Features
Consult Core Econ’s Fact checker for a detailed list of sources.
Building blocks
- Microeconomics 1.6: Production functions and the diminishing average product of labour
- Microeconomics 2.2: Economic decisions: Opportunity costs, economic rents, and incentives
- Microeconomics 2.3: Comparative advantage, specialization, and markets
- Microeconomics 2.8: Economic models: How to see more by looking at less
- Microeconomics 3.2–3.5: Constrained choice problems
- Microeconomics 3.2–3.6: Constrained choice problems, and how choices change
- Microeconomics 3.7: Income and substitution effects
- Microeconomics 4.2–4.3: Game theory and Nash equilibrium
- Microeconomics 4.2–4.4: Game theory, Nash equilibrium, and the prisoners’ dilemma
- Microeconomics 4.2–4.13: Game theory, Nash equilibrium, and coordination games
- Microeconomics 4.5: Evaluating outcomes: The Pareto criterion
- Microeconomics 4.11: The ultimatum game
- Microeconomics 5.12: Measuring economic inequality: The Gini coefficient
- Microeconomics 6.6: Contracts, principals, and agents
- Microeconomics 7.4: The cost function: Marginal and average cost
- Microeconomics 7.7: Gains from trade: The surplus and how it is divided
Extensions
- Extension 1.2: GDP per capita and living standards
- Extension 2.4: Production functions
- Extension 2.5: The equation of an isocost line
- Extension 3.3: Indifference curves, marginal changes, and the marginal rate of substitution
- Extension 3.4: The marginal rate of transformation
- Extension 3.5: Solving the constrained choice problem for consumption and free time
- Extension 3.7: Mathematics of income and substitution effects
- Extension 4.7: Maximizing utility when preferences are altruistic
- Extension 4.11: When will an offer in the ultimatum game be accepted?
- Extension 4.12: Calculating expected pay-offs
- Extension 5.4: The properties of concave production functions and quasi-linear preferences
- Extension 5.5: Angela’s choice of working hours
- Extension 5.7: The outcome of a tenancy contract
- Extension 5.9: The Pareto efficiency curve
- Extension 6.5: The hiring and quitting model
- Extension 6.8: From the reservation wage to the reservation wage curve
- Extension 6.10: Setting the wage to maximize profit
- Extension 7.4: Cost functions for the case when marginal costs are increasing
- Extension 7.5: The elasticity of demand and marginal revenue
- Extension 7.6: Profit maximization
- Extension 8.4: Supply, demand, and competitive equilibrium
- Extension 8.5: Gains from trade
- Extension 8.6: Changes in supply and demand
- Extension 8.7: Short-run and long-run equilibria: An example
- Extension 9.2: Financial assets: Bonds and shares
- Extension 10.2: The external effects of pollution
- Extension 10.4: Pigouvian taxes
How economists learn from facts
- Do institutions matter for growth in income? (1.10 Capitalism, causation, and history’s hockey stick)
- The long shadow of forced labour (5.6 Case 1: Forced labour)
- How large are employment rents? (6.7 Employment rents: The cost of job loss)
- Workers speed up when the economy slows down (6.11 Putting the wage-setting model to work: Wages, employment, and the rate of unemployment)
- Estimating demand curves using surveys (7.2 Breakfast cereal: Choosing a price)
- Fishing for perfect competition (8.10 Supply, demand, and competitive equilibrium: Is this a good model?)
- Who is credit constrained? (9.9 Borrowers and lenders: A principal–agent problem)
When economists disagree
- Homo economicus in question: Are people entirely selfish? (4.7 Social preferences: Altruism)
- Coase and Marx on the firm and its employees (6.2 The structure of the firm: Owners, managers, and workers)
- The discounting dilemma: How should we account for future costs and benefits? (9.5 Application: Discounting, external effects, and the future of the planet)
Great Economists
- Adam Smith (1.2 History’s hockey stick)
- Arthur Lewis (1.9 Structural transformation: From farm to firm)
- Joseph Schumpeter (2.6 Modelling a dynamic economy: Innovation and profit)
- John Nash (4.3 Best responses in the rice–cassava game: Nash equilibrium)
- Vilfredo Pareto (4.5 Evaluating outcomes: The Pareto criterion)
- Elinor Ostrom (4.6 Public good games and cooperation)
- Herbert Simon (6.1 Exploding tyres: The mystery unravelled)
- Karl Marx (6.7 Employment rents: The cost of job loss)
- John Stuart Mill (6.14 Application: Another kind of business organization)
- Augustin Cournot (7.8 Price setting, competition, and the market)
- Joan Robinson (7.8 Price setting, competition, and the market)
- Friedrich Hayek (8.1 How the American Civil War rocked global cotton prices)
- Alfred Marshall (8.2 Buying and selling: Demand, supply, and the market-clearing price)
- Léon Walras (8.10 Supply, demand, and competitive equilibrium: Is this a good model?)
