Microeconomics in Context : Preliminary Edition

by Unknown

• ISBN13: 9780618343157
• ISBN10: 0618343156
• Edition: 1st
• Format: Paperback
• Copyright: 2003-01-21
• Publisher: South-Western College Pub

Table of Contents

Preface	xi
PART I The Context for Economic Analysis
Economic Activity in Context	1	(1)
Your Starting Point	1	(1)
The Goals of Economic Activity
Positive questions. Normative questions	2	(1)
Intermediate and Final Goals
Wealth. Efficiency. Gross Domestic Product. Well-being
Commentary: Goals Beyond Efficiency	2	(3)
Components of Well-being
Commentary: Goals Beyond Survival	5	(2)
Economics and Well-being
Economic actor. Negative externalities. Positive eternalities. Transaction costs	7	(3)
The Issues That Define Economics	10	(1)
The Four Essential Economic Activities
Resource maintenance. Production. Distribution. Consumption	10	(2)
The Three Basic Economic Questions
What? How? For Whom?	12	(1)
Modes of Economic Organization	13	(4)
Customary Economic Organization	13	(1)
Consensual Economic Organization	13	(1)
Administrative Economic Organization	14	(1)
Economic Organization Through Exchange
Commentary: Markets are Organized Around Exchange	15	(2)
Microeconomics in Context	17
The Context
Model. Physical context. Social context. Historical Context	17	(1)
Economic Thinking vs. ``Economistic'' Thinking
Simple mechanical model	18
Economic Actors and Organizations	1	(1)
Thinking About Economic Actors and Organizations	1	(3)
The Relation of Economics and Business	2	(1)
Individual Economic Actors and Organizations	2	(2)
Motivation and Behavior
Purposive behavior	4	(1)
Intrinsic and Extrinsic Motivations
Incentives
Commentary: Normative Interpretations Of Motivations	5	(3)
Self-Interest, Altruism, and the Common Good	8	(2)
Behavior: Habit, Constraint, or Choice?	10	(1)
Information and Rationality
Rational choice. Satisficing	11	(1)
Optimization vs. Bounded Rationality
Commentary: Can Habits Be Rational?	12	(2)
Now or Later?
High and low ``time discount rates.''	14	(1)
The Three Sectors	15	(10)
The Core Sector	16	(1)
The Public Purpose Sector
Public Goods	17	(3)
The Business Sector
Innovation. Market power
Commentary: Are Big Or Small Businesses More Important?	20	(5)
Interactions Among the Three Sectors	25	(4)
Core and Business Interactions	25	(1)
Core and Public Purpose Interactions	26	(1)
Business and Public Purpose Interactions	26	(1)
The Size of the Three Sectors	27	(1)
A Comparative Note: Less Industralized Economies	27	(1)
Economic Sectors in Context	28	(1)
Economics Actors in the Simple Mechanical Model	29
Only Individual Actors	30	(1)
A Limited Set of Activities
Circular flow diagram	30	(2)
Restrictive Assumptions About Behavior
Perfect Information. Perfect Rationality	32
PART II The Four Economic Activities: Resource Maintenance, Production, Distribution, and Consumption
Capital Stocks and Resource Maintenance	1	(1)
The Nature of Capital Stocks	1	(4)
Stocks vs. Flows	2	(2)
Stock-Flow Diagram
The Five Forms of Capital	4	(1)
NK, PK, NK, SK, FK. Physical Capital. Intangible Capital
The Evolution of Capital	5	(2)
Natural Capital (NK)	7	(3)
Renewable and Nonrenewable NK	7	(2)
News Story: Panel Tells Bush Global Warming is Getting Worse
Technology and NK	9	(1)
Substitutability. Precautionary Principle. Sustainable Socio-Economic System
Produced Capital (PK)	10	(5)
Inputs. Outputs. Waste Products
