Price Theory and Applications, 7th Ed.-- Table of Contents

Book Contents

Table of Contents
PART ONE: INTRODUCTION
	1 The Nature and Scope of Economics			3
		1.1 Economics as a Social Science		4
		1.2 "Economic Man"		9
			Rationality	9
			Human Goals- The Self-Interest Assumption	12
			Ignorance and Uncertainty	16
		1.3 Market and Nonmarket Interactions		16
		1.4 Allocation by Prices- The Market System		18
		1.5 Behavior within Organizations		20
		1.6 Positive and Normative Analysis: "Is" versus "Ought"		20
		1.7 Elements of the Economic System		21
			Decision-Making Agents in the Economy	21
			Scarcity, Objects of Choice, and Economic Activities	22
		1.8 Microeconomics and Macroeconomics		23
		summary		23
		questions		24
	2 Working Tools			27
		2.1 Equilibrium: Supply-Demand Analysis		28
			Balancing Supply and Demand	28
			How Changes in Supply and Demand Affect Equilibrium	30
			Algebra of Supply-Demand Analysis	36
			An Application: Introducing a New Supply Source	38
			Taxes on Transactions	39
			An Application: Interdicting Supply	43
			Price Ceilings and Price Floors	46
		2.2 Finding an Optimum		49
			The Logic of Total, Average, and Marginal Concepts	50
			How Total, Average, and Marginal Magnitudes Are Related	54
			An Application: Foraging ?When Is It Time to Pack Up and Leave?	59
		summary		61
		questions		62

PART TWO: PREFERENCE, CONSUMPTION, AND DEMAND
	3 Utility and Preference			69
		3.1 The Laws of Preference		70
		3.2 Utility and Preference		72
			Cardinal versus Ordinal Utility	73
			Utility of Commodity Baskets	77
		3.3 Characteristics of Indifference Curves		79
		3.4 More on Goods and Bads		83
			An Application: Charity	85
		3.5 The Sources and Content of Preferences		86
		summary		90
		questions		90
	4 Consumption and Demand			93
		4.1 The Optimum of the Consumer		94
			The Geometry of Consumer Choice	94
			Optimum of the Consumer (Cardinal Utility)	97
			Optimum of the Consumer (Ordinal Utility)	100
		4.2 Complements and Substitutes		104
		4.3 The Consumer's Response to Changing Opportunities		107
			The Income Expansion Path	107
			The Engel Curve	110
			Price Expansion Path and Demand Curve	112
		4.4 Income and Substitution Effects of a Price Change		115
			An Application: How Can the Giffen Case Come About? How Likely Is It?	117
		4.5 From Individual Demand to Market Demand		118
		4.6 An Application: Subsidy versus Voucher		120
		summary		122
		questions		124
	5 Applications and Extensions of Demand Theory			127
		5.1 The Engel Curve and the Income Elasticity of Demand		128
		5.2 The Demand Curve and the Price Elasticity of Demand		132
		5.3 The Cross-Elasticity of Demand		136
		5.4 Fitting a Demand Curve		137
			Constant Slope versus Constant Elasticity	138
			General Demand Functions	139
		5.5 Determinants of Responsiveness of Demand to Price		142
		5.6 Multiple Constraints - Rationing		144
			Coupon Rationing	144
			Point Rationing	146
		summary		151
		questions		152