- Ronald Coase (10.3 Solving the problem: Private bargaining and property rights)
- Arthur Pigou (10.4 Solving the problem: Regulation, taxation, and compensation)
Videos
- Unit 1: Thomas Piketty and James Heckman explain why data is fundamental to their work
- Unit 1: In this video, Professor Bishnupriya Gupta explains the long period of economic stagnation and even decline during the British rule in India and considers why economic prosperity accelerated following Indian independence in 1947.
- Unit 2: Economic historian Bob Allen addresses the question of why Britain industrialized when others did not. He shows how the rise in women’s earnings prompted mechanization in spinning.
- Unit 2: In our ‘Economist in action’ video, Suresh Naidu, an economic historian, explains how population growth, technological development and political events interacted to produce the real wage hockey stick.
- Unit 3: In our ‘Economist in action’ video, Juliet Schor addresses the question of why we work so hard.
- Unit 4: A solution to the prisoners’ dilemma on the show Golden Balls
- Unit 4: In our ‘Economist in action’ video, Juan Camilo Cárdenas describes how his experiments help us understand why people cooperate even when there are apparent incentives not to.
- Unit 6: Arin Dube describes his study that found that, on average, raising the minimum wage increased the income of poor workers.
- Unit 8: Kathryn Graddy: Fishing for perfect competition
- Unit 9: A more high-tech way of making sure that a loan will be repaid is that those seeking loans to purchase a car are often required to allow a device to be installed in the vehicle that is controlled by the bank, which will disable the ignition of the car if the loan payments are not made as required, as this New York Times video shows. The practice has not made lenders very popular.
- Unit 10: Alvin Roth explains how matching markets work.
- Unit 10: Michael Sandel investigating the moral limits of his audience in his TED Talk ‘Why we shouldn’t trust markets with our civic life’.
Exercises
- 1.2: Exercise E1.1: What should we measure?
- 1.3: Exercise 1.1: How much difference does a couple of degrees warmer or colder make?
- 1.4: Exercise 1.2: Inequality in the fourteenth century
- 1.4: Exercise 1.3: Working with income data
- 1.6: Exercise 1.4: The farmer’s production function
- 1.7: Exercise 1.5: Are people really like other animals?
- 1.7: Exercise 1.6: What would you add?
- 1.8: Exercise 1.7: Capitalism
- 1.8: Exercise 1.8: The poorest man’s cottage
- 1.8: Exercise 1.9: Markets and social networks
- 1.8: Exercise 1.10: Firm or not?
- 1.13: Exercise 1.11: Earth Overshoot Day
- 2.2: Exercise 2.1: Using calculations to make economic decisions
- 2.2: Exercise 2.2: Opportunity costs
- 2.3: Exercise 2.3: Apples and wheat
- 2.3: Exercise 2.4: Specialization and trade
- 2.4: Exercise E2.1: Sketching production functions
- 2.5: Exercise 2.5: Isocost lines
- 2.5: Exercise E2.2: Writing isocost lines as equations
- 2.6: Exercise 2.6: Suit-making technologies
- 2.7: Exercise 2.7: Britain but not France
- 2.7: Exercise 2.8: Why did the Industrial Revolution not happen in Asia?
- 2.8: Exercise 2.9: Designing a model
- 2.8: Exercise 2.10: Using ceteris paribus
- 2.8: Exercise 2.11: Ceteris paribus assumptions: Study time and grades
- 2.9: Exercise 2.12: The role of slavery in economic development
- 2.10: Exercise 2.13: The basic institutions of capitalism
- 2.11: Exercise 2.14: Global poverty
- 2.11: Exercise 2.15: GDP per capita and energy use
- 2.11: Exercise 2.16: Environmental quality and economic growth
- 3.3: Exercise 3.1: Why indifference curves never cross
- 3.3: Exercise 3.2: Your marginal rate of substitution
- 3.3: Exercise E3.1: Comparing indifference curves
- 3.3: Exercise E3.2: Cobb–Douglas preferences
- 3.4: Exercise 3.3: A student budget problem
- 3.4: Exercise E3.3: Calculating and interpreting the marginal rate of transformation
- 3.5: Exercise 3.4: Zoë’s constrained choice problem
- 3.5: Exercise 3.5: Alexei’s constrained choice problem
- 3.5: Exercise E3.4: Solving the constrained problem using two methods
- 3.6: Exercise 3.6: Why do people still work long hours?