Example: Production Inputs and Outputs
Fixed Produced Capital	11	(1)
Physical Investments. Depreciation
Inventories	12	(1)
PK in Core and Public Purpose Sectors	13	(2)
Examples From History: PK and NK Compared (Industrial Revolution)
Human Capital (HK)
Labor	15	(1)
Physical Human Capital	16	(1)
Intangible Human Capital	16	(1)
Labor Productivity
Social Capital (SK)	17	(5)
Technology	17	(2)
Embodied. Disembodied
Social Organization	19	(3)
News Story: The Ties That Lead To Prosperity
Financial Capital (FK)	22	(4)
Equity Finance	22	(1)
Debt Finance	23	(2)
Loan. Principal. Interest
Commentary: The Important Concept Of Opportunity Cost
A Note on Terminology	25	(1)
Sustaining Capital Stocks	26
Production Costs	1	(1)
Society's Production Possibilities	1	(3)
The Production Process	1	(2)
Intermediate and final goods
Abundance and Scarcity	3	(1)
Economic Tradeoffs: Society's Production Possibilities Frontier	4	(8)
Tradeoffs Between Two Outputs	4	(5)
Commentary: Military Expenditure---The Opportunity Cost
Tradeoffs Over Time	9	(3)
Technological progress
Economic Costs	12	(7)
Accounting Costs vs. Opportunity Costs	12	(2)
Economic costs
Transaction Costs	14	(1)
Internal and External Costs	15	(1)
Costs and Productive Efficeincy	16	(1)
Technical Efficiency
Social Costs and Efficiency	17	(2)
The Production Function	19
Thinking About Inputs and Outputs	19	(2)
Commentary: The ``Capital and Labor'' Confusion
Graphing the Relation Between Inputs and Outputs	21	(4)
Direct and inverse relationships. Calculating slopes
Production in the Short Run	25	(4)
Fixed and variable inputs. Capacity constraint. Limiting factor. Diminishing, constant, and increasing marginal returns
Costs in the Short Run	29	(4)
Fixed and variable costs. Increasing, constant, and decreasing marginal costs
Production and Costs in the Long Run	33	(3)
Long run average cost. Economies and diseconomies of scale. News Story: Hospital Network Could Be Split Up
Technology Choice	36	(5)
Input substitution
Appendix: A Formal Model Of Producer Costs	41
The Assumptions
The Firm's Short-Run Costs in Detail
Total Cost and Total Variable Cost as Areas
Production Decisions	1	(1)
Goals and Decision Making	1	(3)
Goals and Economic Benefits from Production	1	(1)
Internal and External Benefits
Weighing Costs and Benefits	2	(2)
Net benefits. Cost/benefit analysis. Economic Profit
Marginal Thinking	4	(10)
Comparing Marginal Benefits and Costs	5	(1)
Marginal Thinking: The Example of Profit Maximization	6	(5)
The marginal revenue = marginal cost rule
The Assumption Underlying Reliance on Marginal Thinking: Convexity	11	(3)
Discrete Decision Making	14	(9)
Comparing Discrete Decisions and Marginal Thinking	14	(1)
Multiple Equilibria, Lumpiness, and Increasing Returns	15	(2)
Bringing in History: Sunk Costs	17	(2)
More Considerations from History: Path Dependence and Switching Costs	19	(2)
Bringing in Social Context: Network Externalities	21	(2)
Commentary: Querty
Financial Capital as an Input to Production	23
Appendix: A Formal Theory of Producer Behavior With Convexity and Perfect Competition	29
The Assumptions
A Detailed Look at Revenue, Cost, and Profit
Profit Maximization
Total Revenue, Cost and Profit as Areas
Response to Variations in Output Price
Distribution: Exchange and Transfer	1	(1)
Who Gets What, and How?	1	(6)
Exchange and Transfer	1	(4)
Commentary: are Taxes ``Exchange'' or ``Transfer''?
