Resources

• Resources
  • Einsteins
  • Great economists
  • How economists learn from facts
  • When economists disagree
  • Exercises
  • Videos
  • Figures
    • Unit 1
    • Unit 2
    • Unit 3
    • Unit 4
    • Unit 5
    • Unit 6
    • Unit 7
    • Unit 8
    • Unit 9
    • Unit 10
    • Unit 11
    • Unit 12
    • Unit 13
    • Unit 14
    • Unit 15
    • Unit 16
    • Unit 17
    • Unit 18
    • Unit 19
    • Unit 20
    • Unit 21
    • Unit 22

Einsteins

• 1.2 Measuring income and living standards: Comparing income at different times, and across different countries
• 2.8 Malthusian economics: Population grows when living standards rise: Modelling Malthus
• 4.10 Dividing a pie (or leaving it on the table): When will an offer in the ultimatum game be accepted?
• 5.12 Measuring economic inequality: Inequality as differences among people
• 5.13 A policy to redistribute the surplus and raise efficiency: The Lorenz curve and the Gini coefficient in a class-divided economy with a large population
• 7.2 Economies of scale and the cost advantages of large-scale production: The size and cost of a pipe
• 7.8 The elasticity of demand: The elasticity of demand and the marginal revenue
• 8.5 Competitive equilibrium: Gains from trade, allocation, and distribution: Total surplus and WTP
• 9.5 The price-setting curve: Wages and profits in the whole economy: The price-setting curve
• 9.8 Labour market equilibrium and the distribution of income: The Lorenz curve and the Gini coefficient in an economy with unemployed, employed, and employers (owners)
• 10.9 The central bank, the money market, and interest rates: Present value (PV)
• 11.1 How people changing prices to gain rents can lead to a market equilibrium: Equilibration through rent-seeking in an experimental market
• 13.1 Growth and fluctuations: Ratio scales and logarithms
• 13.2 Output growth and changes in unemployment: Okun’s law
• 14.2 The multiplier model: Calculating the multiplier
• 14.5 The multiplier model: Including the government and net exports: The multiplier in an economy with a government and foreign trade
• 15.7 Supply shocks and inflation: The price-setting curve with imported materials
• 15.8 Monetary policy: The real interest rate and the Fisher equation
• 16.11 Slower productivity growth in services, and the changing nature of work: How faster productivity growth in goods production may shift employment from goods to services
• 19.1 Inequality across the world and over time: The Gini coefficient and worldwide income differences
• 20.3 The abatement of environmental damages: Cost-benefit analysis: Marginal abatement costs and the total productivity of abatement expenditures

Great economists

• 1.3 History’s hockey stick: Growth in income: Adam Smith
• 2.5 Modelling a dynamic economy: Innovation and profit: Joseph Schumpeter
• 4.6 Public goods, free riding, and repeated interaction: Elinor Ostrom
• 4.13 Social interactions: Conflicts in the choice among Nash equilibria: John Nash
• 5.2 Evaluating institutions and outcomes: The Pareto criterion: Vilfredo Pareto
• 6.1 Firms, markets, and the division of labour: Herbert Simon
• 6.3 Other people’s labour: Karl Marx
• 6.9 Another kind of business organization: John Stuart Mill
• 7.10 Price-setting, competition, and market power: Augustin Cournot
• 8.2 The market and the equilibrium price: Alfred Marshall
• 8.8 The model of perfect competition: Léon Walras
• 11 Introduction: Friedrich Hayek
• 12.2 External effects and bargaining: Ronald Coase
• 12.3 External effects: Policies and income distribution: Arthur Pigou
• 14.6 Fiscal policy: How governments can dampen and amplify fluctuations: John Maynard Keynes
• 15.2 Inflation results from conflicting and inconsistent claims on output: Bill Phillips
• 17.8 Before the financial crisis: Households, banks, and the credit boom: Hyman Minsky
• 18.5 Specialization, factor endowments, and trade between countries: David Ricardo
• 22.5 Democracy as a political institution: Kenneth Arrow
• 22.7 A more realistic model of electoral competition: Albert O. Hirschman

How economists learn from facts

• 1.9 Capitalism, causation and history’s hockey stick: Do institutions matter for growth in income?
• 4.8 Behavioural experiments in the lab and in the field: Laboratory experiments
• 6.4 Employment rents: Managers exert power
• 6.4 Employment rents: How large are employment rents?
• 6.8 Putting the model to work: Owners, employees, and the economy: Workers speed up when the economy slows down
• 7.1 Breakfast cereal: Choosing a price: Estimating demand curves using surveys
• 11.5 The value of an asset: Basics: The wisdom of crowds: The weight of stock (oxen) and the value of stocks
• 13.6 Why is consumption smooth?: My diet starts tomorrow
• 14.7 The multiplier and economic policymaking: The Mafia and the multiplier
• 17 Introduction: ‘I made a mistake’
• 19.10 Redistribution: Taxes and transfers: What is the best way to give money to the poor? Randomize and find out.
• 20.6 The measurement challenges of environmental policy: Natural capital and green growth
• 20.7 Dynamic environmental policies: Future technologies and lifestyles: Social preferences and environmental sustainability
• 22.3 Political competition affects how the government will act: Does electoral competition affect policy?
• 22.10 Democracy makes a difference: Women’s suffrage and the reduction in child mortality in the US
• 22.14 Special interests: ‘How economists (and political scientists) learn from facts’: Does money talk?