- 3.7: Exercise 3.7: Zoë’s problem: The price of a cinema ticket increases
- 3.7: Exercise E3.5: Income and substitution effects
- 3.8: Exercise 3.8: Another definition of economics
- 3.9: Exercise 3.9: Scarcity and choice
- 3.10: Exercise 3.10: The Veblen effect
- 3.11: Exercise 3.11: Gender and changes in working time
- 3.11: Exercise 3.12: Unpaid work, gender, and support for childcare
- 3.11: Exercise 3.13: Domestic technology and time use
- 3.12: Exercise 3.14: Preferences and culture
- 3.12: Exercise 3.15: Working hours across countries and time
- 4.1: Exercise 4.1: Social dilemmas
- 4.3: Exercise 4.2: Game theory in A Beautiful Mind
- 4.4: Exercise 4.3: Playing the prisoners’ dilemma
- 4.4: Exercise 4.4: Political advertising
- 4.5: Exercise 4.5: Pareto’s law
- 4.5: Exercise 4.6: Pareto efficient and Pareto-dominated allocations
- 4.6: Exercise 4.7: Free-riding in the public good game
- 4.7: Exercise 4.8: Altruism and selflessness
- 4.7: Exercise E4.1: Interpreting altruistic preferences in the Cobb–Douglas case
- 4.8: Exercise 4.9: Exploring the data from the worldwide public goods experiments
- 4.9: Exercise 4.10: How valid are laboratory experiments?
- 4.10: Exercise 4.11: Social preferences and sharing
- 4.11: Exercise 4.12: A sequential prisoners’ dilemma
- 4.11: Exercise E4.2: Acceptable offers
- 4.12: Exercise 4.13: Social preferences in the ultimatum game
- 4.12: Exercise 4.14: Strikes and the ultimatum game
- 4.13: Exercise 4.15: Conflict between Astrid and Bettina
- 4.13: Exercise 4.16: Conflict in business
- 4.14: Exercise 4.17: Nash equilibria and climate change
- 4.14: Exercise 4.18: Summary of games in this unit
- 5.2: Exercise 5.1: The dictator game
- 5.3: Exercise 5.2: Substantive fairness
- 5.3: Exercise 5.3: Procedural fairness
- 5.3: Exercise 5.4: Splitting the profits in a partnership
- 5.4: Exercise E5.1: Quasi-linear utility functions
- 5.5: Exercise E5.2: Another example
- 5.6: Exercise 5.5: Persistent effects of the mita system
- 5.7: Exercise E5.3: The landlord’s problem
- 5.9: Exercise E5.4: The Pareto efficiency curve
- 5.10: Exercise 5.6: Evaluating outcomes from Bruno and Angela’s interactions
- 5.12: Exercise 5.7: Calculating Gini coefficients
- 5.12: Exercise 5.8: Inequality in market and disposable income
- 5.13: Exercise 5.9: Land reform and inequality
- 5.13: Exercise 5.10: An increase in inequality
- 5.14: Exercise 5.11: Wages and environmental quality
- 6.2: Exercise 6.1: The structure of an organization
- 6.5: Exercise E6.1: Deriving the reservation wage curve
- 6.6: Exercise 6.2: Incomplete contracts
- 6.7: Exercise 6.3: Marx’s ideas about work and unemployment
- 6.7: Exercise 6.4: Natural experiments
- 6.8: Exercise 6.5: Assumptions of the model
- 6.8: Exercise E6.2: Changes in the reservation wage curve
- 6.9: Exercise 6.6: The no-shirking wage
- 6.9: Exercise 6.7: Equilibrium employment rents
- 6.9: Exercise 6.8: Employee monitoring technologies
- 6.10: Exercise 6.9: Competition and profits
- 6.10: Exercise E6.3: A linear no-shirking wage
- 6.11: Exercise 6.10: The ‘Great Resignation’
- 6.11: Exercise 6.11: Lazear’s results
- 6.14: Exercise 6.12: A worker-owned cooperative
- 6.14: Exercise 6.13: Was Mill wrong? The role of cooperatives in the economy
- 7.2: Exercise 7.1: Changes in the market
- 7.4: Exercise 7.2: Cost functions for university education
- 7.4: Exercise E7.1: Drawing non-linear cost functions
- 7.5: Exercise E7.2: Linear demand function: Elasticity and marginal revenue
- 7.5: Exercise E7.3: Constant elasticity of demand: Elasticity and marginal revenue
- 7.6: Exercise E7.4: Profit maximization
- 7.7: Exercise 7.3: Changing the rules of the game
- 7.9: Exercise 7.4: Identifying product differentiation
- 7.11: Exercise 7.5: Natural monopolies
- 7.12: Exercise 7.6: Market power and competition policy in digital markets
- 8.2: Exercise 8.1: Selling strategies and reservation prices
- 8.3: Exercise 8.2: Price-takers
- 8.4: Exercise E8.1: Equilibrium in markets with identical firms
- 8.4: Exercise E8.2: Market equilibrium with linear functions
- 8.5: Exercise 8.3: Maximizing the surplus
- 8.5: Exercise 8.4: Gains from trade, deadweight loss, and elasticity of supply
- 8.5: Exercise E8.3: Calculating surplus