Ownership and Distribution in Social and Historical Context	5	(2)
News Story: Swept Away In A Gold Rush To Cash in on Our Genes
Principles of Exchange	7	(11)
Gains from Trade	8	(3)
Comparative advantage. Specialization
Other Advantages of Exchange	11	(2)
Problems with Exchange	13	(5)
Infant Industry. Protectionism
Summing up	18	(1)
Principles of Transfer	18	(7)
Gains from Transfer	19	(3)
Dependency needs. Ability-to-pay principle
Problems with Transfer	22	(2)
Moral hazard
Summing up	24	(1)
Distribution Outcomes In the United States	25	(8)
Assets, Wealth, and Income	26	(2)
Capital gain. Liability. Net worth
Sources of Money Income	28	(3)
Labor income. Rent. Capital income. Social insurance programs. Means-tested programs
The Distribution of Money Income	31	(2)
Inequality	33
Measuring Inequality	33	(3)
Lorenz curve. Gini ratio
Varying the Definition of Income	36	(1)
Income Inequality Over Time	36	(2)
Wealth Inequality	38	(2)
News Story: Dozens Of Rich Americans Join In Fight To Retain The Estate Tax: Buffett, Soros and Gates'S Father Call it Only Fair
Equity as a Goal	40	(7)
Appendix: A Formal Theory Of Gains From Trade	47
Consumption and the Consumer Society	1	(1)
Consumption: Final Use	1	(3)
The ``Sovereign'' Consumer?	1	(2)
Who Are the Consumers?	3	(1)
Consumer Behavior: The Marketing View	4	(3)
The Decision-Making Process	4	(1)
Consumer Motivation and Behavior	5	(2)
Psychological and sociological research. Reference points and reference groups
Consumer Behavior: The Utility Theory View	7	(9)
The Budget Line	7	(3)
Utility	10	(1)
Marginal Thinking in Consumer Decision Making	10	(2)
Deriving the Rule for Utility Maximization	12	(2)
Further Developments and Complications	14	(2)
The Consumer Society	16	(7)
The Birth of the Consumer Society	16	(1)
Workers Become Consumers	17	(2)
Institutions of the Consumer Society	19	(3)
Advertising. Consumer credit
Commentary: Has Advertising Gotten Out Of Hand?
Changes in Other Institutions	22	(1)
Consumption and Well-Being	23
Old Utility Theory, New Utility Theory, and Capabilities	24	(2)
Inadequate Consumption: Poverty	26	(2)
Relative and absolute deprivation
Excessive and Mis-Directed Consumption: ``Affluenza''?	28	(1)
The Ecological Impact of Consumption	29	(6)
Appendix: A Formal Theory Of Consumer Behavior	35
The Assumptions
The Budget Line and Its Slope
Indifference Curves
Utility Maximization
Response to Variations in Price
PART III A Closer Look at Markets
Market Institutions	1	(1)
The Meaning of Markets	1	(3)
Markets as Places to Buy and Sell	1	(1)
Markets as Social Institutions	2	(1)
``The Market'' as Pure Exchange	3	(1)
The Development and Expansion of Markets	4	(7)
The Industrial Revolution	5	(2)
Guilds. ``Just-price'' doctrine. Capitalism
The Case of England	7	(2)
Commentary: Some Market Beginnings
Industrial and Market Culture	9	(2)
Institutional Requirements of Markets	11	(6)
Individualist Institutions of Property and Decision Making	11	(2)
Private Property
News Story: Russia'S Health Crisis Srikes the Weaker Sex
Social Institutions of Trust	13	(2)
Implicit and explicit contracts
Infrastructure for the Smooth Flow of Goods and Information	15	(2)
Money. Information
Markets and Well-Being	17	(3)
Types of Markets	20
What is Sold?	20	(2)
Retail. Wholesale. Product. Factor. Resale. Underground
How Are Prices Determined?	22	(2)
Mark-up pricing. Auction markets. Bargaining
What Time Period is Covered?	24	(1)
Spot. Futures. Long-term contracts
Markets in the Simple Mechanical Model	25
Supply and Demand	1	(1)
Explaining Prices and Quantities	1	(2)
Empirical, theoretical, and historical methods. Time-Series Data
The Theory of Supply	3	(6)
The Supply Schedule and Curve	4	(2)
Individual supply. Market supply. Movement along the curve
Changes in Supply	6	(1)
Shift of the curve
Supply by Businesses as Producers	7	(2)
Non-price determinants of supply
The Theory of Demand	9	(6)