When economists disagree

• 4.2 Equilibrium in the invisible hand game: Homo economicus in question: Are people entirely selfish?
• 6.4 Employment rents: ‘When economists agree’: Coase and Marx on the firm and its employees
• 11.7 Asset market bubbles: Do bubbles exist?
• 14.7 The multiplier and economic policymaking: How responsive is the economy to government spending?
• 18.10 Trade and growth: Heckscher–Ohlin, the Leontief paradox, and the new trade theory
• 20.6 The measurement challenges of environmental policy: Willingness to pay versus the right to a livable environment
• 20.9 Why is addressing climate change so difficult?: The discounting dilemma: How should we account for future costs and benefits?
• 21.1 The innovation process: Invention and diffusion: The end of the permanent technological revolution?
• 21.6 Intellectual property rights: Intellectual property rights: Dynamo or drag?

Exercises

• 1.1 Income inequality: Exercise 1.1: Inequality in the fourteenth century
• 1.1 Income inequality: Exercise 1.2: Working with income data
• 1.2 Measuring income and living standards: Exercise 1.3: What should we measure?
• 1.3 History’s hockey stick: Growth in income: Exercise 1.4: The advantages of ratio scales
• 1.5 The economy and the environment: Exercise 1.5: How much difference does a couple of degrees warmer or colder make?
• 1.6 Capitalism defined: Private property, markets, and firms: Exercise 1.6: The poorest man’s cottage
• 1.6 Capitalism defined: Private property, markets, and firms: Exercise 1.7: Markets and social networks
• 1.6 Capitalism defined: Private property, markets, and firms: Exercise 1.8: Capitalism
• 1.7 Capitalism as an economic system: Exercise 1.9: Firm or not?
• 1.8 The gains from specialization: Exercise 1.10: Apples and wheat
• 1.11 Economics and the economy: Exercise 1.11: Where and when would you choose to have been born?
• 2.2 Economic models: How to see more by looking at less: Exercise 2.1: Designing a model
• 2.3 Basic concepts: Prices, costs, and innovation rents: Exercise 2.2: Using ceteris paribus
• 2.4 Modelling a dynamic economy: Technology and costs: Exercise 2.3: Isocost lines
• 2.6 The British Industrial Revolution and incentives for new technologies: Exercise 2.4: Britain but not France
• 2.6 The British Industrial Revolution and incentives for new technologies: Exercise 2.5: Why did the Industrial Revolution not happen in Asia?
• 2.7 Malthusian economics: Diminishing average product of labour: Exercise 2.6: The farmers’ production function
• 2.8 Malthusian economics: Population grows when living standards rise: Exercise 2.7: Are people really like other animals?
• 2.8 Malthusian economics: Population grows when living standards rise: Exercise 2.8: Living standards in the Malthusian world
• 2.9 The Malthusian trap and long-term economic stagnation: Exercise 2.9: What would you add?
• 2.9 The Malthusian trap and long-term economic stagnation: Exercise 2.10: Defining economic progress
• 2.10 Escaping from Malthusian stagnation: Exercise 2.11: The basic institutions of capitalism
• 3.1 Labour and production: Exercise 3.1: Ceteris paribus assumptions
• 3.1 Labour and production: Exercise 3.2: Production functions
• 3.2 Preferences: Exercise 3.3: Why indifference curves never cross
• 3.2 Preferences: Exercise 3.4: Your marginal rate of substitution
• 3.3 Opportunity costs: Exercise 3.5: Opportunity costs
• 3.5 Decision making and scarcity: Exercise 3.6: Exploring scarcity
• 3.6 Hours of work and economic growth: Exercise 3.7: Your production function
• 3.8 Is this a good model?: Exercise 3.8: Another definition of economics
• 3.9 Explaining our working hours: Changes over time: Exercise 3.9: Scarcity and choice
• 3.10 Explaining our working hours: Differences between countries: Exercise 3.10: Preferences and culture
• 3.10 Explaining our working hours: Differences between countries: Exercise 3.11: Working hours across countries and time
• 4 Introduction: Exercise 4.1: Social dilemmas
• 4.3 The prisoners’ dilemma: Exercise 4.2: Political advertising
• 4.4 Social preferences: Altruism: Exercise 4.3: Altruism and selflessness
• 4.5 Altruistic preferences in the prisoners’ dilemma: Exercise 4.4: Amoral self-interest
• 4.8 Behavioural experiments in the lab and in the field: Exercise 4.5: Are lab experiments always valid?
• 4.8 Behavioural experiments in the lab and in the field: Exercise 4.6: Crowding out
• 4.10 Dividing a pie (or leaving it on the table): Exercise 4.7: Acceptable offers
• 4.11 Fair farmers, self-interested students?: Exercise 4.8: Social preferences
• 4.11 Fair farmers, self-interested students?: Exercise 4.9: Offers in the ultimatum game
• 4.11 Fair farmers, self-interested students?: Exercise 4.10: Strikes and the ultimatum game
• 4.12 Competition in the ultimatum game: Exercise 4.11: A sequential prisoners’ dilemma
• 4.13 Social interactions: Conflicts in the choice among Nash equilibria: Exercise 4.12: Conflict between Astrid and Bettina
• 4.13 Social interactions: Conflicts in the choice among Nash equilibria: Exercise 4.13: Conflict in business
• 4.13 Social interactions: Conflicts in the choice among Nash equilibria: Exercise 4.14: Nash equilibria and climate change
• 5.3 Evaluating institutions and outcomes: Fairness: Exercise 5.1: Substantive fairness
• 5.3 Evaluating institutions and outcomes: Fairness: Exercise 5.2: Procedural fairness
• 5.3 Evaluating institutions and outcomes: Fairness: Exercise 5.3: Splitting the profits in a partnership
• 5.4 A model of choice and conflict: Exercise 5.4: Using indifference curves
• 5.5 Technically feasible allocations: Exercise 5.5: Changing conditions for production
• 5.7 Economically feasible allocations and the surplus: Exercise 5.6: Biological and economic feasibility
• 5.7 Economically feasible allocations and the surplus: Exercise 5.7: Why Angela works for 8 hours