- 8.6: Exercise 8.5: Prices, shocks, and revolutions
- 8.6: Exercise 8.6: Cotton prices and the American Civil War
- 8.6: Exercise E8.4: A negative supply shock
- 8.6: Exercise E8.5: Analysing the effects of a supply shock
- 8.7: Exercise 8.7: The market for quinoa
- 8.8: Exercise 8.8: The world market for oil
- 8.9: Exercise 8.9: Price-setting game with three firms: Players B and C behave differently
- 8.10: Exercise 8.10: Price-fixing
- 8.10: Exercise 8.11: The Law of One Price
- 8.10: Exercise 8.12: The Fulton Fish Market
- 8.12: Exercise 8.13: Tax incidence
- 8.13: Exercise 8.14: The distributional impact of rent control
- 8.13: Exercise 8.15: The price of a ticket
- 9.3: Exercise 9.1: Julia’s feasible frontier
- 9.4: Exercise 9.2: Graphing preferences
- 9.4: Exercise 9.3: Income and substitution effects
- 9.5: Exercise 9.4: Simulating different discount rates
- 9.5: Exercise 9.5: Negative discount rates
- 9.6: Exercise 9.6: Marco’s feasible frontier
- 9.7: Exercise 9.7: Income and substitution effects
- 9.8: Exercise 9.8: Lifetime income
- 9.9: Exercise 9.9: Estimating credit constraints
- 9.9: Exercise 9.10: The rise of subprime auto loans
- 9.9: Exercise 9.11: Microfinance and lending to poor people
- 9.9: Exercise 9.12: Limits on lending
- 9.9: Exercise 9.13: Pawnshops as a source of credit
- 9.11: Exercise 9.14: Financial literacy
- 9.13: Exercise 9.15: Higher education funding
- 10.1: Exercise 10.1: Identifying market failures
- 10.2: Exercise E10.1: Comparing the private and Pareto-efficient outcomes
- 10.3: Exercise 10.2: Bargaining in practice
- 10.4: Exercise 10.3: Pigou’s ideas and environmental policy
- 10.4: Exercise 10.4: Comparing policies
- 10.4: Exercise E10.2: Pigouvian taxation
- 10.5: Exercise 10.5: Remedies for a positive externality
- 10.5: Exercise 10.6: Incomplete contracts
- 10.5: Exercise 10.7: Property rights and contracts in Madagascar
- 10.6: Exercise 10.8: Providing podcasts
- 10.7: Exercise 10.9: Rivalry and excludability
- 10.8: Exercise 10.10: Principal–agent relationships and hidden-action problems
- 10.10: Exercise 10.11: Hidden attributes
- 10.10: Exercise 10.12: Market failure
- 10.11: Exercise 10.13: Capitalism among consenting adults
Figures
Unit 1
- Figure 1.1 History’s hockey stick: gross domestic product per capita in five countries (1000–2018).
- Figure 1.2a Carbon dioxide in the atmosphere (1010–2020) and global carbon emissions from burning fossil fuels (1750–2018).
- Figure 1.2b Northern hemisphere temperatures over the long run (1000–2019). The figure shows 5-year moving averages.
- Figure 1.3 Share of the world population living in extreme poverty, 1820–2018.
- Figure 1.4 The global income distribution in 2019: average daily income by country.
- Figure 1.5 Global income inequality 1980 (top panel) and 2020 (bottom panel).
- Figure 1.6 Understanding the global income distribution.
- Figure 1.7 The Industrial Revolution and the continuous technological revolution.
- Figure 1.8a The relationship between the input of labour and the output of grain.
- Figure 1.8b The farmers’ production function.
- Figure 1.8c The diminishing average product of labour.
- Figure 1.9 Malthus’s argument: why technological improvement in farming doesn’t raise living standards.
- Figure 1.10 Equilibrium in a Malthusian model of an agricultural economy.
- Figure 1.11 Malthus’s model: the effect of an improvement in technology.
- Figure 1.12 The Malthusian trap: wages and population (1280s–1800s)
- Figure 1.13 Mention of the word ‘capitalism’ in New York Times articles (1851–2015).
- Figure 1.14 Capitalism: private property, markets, and firms.
- Figure 1.15 Share of non-agricultural labour force in total labour force (1300–2019).
- Figure 1.16 The two Germanies: planning and capitalism (1950–89).
- Figure 1.17 Stagnation and decline in the economies of India and China during periods of foreign intervention.
- Figure 1.18 Shares of world output produced in Asia, the West, and the Rest.
- Figure 1.19 Divergence of GDP per capita among latecomers to the capitalist revolution (1928–2018).
- Figure 1.20 The economy is part of society, which is part of the biosphere.
- Figure 1.21 A model of the economy: flows of resources.
- Figure 1.22 Global biodiversity loss under three different scenarios.