The Demand Schedule and Curve	10	(2)
Effective demand. Individual demand. Market demand. Movement along the curve
Changes in Demand	12	(1)
Shift of the curve. Derived demand
Demand by Households as Consumers	13	(2)
Substitute goods. Complementary goods
News Story: All The Spin Came First, Then The Agitation
The Theory of Market Adjustment	15	(7)
Surplus, Shortage, and Equilibrium	16	(2)
Market Forces and Other Forces	18	(1)
Static model. Dynamic model
Supply and Demand Shifts	19	(3)
Topics in Market Analysis	22	(6)
Signaling and Rationing	22	(2)
Market incentives
Shortage, Scarcity, and Inadequacy	24	(1)
Visualizing Variability	25	(3)
Precision. Accuracy
Explaining Real-World Prices and Quantities	28
The Case of Market Data on Crude Oil	28	(2)
Making the Transition from Fact to Theory	30	(2)
Adding in History	32	(3)
Price Floors and Price Ceilings	35	(2)
Cartel
A Last Thought	37
Working with Supply and Demand	1	(1)
How Much Money Will Sales Bring In?	1	(2)
The Price Elasticity of Demand	3	(12)
Price Inelastic Demand	4	(1)
Price Elastic Demand	5	(1)
Elasticity and Slope	6	(5)
Perfect elasticity. Perfect inelasticity
News Story: Companies & Markets: Drug Firms Under Fire At World Trade Meeting
A Mathematical Approach	11	(4)
Math Box: Calulating Percentage Changes
The Price Elasticity of Supply	15	(2)
Income, Price, and Buyer Behavior	17	(4)
Income Elasticity of Demand	17	(2)
Normal goods. Inferior goods
Income and Substitution Effects of a Price Change	19	(2)
Short-Run vs. Long-Run Elasticities	21	(2)
Looking at Equity and Efficiency	23
Consumer and Producer Surplus	23	(2)
Efficiency	25	(1)
Policy Analysis: Taxation	26	(3)
Equity	29	(1)
Policy Analysis: Rent Control	29	(2)
Market Power and Deadweight Loss	31
Market Power and Market Structures	1	(1)
What is Market Power?	1	(3)
Differing Perspectives on Market Power and Competition	1	(2)
The Traditional Treatment of Market Power	3	(1)
Perfect Competition	4	(7)
The Conditions of Perfect Competition	5	(1)
Examples of Perfect Competition?	6	(1)
Profit Maximization Under Perfect Competition	6	(4)
Perfect Competition and Long-Run Efficiency	10	(1)
Pure Monopoly: One Seller	11	(10)
The Conditions of Monopoly	11	(2)
Barriers to entry. Natural monopoly
Examples of Monopoly	13	(2)
Commentary: The Issues in U.S. vs. Microsfot
Profit Maximization for a Monopolist	15	(3)
Monopoly and Inefficiency	18	(1)
Can Monopoly Be Efficient?	19	(2)
Monopolistic Competition	21	(3)
The Conditions of Monopolistic Competition	21	(1)
Examples of Monopolistic Competition	21	(1)
Profit Maximization with Monopolistic Competition	22	(1)
Monopolistic Competition and Long-Run Efficiency	23	(1)
Oligopoly	24	(12)
The Conditions of Oligopoly	24	(1)
Examples of Oligopoly	25	(1)
Concentration ratio
News Story: GM, Ford, Daimler Chrysler Sales Fall As Japan, Europe Gain
Oligopoly and the Behavior of Firms
Game theory. Collusion. Kinked demand curve	26	(4)
Is Oligopoly Rampant?	30	(6)
Summary and a Final Note
Appendix: A Formal Analysis Of Market Structures	36
The Assumptions
Perfect Competition
Monopoly
Monopolistic Competition
Oligopoly
Markets for Labor	1	(1)
Thinking about Markets for Labor	1	(2)
Labor as an Input to Production	1	(1)
Labor Productivity	2	(1)
Individual Decisions and Paid Labor Supply	3	(5)
The Opportunity Costs of Paid Employment	4	(1)
The Benefits of Paid Employment	5	(1)
The Individual Paid Labor Supply Curve	6	(2)
Upwards-sloping supply. Backwards-bending supply
Supply and Demand at the Market Level	8	(4)
Market Labor Supply	8	(1)
Market Labor Demand	9	(1)
Market Adjustment	10	(2)
Explaining Variations in Wages	12	(15)
Human Capital	12	(1)
Employer-specific. General
Market Power	13	(3)
Monopsony. Oligopsony. Bilateral Monopoly
News Story: Recording Artists Sue, Aiming to Rock Industry
Compensating Wage Differentials	16	(2)
Commentary: Do ``Warm Feelings'' Substitute For Wages?