• 5.7 Economically feasible allocations and the surplus: Exercise 5.8: Take it or leave it?
• 5.12 Measuring economic inequality: Exercise 5.9: Comparing distributions of wealth
• 6.1 Firms, markets, and the division of labour: Exercise 6.1: The structure of an organization
• 6.3 Other people’s labour: Exercise 6.2: Incomplete contracts
• 6.5 Determinants of the employment rent: Exercise 6.3: Assumptions of the model
• 6.7 Wages, effort, and profits in the labour discipline model: Exercise 6.4: The employer sets the wage
• 6.8 Putting the model to work: Owners, employees, and the economy: Exercise 6.5: Effort and wages
• 6.8 Putting the model to work: Owners, employees, and the economy: Exercise 6.6: Lazear’s results
• 6.8 Putting the model to work: Owners, employees, and the economy: Exercise 6.7: Outsourcing comes home
• 6.9 Another kind of business organization: Exercise 6.8: A worker-owned cooperative
• 6.9 Another kind of business organization: Exercise 6.9: Was Mill wrong?
• 6.10 Principals and agents: Interactions under incomplete contracts: Exercise 6.10: Principal–agent relationships
• 7.1 Breakfast cereal: Choosing a price: Exercise 7.1: Changes in the market
• 7.3 Production: The cost function for Beautiful Bicycles: Exercise 7.2: The cost function for Apple-Cinnamon Cheerios
• 7.3 Production: The cost function for Beautiful Bicycles: Exercise 7.3: Cost functions for university education
• 7.4 Demand and isoprofit curves: Beautiful Bicycles: Exercise 7.4: Looking at isoprofit curves
• 7.7 Gains from trade: Exercise 7.5: Changing the rules of the game
• 7.9 Using demand elasticities in government policy: Exercise 7.6: Elasticity and expenditure
• 7.9 Using demand elasticities in government policy: Exercise 7.7: Food taxes and health
• 7.10 Price-setting, competition, and market power: Exercise 7.8: Multinationals or independent retailers?
• 8.1 Buying and selling: Demand and supply: Exercise 8.1: Selling strategies and reservation prices
• 8.2 The market and the equilibrium price: Exercise 8.2: Price-takers
• 8.5 Competitive equilibrium: Gains from trade, allocation, and distribution: Exercise 8.3: Maximizing the surplus
• 8.5 Competitive equilibrium: Gains from trade, allocation, and distribution: Exercise 8.4: Surplus and deadweight loss
• 8.6 Changes in supply and demand: Exercise 8.5: The market for quinoa
• 8.6 Changes in supply and demand: Exercise 8.6: Prices, shocks, and revolutions
• 8.7 The effects of taxes: Exercise 8.7: The deadweight loss of the butter tax
• 8.8 The model of perfect competition: Exercise 8.8: Price-fixing
• 8.9 Looking for competitive equilibria: Exercise 8.9: Price dispersion
• 8.9 Looking for competitive equilibria: Exercise 8.10: The Fulton Fish Market
• 9.2 Measuring the economy: Employment and unemployment: Exercise 9.1: Employment, unemployment, and participation
• 9.3 The wage-setting curve: Employment and real wages: Exercise 9.2: Shifts in the wage-setting curve
• 9.5 The price-setting curve: Wages and profits in the whole economy: Exercise 9.3: The price-setting curve
• 9.6 Wages, profits, and unemployment in the whole economy: Exercise 9.4: Is this really a Nash equilibrium?
• 9.7 How changes in demand for goods and services affect unemployment: Exercise 9.5: Wages and aggregate demand
• 9.9 Labour supply, labour demand, and bargaining power: Exercise 9.6: Immigration of entrepreneurs
• 10.3 Impatience and the diminishing marginal returns to consumption: Exercise 10.1: The consequences of pure impatience
• 10.4 Borrowing allows smoothing by bringing consumption to the present: Exercise 10.2: Income and substitution effects
• 10.6 Investing: Another way to move consumption to the future: Exercise 10.3: An increase in the interest rate
• 10.6 Investing: Another way to move consumption to the future: Exercise 10.4: Lifetime income
• 10.9 The central bank, the money market, and interest rates: Exercise 10.5: Interest rate markups
• 10.11 The central bank’s policy rate can affect spending: Exercise 10.6: Interest rates and consumption spending
• 10.12 Credit market constraints: A principal–agent problem: Exercise 10.7: Microfinance and lending to the poor
• 10.13 Inequality: Lenders, borrowers, and those excluded from credit markets: Exercise 10.8: Unpopular banks
• 10.13 Inequality: Lenders, borrowers, and those excluded from credit markets: Exercise 10.9: Limits on lending
• 11.1 How people changing prices to gain rents can lead to a market equilibrium: Exercise 11.1: A supply shock and adjustment to a new market
• 11.1 How people changing prices to gain rents can lead to a market equilibrium: Exercise 11.2: Cotton prices and the American Civil War
• 11.4 Prices, rent-seeking, and market dynamics at work: Oil prices: Exercise 11.3: The world market for oil
• 11.4 Prices, rent-seeking, and market dynamics at work: Oil prices: Exercise 11.4: The shale oil revolution
• 11.6 Changing supply and demand for financial assets: Exercise 11.5: Supply and demand curves
• 11.7 Asset market bubbles: Exercise 11.6: Markets for gems
• 11.8 Modelling bubbles and crashes: Exercise 11.7: What is the fundamental value of a Bitcoin?
• 11.8 Modelling bubbles and crashes: Exercise 11.8: The big ten asset price bubbles of the last 400 years
• 11.9 Non-clearing markets: Rationing, queuing, and secondary markets: Exercise 11.9: IOC policy
• 11.9 Non-clearing markets: Rationing, queuing, and secondary markets: Exercise 11.10: The price of a ticket
• 11.10 Markets with controlled prices: Exercise 11.11: Why not raise the price?
• 12 Introduction: Exercise 12.1: Property rights and contracts in Madagascar
• 12.2 External effects and bargaining: Exercise 12.2: Bargaining power
• 12.2 External effects and bargaining: Exercise 12.3: A positive externality
• 12.3 External effects: Policies and income distribution: Exercise 12.4: Pigouvian subsidy