Unit 2
- Figure 2.1 Real wages over seven centuries: wages of craftsmen (skilled workers) in London (1264–2001), and the population of Britain.
- Figure 2.2a Productivity in apples and wheat.
- Figure 2.2b Relative costs of apples and wheat.
- Figure 2.2c Comparing self-sufficiency and specialization.
- Figure 2.3 A fixed-proportions technology for making olive oil.
- Figure 2.4 Summarizing and comparing two fixed-proportions technologies.
- Figure E2.1a A variable-proportions technology: some combinations of workers, N, and energy, E, and corresponding output, Y.
- Figure E2.1b A three-dimensional representation of the production function for olive oil: Y=f(N,E).
- Figure E2.1c The production function for olive oil when energy is held constant.
- Figure E2.1d The slope of the production function and the average product of labour.
- Figure 2.5 Different technologies for producing 100 metres of cloth.
- Figure 2.6 Technology A dominates C; technology B dominates D.
- Figure 2.7 Isocost lines for different technologies when the wage is £10 and the price of coal is £20.
- Figure 2.8 The costs of using different technologies to produce 100 metres of cloth.
- Figure 2.9 The cost of using different technologies to produce 100 metres of cloth: high relative cost of labour.
- Figure 2.10 The cost of using different technologies to produce 100 metres of cloth.
- Figure 2.11 The change in spinning technology during the Industrial Revolution.
- Figure 2.12 Wages relative to the price of energy (early 1700s).
- Figure 2.13 Wages relative to the cost of capital goods (late sixteenth to the early nineteenth century).
- Figure 2.14 A model of the cost of using different technologies to produce 100 metres of cloth in Britain in the seventeenth and eighteenth centuries.
- Figure 2.15 The cost of using different technologies to produce 100 metres of cloth.
- Figure 2.16 Irving Fisher’s sketch of his hydraulic model of economic equilibrium (1891).
- Figure 2.17 Escaping the Malthusian trap.
- Figure 2.18 From technological progress to rising living standards.
- Figure 2.19 A bathtub model: the stock of atmospheric CO2.
- Figure 2.20 Global atmospheric concentration of carbon dioxide and global temperatures (1750–2019).
- Figure 2.21 Carbon dioxide emissions are higher in richer countries.
- Figure 2.22 The price of photovoltaic cells (1976–2019).
- Figure 2.23 The price of renewable and non-renewable energy sources in 2009 and 2019.
- Figure 2.24 Changes in energy use and changes in GDP per capita in Sweden (1995–2019).
Unit 3
- Figure 3.1 Annual hours of work and income (1870–2018).
- Figure 3.2 Annual hours of free time per worker and income (2020).
- Figure 3.3 Karim’s income depends on his working hours.
- Figure 3.4 Mapping Karim’s preferences.
- Figure 3.5 The marginal rate of substitution.
- Figure E3.1 Mapping Karim’s preferences.
- Figure 3.6 The budget constraint and the feasible set.
- Figure E3.2 Marina’s feasible frontier.
- Figure 3.7a How many hours does Karim decide to work?
- Figure 3.7b How many hours does Karim decide to work?
- Figure 3.8 Karim’s trade-offs.
- Figure E3.3 How many hours does Karim decide to work?
- Figure 3.9 How Karim’s choice changes when the wage rises.
- Figure 3.10 Your preferred choice of free time and consumption.
- Figure 3.11 The effect of additional income on your choice of free time and consumption.
- Figure 3.12 A student with different preferences: their MRS doesn’t change when consumption rises.
- Figure 3.13a The effect of a wage rise on your choice of free time and consumption.
- Figure 3.13b The effect of a wage rise on your choice of free time and consumption.
- Figure 3.14 The feasible set for a worker whose wage is $15.
- Figure E3.4 A wage increase from $96 to $150 reduces your choice of free time from 38 days (point A) to 37 days (point D).
- Figure 3.15 Annual working hours per worker (non-agricultural workers, 1870–2017).
- Figure 3.16 Applying the model to history: increased goods and free time in the US (1900–2020).
- Figure 3.17 Estimated lifetime hours of work and leisure (1880, 1995, 2040).
- Figure 3.18 Inequality and work hours from 1900 to 2000.
- Figure 3.19 Gender gaps in wages and hours of paid work.
- Figure 3.20 Average minutes per day of paid and unpaid work, for women and men.
- Figure 3.21 The household’s choice of consumption and non-working time.
- Figure 3.22 The household’s choice when Ana receives a lower wage than Luis.
- Figure 3.23 Total time spent doing unpaid care work by men and women in Belgium, Finland, and the US.
- Figure 3.24 Free time and consumption per day across countries (2020).
- Figure 3.25 Using the model to explain free time and consumption per day across countries (2020).
Unit 4
- Figure 4.1 Planting rice or cassava: social interactions between Anil and Bala.