Worker Motivation	18	(3)
Monitoring costs. Efficiency wages. Morale. Wage contous. Dual labor markets
Discrimination	21	(6)
Wage discrimination. Occupational segregation
News Story: Mit Women Win A Fight Against Bias: In Rare Move, School Admits Discrimination
Labor in the Simple Mechanical Model	27
Labor Supply	27	(1)
Labor Demand	27	(6)
Marginal revenue product. Marginal factor cost
Appendix: A Formal Model Of A Firm'S Hiring Decision In Perfect Competition	33
Markets for Other Resources	1	(1)
Valuing Capital Stocks	1	(7)
The Value of Capital: A Simple Case with Certainty	1	(4)
Math Box: The Present Value of Future Funds
Varying Returns, Varying Costs, and Risk	5	(1)
A Tougher Complication: Uncertainty	6	(1)
Market Value	6	(2)
Markets for Produced, Natural, and Social Capital	8	(5)
Produced Capital in the Simple Mechanical Model	9	(1)
Marginal revenue product. Marginal factor cost
Should Natural Capital Be Treated Differently?	9	(2)
Coase Theorem
Social Capital and Markets	11	(2)
Accounting goodwill
Markets for Financial Capital	13
When Businesses Need Financial Capital	13	(1)
The Bond Market	14	(1)
The Stock Market	15	(3)
Commentary: Reading Financial Market Reports
Households and Governments as Borrowers	18	(1)
The Supply of Financial Capital	19	(2)
A Last Note on Financial Capital Markets	21
News Story: Investors Dump Stock Funds for Shelter of Bonds
PART IV A Closer Look at Economic Organizations
The Core Sector: Households and Communities	1	(1)
Households and Communities as Organizations	1	(4)
The Functions of the Core Sector	1	(2)
Children. Care. Final production. Savings. Consumption. Human capital. Labor. Leisure. Neighborhood effects
Commentary: Valuing Core Sector Activities
Getting Information on Core Sector Activities	3	(2)
Definitions of households and families. Time use surveys
The Core Sector in Historical Perspective	5	(7)
Pre-Industrial Economies	6	(1)
``Outside'' of the Economy?	6	(2)
``Cult of domesticity.'' ``The family'' as ``non-economic.''
Shifting the Boundaries	8	(2)
Growth in female paid LFP, service sector
A Crisis in Care?	10	(2)
Commentary: Bowling Alone?
``Work/Family'' Challenges	12	(3)
Employer Policies	13	(1)
Government Policies	13	(1)
Family and Medical Leave Act. Crosscountry comparisons
Distributing The Costs of Care	14	(1)
Theories of Household Behavior	15
The ``Glued Together'' Family	15	(1)
The Dictatorship Theory	16	(2)
Commentary: ``Missing Women''
Specialization and Exchange	18	(1)
Bargaining	18	(3)
What Is Missing	21
The Business Sector: For-Profit Firms	1	(1)
Businesses as Organizations	1	(4)
The Legal Organization and Ownership of Firms	1	(2)
Proprietorship. Partnership. Corporation. Cooperative
How Large are the Largest Firms?	3	(2)
The Evolution of Big Business	5	(5)
The Second Industrial Revolution	5	(1)
Technology and Economies of Scale	6	(1)
Horizontal integration
Diverse Products: Economies of Scope	7	(1)
Avoiding Transaction Costs	7	(2)
Vertical integration
Continuing Trends in Corporate Growth	9	(1)
Conglomerate. Multinational corporation
The Goals of Firms	10	(9)
Shareholders and Profit?	11	(1)
Shareholder theory
Stakeholders and Diverse Interests?