• 12.3 External effects: Policies and income distribution: Exercise 12.5: Comparing policies
• 12.4 Property rights, contracts, and market failures: Exercise 12.6: Incomplete contracts
• 12.5 Public goods: Exercise 12.7: Rivalry and excludability
• 12.6 Missing markets: Insurance and lemons: Exercise 12.8: Hidden attributes
• 12.8 The limits of markets: Exercise 12.9: Capitalism among consenting adults
• 12.9 Market failure and government policy: Exercise 12.10: Market failure
• 13 Introduction: Exercise 13.1: The OECD Better Life Index
• 13.1 Growth and fluctuations: Exercise 13.2: Defining recessions
• 13.2 Output growth and changes in unemployment: Exercise 13.3: Okun’s Law
• 13.4 Measuring the aggregate economy: The components of GDP: Exercise 13.4: How to use FRED
• 13.5 How households cope with fluctuations: Exercise 13.5: Health insurance
• 13.6 Why is consumption smooth?: Exercise 13.6: Changes in income, changes in consumption
• 13.7 Why is investment volatile?: Exercise 13.7: Consulting FRED
• 13.8 Measuring the economy: Inflation: Exercise 13.8: Measuring inflation
• 13.8 Measuring the economy: Inflation: Exercise 13.9: The CPI and the GDP deflator
• 14.3 Household target wealth, collateral, and consumption spending: Exercise 14.1: A household’s balance sheet
• 14.3 Household target wealth, collateral, and consumption spending: Exercise 14.2: Housing in France and Germany
• 14.5 The multiplier model: Including the government and net exports: Exercise 14.3: The multiplier model
• 14.6 Fiscal policy: How governments can dampen and amplify fluctuations: Exercise 14.4: Spending cuts in a recession
• 14.7 The multiplier and economic policymaking: Exercise 14.5: Methods to estimate the multiplier
• 14.7 The multiplier and economic policymaking: Exercise 14.6: Contributions to change in real gross domestic product over the business cycle
• 14.7 The multiplier and economic policymaking: Exercise 14.7: The fall of France
• 14.7 The multiplier and economic policymaking: Exercise 14.8: Stimulus without more debt
• 14.8 The government’s finances: Exercise 14.9: Efficiency and fairness
• 14.9 Fiscal policy and the rest of the world: Exercise 14.10: Coordinating a stimulus
• 15.3 Inflation, the business cycle, and the Phillips curve: Exercise 15.1: The bargaining gap in a recession
• 15.3 Inflation, the business cycle, and the Phillips curve: Exercise 15.2: Positive and negative shocks
• 15.4 Inflation and unemployment: Constraints and preferences: Exercise 15.3: The Phillips curve and the policymaker’s preferences
• 15.6 Expected inflation and the Phillips curve: Exercise 15.4: A negative aggregate demand shock with high unemployment
• 15.6 Expected inflation and the Phillips curve: Exercise 15.5: Inflation, expected inflation, and the bargaining gap
• 15.7 Supply shocks and inflation: Exercise 15.6: An oil shock
• 15.8 Monetary policy: Exercise 15.7: Fiscal or monetary policy?
• 15.9 The exchange rate channel of monetary policy: Exercise 15.8: Why bonds?
• 15.10 Demand shocks and demand-side policies: Exercise 15.9: A construction boom
• 16 Introduction: Exercise 16.1: Wealth and life satisfaction
• 16.2 The job creation and destruction process: Exercise 16.2: Schumpeter revisited
• 16.3 Job flows, worker flows, and the Beveridge curve: Exercise 16.3: Beveridge curves and the German labour market
• 16.4 Investment, firm entry, and the price-setting curve in the long run: Exercise 16.4: Measuring the conditions for investment
• 16.6 Technological change and income inequality: Exercise 16.5: Technological progress and inequality
• 16.8 Institutions and policies: Why do some countries do better than others?: Exercise 16.6: You are the policymaker
• 16.9 Technological change, labour markets, and trade unions: Exercise 16.7: Unemployment rates and labour market institutions
• 16.10 Changes in institutions and policies: Exercise 16.8: The labour market model
• 17.2 The Great Depression, positive feedbacks, and aggregate demand: Exercise 17.1: Farmers in the Great Depression
• 17.3 Policymakers in the Great Depression: Exercise 17.2: Advantages and disadvantages of fixed exchange rates
• 17.7 After stagflation: The fruits of a new policy regime: Exercise 17.3: Workers’ bargaining power
• 17.8 Before the financial crisis: Households, banks, and the credit boom: Exercise 17.4: Household wealth as a balance sheet
• 17.9 Modelling housing bubbles: Exercise 17.5: Differences between equilibrium and stability
• 17.10 The financial crisis and the great recession: Exercise 17.6: The crisis and the multiplier
• 17.11 The role of banks in the crisis: Exercise 17.7: How conventional wisdom on financial markets contributed to the global financial crisis
• 17.11 The role of banks in the crisis: Exercise 17.8: Behaviour in the financial crisis
• 17.12 The economy as teacher: Exercise 17.9: Banking regulations can help bring on financial crises
• 17.12 The economy as teacher: Exercise 17.10: Hoover’s balanced budget
• 17.12 The economy as teacher: Exercise 17.11: Austerity policy
• 18.1 Globalization and deglobalization in the long run: Exercise 18.1: Price gaps that did and didn’t fall
• 18.1 Globalization and deglobalization in the long run: Exercise 18.2: Learning more about tariffs
• 18.2 Globalization and investment: Exercise 18.3: International capital flows: Does capital flow from richer to poorer countries?
• 18.4 Specialization and the gains from trade among nations: Exercise 18.4: Assess some country production specialization patterns
• 18.5 Specialization, factor endowments, and trade between countries: Exercise 18.5: Comparative advantage
• 18.5 Specialization, factor endowments, and trade between countries: Exercise 18.6: Power and bargaining
• 18.6 Winners and losers from trade and specialization: Exercise 18.7: Winners and losers from specialization due to economies of scale