- Figure 4.2a The pay-offs from crop choice.
- Figure 4.2b Finding best responses in the rice–cassava game.
- Figure 4.3 Another rice–cassava game: dominant strategies for both players.
- Figure 4.4a Social interactions in the pest control game.
- Figure 4.4b Pay-off matrix for the pest control game.
- Figure 4.5 Prisoners’ dilemma (pay-offs are years in prison).
- Figure 4.6 The four allocations in the pest control game.
- Figure 4.7 Applying the Pareto criterion to the pest control game.
- Figure 4.8 When two others contribute, Kim’s pay-off is lower if she contributes too.
- Figure 4.9 Kim’s pay-offs in the irrigation game.
- Figure 4.10 The shape of Zoë’s indifference curves depends on whether she is altruistic or self-interested.
- Figure 4.11 How Zoë chooses to distribute her lottery winnings depends on whether she is selfish or altruistic.
- Figure 4.12 Anil’s best response in the pest control game when he has self-interested preferences.
- Figure 4.13 Anil’s best response in the pest control game when he is altruistic towards Bala.
- Figure E4.1 How Zoë chooses to distribute her lottery winnings when she is altruistic.
- Figure 4.14a Comparing the pay-offs from free-riding and contributing $10.
- Figure 4.14b Worldwide public goods experiments: contributions over 10 periods.
- Figure 4.14c Worldwide public goods experiments with opportunities for peer punishment.
- Figure 4.15 Average number of late-coming parents, per week.
- Figure 4.16 Game tree for a simplified ultimatum game.
- Figure 4.17 Offers accepted by Responders.
- Figure 4.18a Offers made by Proposers.
- Figure 4.18b Actual offers, showing the proportion that Proposers could expect to be rejected.
- Figure 4.19 The farmers’ expected pay-offs from some possible offers.
- Figure 4.20 Proportion of Responders who rejected offers in the ultimatum game, according to offer size and the number of Responders.
- Figure 4.21 A third rice–cassava game: more than one Nash equilibrium.
- Figure 4.22 Interactions and pay-offs in the choice of programming language.
- Figure 4.23a Outcomes of climate change policies.
- Figure 4.23b Two different climate policy games.
- Figure 4.23c Best responses in a climate change game with a conflict of interest.
Unit 5
- Figure 5.1 Illustration of ‘The Royal Rover’s Articles’.
- Figure 5.2 Efficiency and fairness.
- Figure 5.3a Angela’s indifference curves for free time and grain.
- Figure 5.3b Angela’s MRS depends on her amount of free time but not on the amount of grain.
- Figure 5.3c Bruno’s preferences for grain and Angela’s free time.
- Figure 5.4 Angela’s production function.
- Figure 5.5 Angela’s feasible frontier.
- Figure E5.1 Concave and convex functions.
- Figure E5.2a A concave production function, y=10h0.4.
- Figure E5.2b A concave feasible frontier, y=10(24−h)0.4.
- Figure E5.3 Angela’s MRS depends on her amount of free time but not on the amount of grain.
- Figure 5.6 The rules of the game in different institutional settings.
- Figure 5.7 Independent farmer Angela’s choice between free time and grain.
- Figure 5.8 The outcome in the baseline case.
- Figure E5.4 The solution of the constrained choice problem with utility u=4 √ t +c and feasible frontier c=2 √ 2(24−t) .
- Figure 5.9 The combined feasible frontier.
- Figure 5.10 Forced labour: the maximum feasible transfer from Angela to Bruno.
- Figure 5.11 The outcome of Case 1.
- Figure 5.12 Boundaries of the mining mita (treatment group).
- Figure 5.13 Bruno’s employment contract offer.
- Figure 5.14 Angela’s choice of hours under the tenancy contract.
- Figure 5.15 The outcome of Case 2.
- Figure E5.5 The outcome under a tenancy contract.
- Figure 5.16 The effect of a law setting maximum working hours and minimum pay.
- Figure 5.17 The allocation under contract N, satisfying the new minimum wage and maximum hours law.
- Figure 5.18 After the new laws are implemented, MRT > MRS.
- Figure 5.19 Bargaining to restore Pareto efficiency.
- Figure 5.20 The change in outcomes from Case 2 to Case 3.
- Figure 5.21 The Pareto efficiency curve.
- Figure E5.6 The Pareto efficiency curve (quasi-linear preferences).
- Figure E5.7 The indifference curves for the case when Angela has Cobb–Douglas preferences.
- Figure E5.8 The Pareto efficiency curve (Cobb–Douglas preferences).
- Figure 5.22 Comparing the cases: the amount of grain produced, Angela’s free time, and how the grain is divided between the two players.
- Figure 5.23 The causal relationships between technology, institutions and policies, endowments, and income inequality (or other disparities like wealth inequality).
