advertising help the cigarette companies?
- Entry Deterrence and Sequential Games
- ECONOMIC NATURALIST 13.5: Why might a company make an investment it knew it would never use?
- ECONOMIC NATURALIST 13.6: Why would a firm build a factory with more capacity than it would ever need?
- Competition When There Are Increasing Returns to Scale
- ECONOMIC NATURALIST 13.7: Why is cutting price not the only way to oust rivals?
- Summary
- Questions for Review
- Problems
- Answers to In-Chapter Exercises
- PART 4 Factor Markets
- Chapter 14 Labour
- Chapter Preview
- The Perfectly Competitive Firm's Short-Run Demand for Labour
- The Perfectly Competitive Firm's Long-Run Demand for Labour
- The Market Demand Curve for Labour
- An Imperfect Competitor's Demand for Labour
- The Supply of Labour
- Example 14.1: The labour supply curve for someone with a target level of income
- ECONOMIC NATURALIST 14.1: Why is it so hard to find a taxi on rainy days?
- Example 14.2: The optimal leisure demand for someone who views income and leisure as perfect complements
- ECONOMIC NATURALIST 14.2: Why may it not make sense to tax the rich?
- The Non-Economist's Reaction to the Labour Supply Model
- The Market Supply Curve
- Example 14.3: How do rising MBA enrolments affect the salaries and employment of economists in liberal arts schools?
- Monopsony
- Minimum Wage Laws
- Labour Unions
- Discrimination in the Labour Market
- Statistical Discrimination
- The Internal Wage Structure
- Winner-Takes-All Markets
- Summary
- Questions for Review
- Problems
- Answers to In-Chapter Exercises
- Appendix 14: The Economics of Workplace Safety
- Chapter 15 Capital
- Chapter Preview
- Financial Capital and Real Capital
- The Demand for Real Capital
- The Relationship between the Rental Rate and the Interest Rate
- The Criterion for Buying a Capital Good
- Interest Rate Determination
- ECONOMIC NATURALIST 15.1: Why do we get bank runs?
- Real versus Nominal Interest Rates
- The Market for Stocks and Bonds
- ECONOMIC NATURALIST 15.2: Why do we get stock market bubbles and crashes?
- ECONOMIC NATURALIST 15.3: Why are some assets more prone to speculative bubbles than others?
- ECONOMIC NATURALIST 15.4: Why is owning stock in a monopoly no better than owning stock in a perfectly competitive firm?
- The Anomaly of the Investment Newsletter
- Economic Rent
- Peak-Load Pricing
- Exhaustible Resources as Inputs in Production
- Summary
- Questions for Review
- Problems
- Answers to In-Chapter Exercises
- Appendix 15: A More Detailed Look at Exhaustible Resource Allocation
- PART 5 Externalities, Public Goods and Welfare
- Chapter 16 Externalities, Property Rights and the Coase Theorem
- Chapter Preview
- Externalities and Market Efficiency
- The Reciprocal Nature of Externalities
- Example 16.1: The confectioner and the doctor (I): making the confectioner liable for noise damage
- Example 16.2: The confectioner and the doctor (II): changing costs and benefits
- Example 16.3: The confectioner and the doctor (III): installing a soundproofing device
- Example 16.4: The confectioner and the doctor (IV): should the doctor rearrange his office?
- Example 16.5: The confectioner and the doctor (V): costly negotiation when the confectioner can make the least-cost adjustment
- Example 16.6: The confectioner and the doctor (VI): costly negotiation when the doctor can make the least-cost adjustment
- Application: External Effects from Nuclear Power Plants
- Property Rights
- ECONOMIC NATURALIST 16.1: Why does the law permit airlines to operate flights over private land without permission?
- ECONOMIC NATURALIST 16.2: Why does the law of trespass not apply along waterfront property?
- ECONOMIC NATURALIST 16.3: Why does the law of trespass not apply in the mountains?
- ECONOMIC NATURALIST 16.4: Why are property laws often suspended during storms?
- ECONOMIC NATURALIST 16.5: Why do building height limits vary from city to city?
- The Tragedy of the Commons
- Example 16.7: If village residents make their investment decisions independently, how many of their steers will graze on the commons?
- Externalities, Efficiency and Free Speech
- Smoking Rules, Public and Private
- Example 16.8: Should smoker Smith live with non-smoker Jones, or find a separate apartment?
- Positive Externalities
- Positional Externalities
- Taxing Externalities
- Example 16.9: The confectioner and the doctor (VII): taxing the confectioner for noise
- Example 16.10: What is the best way for the city council to reduce air pollution?
- Summary
- Questions for Review
- Problems
- Answers to In-Chapter Exercises
- Chapter 17 Government
- Chapter Preview
- Public Goods
- ECONOMIC NATURALIST 17.1: Should it be free to visit the Natural History Museum?
- Example 17.1: Should the network broadcast Jerry Springer or Masterpiece Theater?
- Public Choice
- ECONOMIC NATURALIST 17.2: How does a vote count in the EU?
- ECONOMIC NATURALIST 17.3: Why does the minority prefer cost-benefit analysis?
- Example 17.2: If two people, one rich and one poor, have opposite views on a proposed public project, on what basis would each like to see the decision made, cost-benefit analysis or majority rule?
- Example 17.3: Which company will win the franchise to operate the rail system in South East England?
- Income Distribution
- Summary
- Questions for Review
- Problems
- Answers to In-Chapter Exercises
- Index I1
- Chapter 18W General Equilibrium and Market Efficiency (online)
- Chapter Preview
- A Simple Exchange Economy
- ECONOMIC NATURALIST 18W.1: Why is it easier to buy fresh tomatoes in the UK than in Russia?
- Efficiency in Production
- Efficiency in Product Mix
- Gains from International Trade
- Example 18W.1: General equilibrium and market efficiency
- Taxes in General Equilibrium
- Other Sources of Inefficiency
- ECONOMIC NATURALIST 18W.2: Why do the latest technology goods sell out so quickly?
- Summary
- Questions for Review
- Problems
- Answers to In-Chapter Exercises
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