• 18.6 Winners and losers from trade and specialization: Exercise 18.8: The collapse of the Soviet Union
• 18.8 Migration: Globalization of labour: Exercise 18.9: The economic effects of immigration
• 18.9 Globalization and anti-globalization: Exercise 18.10: Rodrik’s Trilemma
• 18.9 Globalization and anti-globalization: Exercise 18.11: Examine the respective strengths and costs of economic independence, and interdependency
• 18.10 Trade and growth: Exercise 18.12: The effect of trade on growth
• 19 Introduction: Exercise 19.1: Income variation across and within countries
• 19.1 Inequality across the world and over time: Exercise 19.2: Inequalities among your classmates
• 19.1 Inequality across the world and over time: Exercise 19.3: Another way to interpret Gini coefficients
• 19.2. Accidents of birth: Another lens to study inequality: Exercise 19.4: How inequalities of birth persist between generations
• 19.3 What (if anything) is wrong with inequality?: Exercise 19.5: Estimated, ideal, and actual distributions of wealth
• 19.3 What (if anything) is wrong with inequality?: Exercise 19.6: A level playing field
• 19.5 Endowments, technology, and institutions: Exercise 19.7: Yichen, Renfu, Mark, and Stephanie
• 19.7 Putting the model to work: Explaining changes in inequality: Exercise 19.8: How automation affects employment
• 19.8 Predistribution: Exercise 19.9: Non-compete contracts in the labour market model
• 19.10 Redistribution: Taxes and transfers: Exercise 19.10: Regressive and progressive taxes
• 19.11 Equality and economic performance: Exercise 19.11: The U-turn countries
• 19.11 Equality and economic performance: Exercise 19.12: High and low performers
• 20.2 Climate change: Exercise 20.1: Assessing the economic impacts of global warming
• 20.2 Climate change: Exercise 20.2: Climate change causes and evidence
• 20.3 The abatement of environmental damages: Cost-benefit analysis: Exercise 20.3: Choosing abatement strategies
• 20.3 The abatement of environmental damages: Cost-benefit analysis: Exercise 20.4: Optimistic and pessimistic policies
• 20.5 Cap and trade environmental policies: Exercise 20.5: Assessing cap and trade policies
• 20.5 Cap and trade environmental policies: Exercise 20.6: A successful tradable emissions permit program
• 20.5 Cap and trade environmental policies: Exercise 20.7: Would a carbon tax reduce emissions more than regulation?
• 20.6 The measurement challenges of environmental policy: Exercise 20.8: Wealth and natural capital
• 20.7 Dynamic environmental policies: Future technologies and lifestyles: Exercise 20.9: Improvements in technology
• 20.7 Dynamic environmental policies: Future technologies and lifestyles: Exercise 20.10: The price elasticity of demand
• 20.8 Environmental dynamics: Exercise 20.11: Representing regime shifts
• 20.8 Environmental dynamics: Exercise 20.12: Self-reinforcing processes
• 20.9 Why is addressing climate change so difficult?: Exercise 20.13: Simulating different discount rates
• 20.10 Policy choices matter: Exercise 20.14: High and low performers
• 21 Introduction: Exercise 21.1: Patents and innovation in the pharmaceutical industry
• 21.1 The innovation process: Invention and diffusion: Exercise 21.2: The permanent technological revolution
• 21.2 Innovation systems: Exercise 21.3: Comparing innovation systems
• 21.3 External effects: Complements, substitutes, and coordination: Exercise 21.4: Complements
• 21.3 External effects: Complements, substitutes, and coordination: Exercise 21.5: Substitutes and complements
• 21.5 Matching (two-sided) markets: Exercise 21.6: Understanding matching markets
• 21.5 Matching (two-sided) markets: Exercise 21.7: Why do curves in the matching markets model slope upwards?
• 21.5 Matching (two-sided) markets: Exercise 21.8: Mismatched posters and seekers in a matching market model
• 21.5 Matching (two-sided) markets: Exercise 21.9: Chicken-and-egg
• 21.6 Intellectual property rights: Exercise 21.10: Thomas Jefferson
• 21.6 Intellectual property rights: Exercise 21.11: How copyright improved Italian opera, and how such protection should be limited
• 21.6 Intellectual property rights: Exercise 21.12: Intellectual property rights
• 21.7 Optimal patents: Balancing the objectives of invention and diffusion: Exercise 21.13: Optimal patents
• 21.8 Public funding of basic research, education, and information infrastructure: Exercise 21.14: Government-funded research
• 22.1 The government as an economic actor: Exercise 22.1: Building self-control into government
• 22.1 The government as an economic actor: Exercise 22.2: The relationship between economic development and size of government
• 22.3 Political competition affects how the government will act: Exercise 22.3: Comparing duration curves for governments and monopolistic firms
• 22.3 Political competition affects how the government will act: Exercise 22.4: Income and substitution effects
• 22.4 Why an erstwhile dictator might submit to political competition: Exercise 22.5: Effects of cost-saving improvements to public services
• 22.6 Political preferences and electoral competition: The median voter model: Exercise 22.6: Rock-paper-scissors politics
• 22.7 A more realistic model of electoral competition: Exercise 22.7: Nash equilibria in the median voter model
• 22.8 The advance of democracy: Exercise 22.8: Past influences on current government spending patterns
• 22.8 The advance of democracy: Exercise 22.9: Comparing government expenditures
• 22.9 Varieties of democracy: Exercise 22.10: How democracy helps protect the governed
• 22.10 Democracy makes a difference: Exercise 22.11: Work times and inequality in less democratic democracies
• 22.12 Economic infeasibility: Exercise 22.12: Economies succeed when national policies align with individual impulses