PART THREE: THE FIRM AND THE INDUSTRY
	6 The Business Firm			157
		6.1 Why Firms? Entrepreneur, Owner, Manager		158
			Economic Profit versus Accounting Profit	160
			The Separation of Ownership and Control	160
		6.2 The Optimum of the Firm in Pure Competition		165
			The Shutdown Decision	172
			An Application: Division of Output among Plants	174
		6.3 Cost Functions		176
			Short Run versus Long Run	176
			Rising Costs and Diminishing Returns	180
		6.4 An Application: Peak versus Off-Peak Operation		182
		summary		186
		questions		187
	7 Equilibrium in the Product Market - Competitive Industry			191
		7.1 The Supply Function		192
			From Firm Supply to Market Supply: The Short Run	192
			Long-Run and Short-Run Supply	195
			External Economies and Diseconomies	199
		7.2 Firm Survival and the Zero-Profit Theorem		201
		7.3 The Benefits of Exchange: Consumer Surplus and Producer Surplus		203
			An Application: The Water-Diamond Paradox	205
			An Application: Benefits of an Innovation	206
		7.4 Transaction Taxes and Other Hindrances to Trade		207
			Transaction Taxes	208
			Supply Quotas	209
			An Application: Import Quotas	210
			Price Ceilings and "Shortages"	213
		summary		217
		questions		218
	8 Monopolies, Cartels, and Networks			221
		8.1 The Monopolist's Profit-Maximizing Optimum		222
			Price-Quantity Solution	222
			Monopoly versus Competitive Solutions	226
			An Application: Author versus Publisher	228
			An Application: Monopolist with Competitive Fringe	231
		8.2 Monopoly and Economic Efficiency		231
		8.3 Regulation of Monopoly		234
		8.4 Monopolistic Price Discrimination		238
			Market Segmentation	238
			Block Pricing	241
			Perfect Discrimination	243
		8.5 Cartels		244
		8.6 Network Externalities		248
			Demand for a Network Good	248
			Monopoly or Competition?	250
			The Lock-in Issue	250
		summary		253
		questions		254
	9 Product Quality and Product Variety			257
		9.1 Quality		258
			Quality under Competition and Monopoly	259
			An Application: Suppression of Inventions	263
			Cartels and Quality	265
		9.2 Variety		266
			Product Variety under Monopoly	268
			Blending Monopoly and Competition - Monopolistic Competition	270
		summary		275
		questions		276
	10 Competition Among the Few: Oligopoly and Strategic Behavior			279
		10.1 Strategic Behavior: The Theory of Games		280
			Patterns of Payoffs	280
			An Application: Public Goods - Two-Person versus Multiperson Prisoners' Dilemma	282
			Pure Strategies	283
			Mixed Strategies	286
		10.2 Duopoly - Identical Products		288
			Quantity Competition	289
			Price Competition	293
			An Application: "Most-Favored-Customer" Clause	295
		10.3 Duopoly - Differentiated Products		297
			Quantity Competition	297
			Price Competition	298
		10.4 Oligopoly, Collusion, and Numbers		300
			An Application: The "Kinked" Demand Curve	300
			Oligopoly and Numbers	302
		summary		304
		questions		304
	11 Dealing with Uncertainty - The Economics of Risk and Information			307
		11.1 Decisions under Uncertainty		308
			Expected Gain versus Expected Utility	308
			Risk Aversion	309
			Risk-Bearing and Insurance	312
		11.2 The Value of Information		316
		11.3 Asymmetric Information		317
			Adverse Selection ? The Lemons Problem	317
			Conveying Quality through Reputation	321
			Do Prices Signal Quality? Information as a Public Good	323
			Conveying Information - Advertising	325
		11.4 Herd Behavior and Informational Cascades		325
		11.5 Copyright, Patents, and Intellectual Property Rights		328
		summary		332
		questions		334

PART FOUR: FACTOR MARKETS AND INCOME DISTRIBUTION
	12 The Demand for Factor Services			339
		12.1 Production and Factor Employment with a Single Variable Input		340
			The Production Function	340
			Diminishing Returns	340
			From Production Function to Cost Function	343
			The Firm's Demand for a Single Variable Input	345
		12.2 Production and Factor Employment with Several Variable Inputs		349
			The Production Function	350
			Factor Balance and Factor Employment	355
			The Firm's Demand for Inputs	358
		12.3 The Industry's Demand for Inputs		362
		12.4 Monopsony in the Factor Market		364
		12.5 An Application: Minimum-Wage Laws		366
		summary		371
		questions		373
	13 Resource Supply and Factor-Market Equilibrium			375
		13.1 The Optimum of the Resource-Owner		376
			An Application: The Incentive Effects of "Welfare" and Social Security	382
		13.2 Personnel Economics: Managerial Applications of Employment Theory		385
			The Principal-Agent Problem	385
			Paying by the Piece	386
			Signalling	389
		13.3 Factor-Market Equilibrium		390
			From Individual Supply to Market Supply	390
			Demand and Supply Together	391
			An Application: Sources of GrowingWage Inequality	392
		13.4 Monopolies and Cartels in Factor Supply		395
		13.5 The "Functional" Distribution of Income		397
			The Traditional Classification: Land, Labor, and Capital	397
			Capital, Rate of Return, and Interest	398
		13.6 Economic Rent		402
		summary		403
		questions		404