- Figure 5.24 Economic inequality over time.
- Figure 5.25 Income differences in a three-person population.
- Figure 5.26 The distribution of spoils: inequality among pirates and the British navy.
- Figure 5.27 Market income and disposable income.
- Figure 5.28 Income inequality in market and disposable income across the world.
- Figure 5.29 Bargaining in practice: how a land tenure reform in West Bengal reduced the Gini coefficient.
- Figure 5.30 Conflicts of interest over wages and environmental spending.
Unit 6
- Figure 6.1 The firm’s actors and its decision-making and information structures.
- Figure 6.2 Distribution of job tenure, 2021.
- Figure 6.3 Labour market flows: workers and jobs.
- Figure 6.4 Labour market flows in the EU, 2021(Q4) to 2022(Q1).
- Figure 6.5 Setting the wage so that hiring equals quitting.
- Figure 6.6 The wage required to maintain employment of N workers.
- Figure E6.1 The hiring and quitting model for the language school, when N=50, and q=0.04.
- Figure E6.2 The wage required for employment of N workers (the reservation wage curve).
- Figure 6.7 Average unemployment duration in a sample of countries, 2021.
- Figure 6.8a Maria’s next best alternative and total employment rent.
- Figure 6.8b Maria’s reservation wage and employment rent per hour.
- Figure 6.9 Comparing the pay-offs from working and shirking.
- Figure 6.10 The school’s reservation wage curve.
- Figure 6.11 The no-shirking wage curve.
- Figure 6.12 The feasible set.
- Figure 6.13 Isoprofit curves when profit = (800 – w) × N.
- Figure 6.14 Calculating the slope at two points on an isoprofit curve.
- Figure 6.15 Where is the highest profit in the feasible set?
- Figure 6.16 Maximum profit of €3,610 is achieved at point E, where w = €705 and N = 38.
- Figure E6.3 Isoprofit curves when profit=(800 – w)×N.
- Figure 6.17 Wages and involuntary unemployment.
- Figure 6.18 A rise in the cost of effort.
- Figure 6.19 The effect of a minimum wage on wages and employment.
Unit 7
- Figure 7.1 The firm’s decisions.
- Figure 7.2a Profit as a function of price and quantity for a firm with unit cost of 2.
- Figure 7.2b Isoprofit curves for a firm with unit cost of 2.
- Figure 7.3 Estimated demand for Apple Cinnamon Cheerios.
- Figure 7.4a The profit-maximizing choice of price and quantity for Apple Cinnamon Cheerios.
- Figure 7.4b The profit-maximizing choice of price and quantity for Apple Cinnamon Cheerios.
- Figure 7.5 Ten companies dominate the food and beverage industry worldwide.
- Figure 7.6 The largest firms in the world by employment, 2022.
- Figure 7.7 Beautiful Cars: total cost and average cost.
- Figure 7.8 Beautiful Cars: average and marginal cost.
- Figure E7.1 An alternative cost function for Beautiful Cars.
- Figure 7.9 The demand for cars (per day).
- Figure 7.10 Calculating the elasticity at a point on the demand curve.
- Figure 7.11 Formulas for calculating elasticity.
- Figure 7.12 The elasticity of demand for cars.
- Figure 7.13 Competition, elasticity, and revenue.
- Figure 7.14 Isoprofit curves for Beautiful Cars.
- Figure 7.15 Maximizing the profit for Beautiful Cars.
- Figure 7.16 Interpreting the tangency condition.
- Figure 7.17 Marginal revenue and marginal cost.
- Figure 7.18 The profit-maximizing point can be found from MR and MC, or from isoprofit curves.
- Figure E7.2 Isoprofit curves and profit-maximisation for Beautiful Cars.
- Figure E7.3 MC, AC, and isoprofit curves for C(Q)=320+2Q+0.2Q2.
- Figure E7.4 Profit at each point on the demand function.
- Figure E7.5 Maximizing profit with costs, C(Q)=320+2Q+0.2Q2, and inverse demand, P=44−0.5Q.
- Figure 7.19 The surplus in the market for Beautiful Cars.
- Figure 7.20 The firm’s profit-maximizing decision results in a deadweight loss (DWL).
- Figure 7.21 Prices of a litre of mineral water in Singapore, 2019.
- Figure 7.22 Estimates of profit margin, markup, and demand elasticities (prices in 1983 USD).
- Figure 7.23 Advertising expenditure and market share of breakfast cereals in Chicago (1991–92).
- Figure 7.24 Demand (left panel) and profits (right panel) depending on Kit’s and Wanda’s prices.
- Figure 7.25 Pay-offs when consumers are less and more responsive to prices.
- Figure 7.26 Economics of scale and market share.
- Figure 7.27 Browser market share worldwide, 2009–2022.
Unit 8
- Figure 8.1 The market demand curve for books.