Videos

• Unit 1: In our ‘Economist in action’ video, Thomas Piketty and James Heckman explain why data is fundamental to their work.
• Unit 1: In our ‘Economist in action’ video, Lisa Cook explains what promotes or kills innovation.
• Unit 2: Lynne Kiesling, a historian of economic thought, discusses Joseph Schumpeter.
• Unit 2: In our ‘Economist in action’ video, economic historian Bob Allen addresses the question of why Britain industrialized when others did not.
• 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 talks about his innovative use of experimental economics in real-life situations.
• Unit 6: In our ‘Economist in action’ video, Richard Freeman explains why you can’t outsource responsibility.
• Unit 8: In our ‘Economist in action’ video, Kathryn Graddy discusses fishing for perfect competition.
• Unit 10: Those seeking loans to purchase a bicycle 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 bicycle 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 11: Watch our video in which Rajiv Sethi, one of the authors of this unit, demonstrates how orders are processed in a continuous double auction.
• Unit 12: Michael Sandel investigating the moral limits of his audience in his TED Talk ‘Why we shouldn’t trust markets with our civic life’.
• Unit 16: In our ‘Economist in action’ video, John Van Reenen uses the game of cricket to explain how the economy’s average productivity is affected by the survival of low productivity firms.
• Unit 16: (Repeat) In our ‘Economist in action’ video, Kathryn Graddy discusses fishing for perfect competition.
• Unit 16: (Repeat) In our ‘Economist in action’ video, Richard Freeman explains why you can’t outsource responsibility.
• Unit 17: In our ‘Economist in action’ video, Barry Eichengreen discusses pegged exchange rates.
• Unit 17: In our ‘Economist in action’ video, Joseph Stiglitz explains why the financial crisis was a market failure.
• Unit 17: The Crisis of Credit Visualized.
• Unit 17: In our ‘Economist in action’ video, Anat Admati talks about what’s wrong with banking (and what to do about it).
• Unit 18: The economic effects of immigration are widely debated among the public. This interview from 2006 with Christian Dustmann, an economic historian who specializes in the effects of migration, captures this debate—in particular the impact of migrant workers on the British town of Swindon.
• Unit 18: In our ‘Economist in action’ video, Dani Rodrik explains that economics is a science of trade-offs, and that we can have too much globalization. His ‘Globalization Trilemma’ shows that when economies are increasingly globalized, they must ‘give up some sovereignty or some democracy’.
• Unit 19: In our ‘Economist in action’ video, Thomas Piketty explains how he ‘tries to be useful’ by collecting long-run data on the distribution of wealth.
• Unit 19: In our ‘Economist in action’ video, Arin Dube describes his study that found that, on average, raising the minimum wage increased the income of poor workers.
• Unit 19: In our ‘Economist in action’ video, James Heckman describes why investing in the early years of disadvantaged children’s lives is both fair and efficient.
• Unit 21: In our ‘Economist in action’ video, F. M. Scherer, an economic historian who specializes in the effects of technological change, explains how patents support innovation in pharmaceuticals.
• Unit 21: (Repeat) In our ‘Economist in action’ video, Lisa Cook explains what promotes or kills innovation.
• Unit 21: In our ‘Economist in action’ video, Alvin Roth explains how matching markets work.
• Unit 21: In our ‘Economist in action’ video, Petra Moser discusses copyright protection for nineteenth century Italian operas.
• Unit 21: In this video, Mariana Mazzucato suggests that governments should start to take investment stakes in technology companies, so that they will earn a return on the funds they invest in research.
• Unit 22: (Repeat) In our ‘Economist in action’ video, John Van Reenen uses the game of cricket to explain how the economy’s average productivity is affected by the survival of low productivity firms.
• Unit 22: In our ‘Economist in action’ video, Esther Duflo explains what happened when it was mandated that randomly selected villages elect a woman to head their local council.
• Unit 22: (Repeat) In our ‘Economist in action’ video, James Heckman explores the question of how schooling and preschool experience affects inequality.