PART FIVE: EXCHANGE
	14 Exchange, Transaction Costs, and Money			409
		14.1 Pure Exchange: The Edgeworth Box		410
		14.2 Supply and Demand in Pure Exchange		416
			An Application: Market Experiments in Economics	420
		14.3 Exchange and Production		423
		14.4 Imperfect Markets: Costs of Exchange		430
			How Perfect Are Markets?	430
			Proportional Transaction Costs	433
			Lump-Sum Transaction Costs	437
		14.5 The Role of Money		440
			Money as Medium of Exchange	440
			Money as Temporary Store of Value	442
		14.6 An Application: Auctions		443
			The English Auction	445
			Sealed-Bid Second-Price Auction	445
			Sealed-Bid First-Price Auction	445
			The Dutch Auction	446
		summary		448
		questions		449

PART SIX: ECONOMICS AND TIME
	15 The Economics of Time			455
		15.1 Present versus Future		456
		15.2 Consumption Choices over Time: Pure Exchange		459
			Borrowing-Lending Equilibrium with Zero Net Investment	459
			An Application: Double Taxation of Saving?	461
		15.3 Production and Consumption over Time: Saving and Investment		464
		15.4 Investment Decisions and Project Analysis		468
			The Separation Theorem	468
			The Present-Value Rule	469
			The Rate of Return (ROR) Rule	475
		15.5 Real Interest and Monetary Interest: Allowing for Inflation		479
		15.6 The Multiplicity of Interest Rates		482
			An Application: The Discount Rate for Project Analysis	485
		15.7 The Fundamentals of Investment, Saving, and Interest		486
		summary		490
		questions		491

PART SEVEN: POLITICAL ECONOMY
	16 Welfare Economics: The Market and the State			497
		16.1 Goals of Economic Policy		498
			Efficiency versus Equity	498
			Utilitarianism	500
			Efficiency as the Sum of Consumer Surplus and Producer Surplus	500
			Efficient Allocations in the Edgeworth Box	501
			"Equity" Reconsidered	502
			An Application: How to Divide a Cake	504
		16.2 The Theorem of the Invisible Hand: The Role of Prices		506
			Efficient Consumption	506
			Efficient Production	506
			Efficient Balance between Production and Consumption	507
		16.3 "Market Failures"		508
			Monopoly	508
			Externalities	508
			The Coase Theorem	513
		16.4 The Commons: The Consequences of Unrestricted Access		515
		16.5 Public Goods		518
			Efficient Production and Consumption of Public Goods	518
			Voluntary Provision of Nonexcludable Public Goods & Free-Riding	521
			An Extension:Weakest-Link versus Best-Shot Models of Public Goods	525
		16.6 Appropriative Activity and Rent-Seeking		529
		summary		533
		questions		534
	17 Government, Politics, and Conflict			537
		17.1 The Other Side of the Coin: Government Failures		538
			Corruption as Government Failure	538
			Political Competition and Its Limits	539
			Politics and Special Interests	541
		17.2 Voting as an Instrument of Control		543
			Majority and Minority - "Log-Rolling"	544
			The Cycling Paradox	545
			The Median-Voter Theorem	546
		17.3 Conflict and Cooperation		550
			Sources of Cooperation and Conflict	550
			Conflict and Game Theory	557
			An Application: Should You Pay Ransom?	561
		summary		563
		questions		564

	Answers to Selected questions			567

	Name Index			597

	Subject Index			601

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