- Figure 8.2 The supply curve for books.
- Figure 8.3 The market for second-hand books will clear if the price is $8.
- Figure 8.4 Equilibrium in the market for second-hand books.
- Figure 8.5 Buyers and sellers, price-taking and price setting.
- Figure 8.6 Vernon Smith’s experimental results.
- Figure 8.7 The market demand curve for bread.
- Figure 8.8 The profit-maximizing price and quantity.
- Figure 8.9 The market supply curve: 15 firms.
- Figure 8.10 The market supply curve: 50 bakeries.
- Figure 8.11 Equilibrium in the market for bread.
- Figure E8.1 Marginal cost and isoprofit curves for a bakery with increasing marginal cost.
- Figure E8.2 The bakery maximizes profit where the feasible frontier is tangent to an isoprofit curve, which lies on the marginal cost curve.
- Figure E8.3 Supply functions for the firm and the market (identical bakeries).
- Figure 8.12 Equilibrium in the bread market: gains from trade.
- Figure E8.4 Equilibrium in the bread market: gains from trade.
- Figure E8.5 Consumer and producer surplus when Q=Q0 and P=P0.
- Figure 8.13a The production of quinoa.
- Figure 8.13b Quinoa producer prices.
- Figure 8.13c Global import demand for quinoa.
- Figure 8.14 An increase in demand for hats.
- Figure 8.15 An increase in the supply of bread: a fall in marginal cost.
- Figure 8.16 Investing in more capacity (at the firm level).
- Figure 8.17 An increase in the supply of bread: investment in new capacity (at the market level).
- Figure 8.18 World oil prices in constant prices (1865–2021) and global oil consumption (1965–2021).
- Figure 8.19 OPEC and the world market for oil.
- Figure 8.20 Pay-offs in the price-setting game with two firms, a coordination game with two Nash equilibria.
- Figure 8.21 Pay-offs in the price-setting game with three firms, a prisoners’ dilemma.
- Figure 8.22 Bargaining power and prices in the Kerala wholesale fish market (14 January 1997).
- Figure 8.23 The effect of a 30% salt tax.
- Figure 8.24 When the tax is imposed, the surplus from the salt market is: total surplus = consumer surplus + producer surplus + government revenue
- Figure 8.25 Housing rents and economic rents.
Unit 9
- Figure 9.1 Wealth, income, depreciation, and consumption: the bathtub analogy.
- Figure 9.2 Who owns what? Who owes what?
- Figure 9.3 Borrowing, the interest rate, and the feasible set.
- Figure 9.4a Consumption smoothing: diminishing marginal utility.
- Figure 9.4b Intrinsic impatience: comparing the indifference curves of two people.
- Figure 9.5 Julia’s indifference curves.
- Figure 9.6 Moving consumption over time by borrowing.
- Figure 9.7 Smoothing consumption by storing.
- Figure 9.8 Smoothing consumption by storing and lending.
- Figure 9.9 Investing in a high-return project.
- Figure 9.10 Borrowing to invest in a high-return project.
- Figure 9.11 Storage, lending, investment, and borrowing provide Marco with many feasible sets.
- Figure 9.12 Options for the individual (Marco) who starts with assets.
- Figure 9.13 Options for the individual (Julia) who starts without assets but can borrow and invest.
- Figure 9.14 On opposite sides of the market: an increase in the interest rate improves Marco’s welfare and reduces Julia’s.
- Figure 9.15 Indicators of credit market exclusion and credit constraints in the US in 2019.
- Figure 9.16 Wealth, project quality, and credit.
- Figure 9.17 Principal–agent problems: the credit market and the labour market.
- Figure 9.18 The credit and labour markets shape the relationships between groups with different endowments.
- Figure 9.19a The incomes and income differences of all individuals.
- Figure 9.19b Incomes and income differences when borrowers 4 and 5 are excluded.
- Figure 9.20 Share of risky assets in total assets held: evidence from six countries.
- Figure 9.21 A vicious circle perpetuating poverty (a poverty trap) and a virtuous circle perpetuating wealth.
Unit 10
- Figure 10.1 Marginal costs of banana production using Weevokil.
- Figure 10.2 The plantations’ choice of banana output.
- Figure E10.1 The plantations’ choice of banana output.
- Figure 10.3 The gains from bargaining.
- Figure 10.4 Using a tax to achieve Pareto efficiency.
- Figure 10.5 The plantations compensate the fishermen.
- Figure 10.6 External effects and misallocation of resources.
- Figure 10.7 Demand and marginal cost for Min’s Music.
- Figure 10.8 Private provision of Min’s Music when it is excludable.
- Figure 10.9 Rivalry and excludability.
- Figure 10.10 External effects: public goods and bads, and shared resources.
- Figure 10.11 Hidden action problems.
- Figure 10.12 External effects: hidden actions and attributes.