Figures

Unit 1

• Figure 1.1a: History’s hockey stick: Gross domestic product per capita in five countries (1000–2018).
• Figure 1.2: Countries are ranked by GDP per capita from left to right. For each country the heights of the bars show average income for deciles of the population, from the poorest 10% at the front to the richest 10% at the back. The width of the bar indicates the country’s population.
• Figure 1.1b: History’s hockey stick: Living standards in five countries (1000–2018) using the ratio scale.
• Figure 1.3: The productivity of labour in producing light.
• Figure 1.4: The speed at which information travelled (1000–1865).
• Figure 1.5: The economy is part of society, which is part of the biosphere.
• Figure 1.6a: Carbon dioxide in the atmosphere (1010–2020) and global carbon emissions from burning fossil fuels (1750–2018).
• Figure 1.6b: Northern hemisphere temperatures over the long run (1000–2019).
• Figure 1.7: Mention of the word ‘capitalism’ in New York Times articles (1851–2015).
• Figure 1.8: Capitalism: Private property, markets and firms.
• Figure 1.9a: Absolute and comparative advantage in the production of apples and wheat.
• Figure 1.9b: Comparing self-sufficiency and specialization. Under self-sufficiency, both consume exactly what they produce. Under complete specialization, Greta produces only wheat; Carlos produces only apples; and they trade the surplus of their production above what they consume.
• Figure 1.10: The two Germanies: Planning and capitalism (1950–89).
• Figure 1.11: Divergence of GDP per capita among latecomers to the capitalist revolution (1928–2018). Note: Former Soviet Union series excludes Russian Federation post 1992.
• Figure 1.12: A model of the economy: Households and firms.

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 2.2: Irving Fisher’s sketch of his hydraulic model of economic equilibrium (1891).
• Figure 2.3: Different technologies for producing 100 metres of cloth.
• Figure 2.4: Technology A dominates C; technology B dominates D.
• Figure 2.5: Isocost lines when the wage is £10 and the price of coal is £20.
• Figure 2.6: The cost of using different technologies to produce 100 metres of cloth: Low relative cost of labour.
• Figure 2.7: The cost of using different technologies to produce 100 metres of cloth: high relative cost of labour.
• Figure 2.8: The cost of using different technologies to produce 100 metres of cloth.
• Figure 2.9: The change in spinning technology during the Industrial Revolution.
• Figure 2.10: Wages relative to the price of energy (early 1700s).
• Figure 2.11: Wages relative to the cost of capital goods (late sixteenth to the early nineteenth century).
• Figure 2.12: The cost of using different technologies to produce 100 metres of cloth in Britain in the seventeenth and eighteenth centuries.
• Figure 2.13: The cost of using different technologies to produce 100 metres of cloth.
• Figure 2.14a: Recorded values of a farmer’s production function: Diminishing average product of labour.
• Figure 2.14b: The farmers’ production function: Diminishing average product of labour.
• Figure 2.15: Malthus’ model: The effect of an improvement in technology.
• Figure 2.16: A Malthusian economy.
• Figure 2.17: The introduction of a new technology in a Malthusian economy.
• Figure 2.18: The Malthusian trap: Wages and population (1280s–1600s).
• Figure 2.19: The Black Death, labour supply, politics, and the wage: A Malthusian economy.
• Figure 2.20: Escaping the Malthusian trap.
• Figure 2.21: Escaping the Malthusian trap. Note: Labour productivity and real wages are five-year centred moving averages.

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: Study time and grades.
• Figure 3.4: Average GPA in good and poor study environments.
• Figure 3.5: How does the amount of time spent studying affect Alexei’s grade?
• Figure 3.6: Mapping Alexei’s preferences.
• Figure 3.7: The marginal rate of substitution.
• Figure 3.8: Opportunity costs and economic rent: Which concert will you choose?
• Figure 3.9: How does Alexei’s choice of free time affect his grade?
• Figure 3.10a: How many hours does Alexei decide to study?
• Figure 3.10b: How many hours does Alexei decide to study?
• Figure 3.11: Alexei’s trade-offs.
• Figure 3.12: How technological change affects the production function.
• Figure 3.13: An improvement in technology expands Angela’s feasible set.
• Figure 3.14: Angela’s choice between free time and grain.
• Figure 3.15: Your preferred choice of free time and consumption.
• Figure 3.16: Your two trade-offs.
• Figure 3.17: The effect of additional income on your choice of free time and consumption.
• Figure 3.18: The effect of additional income for someone whose MRS doesn’t change when consumption rises.
• Figure 3.19a: The effect of a wage rise on your choice of free time and consumption.
• Figure 3.19b: The effect of a wage rise on your choice of free time and consumption.
• Figure 3.20: Applying the model to history: Increased goods and free time in the US (1900–2020).
• Figure 3.21: Estimated lifetime hours of work and leisure (1880, 1995, 2040).
• Figure 3.22: Free time and consumption per day across countries (2020).
• Figure 3.23: Using the model to explain free time and consumption per day across countries (2020).