Stakeholder theory
Commentary: The Founding Principles of Johnson & Johnson	11	(3)
Principal-Agent Problems	14	(3)
News Story: Audacious Climb To Success Ended In A Dizzying Plunge
Conflict, Cooperation, and Motivation in Social Organizations	17	(2)
X-efficiency
Dualism in Modern Markets: Will Small Firms Survive?	19
Small Firms and Efficiency	19	(2)
How Big Firms Depend on Small Ones	21	(2)
``Bigger Is Better?''	23
The Public Purpose Sector: Governments and Non-Profits	1	(1)
Public Purpose Organizations and Their Functions	1	(4)
The Regulatory Function	1	(3)
Commentary: Can A Market Be An ``Open Access Resource''?
The Direct Provision Function	4	(1)
Types of Public Purpose Organizations	5	(6)
Government Organizations	5	(2)
Domestic Nonprofit Organizations	7	(3)
Commentary: Two New York Nonprofits With A Focus On Government
International Organizations	10	(1)
The Public Purpose Sector in Historical Perspective	11	(12)
Social Welfare	12	(2)
Progressive Era. War on Poverty
Regulation of Monopolies and Trade Practices	14	(2)
Interstate Commerce Act. Sherman Anti-Trust Act. Federal Trade Commission. World Trade Organization
News Story: Eu Penalties On U.S. Goods Approved
Regulation of Financial Markets	16	(2)
Securities and Exchange Commission. Generally Accepted Accounting Principles
Environmental Protection	18	(2)
Conservation movement. Environmental Protection Agency. Pigovian taxes
Commentary: Public Purpose Organizations and the Kyoto Protocol
Is Government Too Big?	20	(3)
News Story: Boston Beer Pulls Ad After Complaints
Theories of Organizational Behavior	23
The Theory of Pure Public Service	23	(1)
The Theory of Pure Special-Interest ``Capture''	24	(1)
``Public choice'' theory
The Theory of Civic Responsibility	25
PART V Economic Outcomes and Economic Ideology
The Variety of Economic Systems	1	(1)
Comparing Economic Systems	1	(5)
Models of Organization: An Elaboration	1	(2)
Patterns of Ownership	3	(3)
Individual. Corporate. Cooperative. Government
Commentary: Common Property Resources
Varieties of Capitalism and Socialism	6	(4)
Classifying Capitalist Systems	7	(2)
Laissez-faire and administrative capitalism
Classifying Socialist Systems	9	(1)
Market and administrative socialism
Comparative Systems in Historical Perspective	10	(9)
The Anglo-American Experience of Laissez-Faire Capitalism	10	(2)
Privatization. Deregulation
Capitalism and Social Democracy in Western Europe	12	(1)
Industry and Government in Japan and the Newly Industrializing Economies	13	(2)
Russia and the Transition Economies	15	(1)
China: From Administrative to Market Socialism	16	(1)
Economies in Less Industrialized Countries	17	(2)
Colonial rule
Comparing Economic Performance	19
Average Incomes	19	(1)
Health and Literacy	20	(1)
Sustainability	21
Market Systems and Normative Claims	1	(1)
Why Discuss Normative Claims?	1	(2)
Debating the Merits of Systems	1	(1)
Theory and Ideology	2	(1)
Neoclassical economics. Free market ideology
The Theory Behind the ``Free Market'' Argument	3	(9)
The Set-Up: The Idealized World	3	(1)
The Normative Standard: Pareto Efficiency	4	(3)
The Result: ``Markets Are Best''	7	(1)
General equilibrium. First fundamental theorem of welfare economics
The Policy Prescription: Don't ``Interfere''	8	(1)
Variations in Neoclassical Thinking	9	(2)
Imperfect information. New institutionalist economics
Precision vs. Accuracy, Once Again	11	(1)
Contextual Economics: Into the Future	12	(7)
Varieties of Economic Thought	13	(2)
Institutionalist. Social (socio-). Marxist (radical). Post-Keynesian. Austrian. Ecological. Feminist
A Point to Ponder: Intergenerational Equity	15	(1)
A Point to Ponder: Individuals and Society	16	(3)
Last Words	19
Strengths and weaknesses of markets
Glossary	1