Unit 4

• Figure 4.1: Social interactions in the invisible hand game.
• Figure 4.2a: The payoffs in the invisible hand game.
• Figure 4.2b: The payoff matrix in the invisible hand game.
• Figure 4.3a: Social interactions in the pest control game.
• Figure 4.3b: Payoff matrix for the pest control game.
• Figure 4.4: Prisoners’ dilemma (payoffs are years in prison).
• Figure 4.5: How Anil chooses to distribute his lottery winnings depends on whether he is selfish or altruistic.
• Figure 4.6: Anil’s decision to use IPC (I) or Terminator (T) as his crop management strategy depends on whether he is completely selfish or somewhat altruistic.
• Figure 4.7: Kim’s payoffs in the public goods game.
• Figure 4.8: Example: When two others contribute, Kim’s payoff is lower if she contributes too.
• Figure 4.9a: Worldwide public goods experiments: Contributions over 10 periods.
• Figure 4.9b: Worldwide public goods experiments with opportunities for peer punishment.
• Figure 4.10: Average number of late-coming parents, per week.
• Figure 4.11: Game tree for the ultimatum game.
• Figure 4.12: Acceptable offers in the ultimatum game.
• Figure 4.13: Actual offers and expected rejections in the ultimatum game.
• Figure 4.14: Fraction of offers rejected in the ultimatum game, according to offer size and the number of Responders.
• Figure 4.15: A division of labour problem with more than one Nash equilibrium.
• Figure 4.16a: Interactions in the choice of programming language.
• Figure 4.16b: Payoffs (thousands of dollars to complete the project) according to the choice of programming language.
• Figure 4.17: Climate change policy as a prisoners’ dilemma (top). Payoffs for a climate change policy as a prisoners’ dilemma (bottom left), and payoffs with inequality aversion and reciprocity (bottom right).

Unit 5

• Figure 5.1: Pareto-efficient allocations. All of the allocations except mutual use of the pesticide (T, T) are Pareto efficient.
• Figure 5.2: Independent farmer Angela’s feasible frontier, best feasible indifference curve, and choice of hours of work.
• Figure 5.3: Feasible outcomes of the interaction between Angela and Bruno.
• Figure 5.4: Technically feasible allocations.
• Figure 5.5: Coercion: The maximum technically feasible transfer from Angela to Bruno.
• Figure 5.6: Economically feasible allocations when exchange is voluntary.
• Figure 5.7a: Bruno’s take-it-or-leave-it proposal when Angela can refuse.
• Figure 5.7b: Bruno’s take-it-or-leave-it proposal when Angela can refuse.
• Figure 5.8: Pareto-efficient allocations and the distribution of the surplus.
• Figure 5.9: The effect of an increase in Angela’s bargaining power through legislation.
• Figure 5.10: Bargaining to restore Pareto efficiency.
• Figure 5.11: The fundamental determinants of economic outcomes.
• Figure 5.12: A Lorenz curve for wealth ownership.
• Figure 5.13: The distribution of spoils: Pirates and the Royal Navy.
• Figure 5.14a: The Lorenz curve and Gini coefficient for wealth ownership.
• Figure 5.14b: Comparing Gini coefficients.
• Figure 5.15: Distribution of market and disposable income in the Netherlands (2010).
• Figure 5.16: Income inequality in market and disposable income across the world.
• Figure 5.17: Efficiency and fairness.
• Figure 5.18: Bargaining in practice: How a land tenure reform in West Bengal reduced the Gini coefficient.
• Figure 5.19: The Lorenz curve and the perfect equality line.

Unit 6

• Figure 6.1: The firm’s actors and its decision making and information structures.
• Figure 6.2: Maria’s employment rent for a given effort and $12 wage in an economy without an unemployment benefit.
• Figure 6.3: Maria’s employment rent for a given effort and a $12 wage in an economy with an unemployment benefit of $6 of unlimited duration.
• Figure 6.4: Maria’s best response to the wage. Point J refers to the information in Figure 6.3 (wage = $12, effort = 0.5 and expected duration of unemployment if she were to lose her job = 44 weeks).
• Figure 6.5: The employer’s indifference curves: Isocost curves for effort.
• Figure 6.6: The employer sets the wage to minimize the cost of effort.
• Figure 6.7: The best response curve depends on the level of unemployment and the unemployment benefit.
• Figure 6.8: Hidden action problems.

Unit 7

• Figure 7.1: Firm size in the US: Number of employees (1900–2021).
• Figure 7.2: The firm’s decisions.
• Figure 7.3: Estimated demand for Apple-Cinnamon Cheerios.
• Figure 7.4: Isoprofit curves for the production of Apple-Cinnamon Cheerios. Note: Isoprofit data is illustrative only, and does not reflect the real-world profitability of the product.
• Figure 7.5a: The profit-maximizing choice of price and quantity for Apple-Cinnamon Cheerios.
• Figure 7.5b: The profit-maximizing choice of price and quantity for Apple-Cinnamon Cheerios.
• Figure 7.6: Beautiful Bicycles: Cost function and average cost.
• Figure 7.7: The marginal cost of a bicycle.
• Figure 7.8: Average and marginal cost curves.
• Figure 7.9: The demand for bicycles (per day).
• Figure 7.10: Isoprofit curves for Beautiful Bicycles.
• Figure 7.11: The profit-maximizing choice of price and quantity for Beautiful Bicycles.
• Figure 7.12a: Calculating marginal revenue.
• Figure 7.12b: Marginal revenue, marginal cost, and profit.
• Figure 7.13: Gains from trade.
• Figure 7.14: Deadweight loss.
• Figure 7.15: The elasticity of demand for bicycles.
• Figure 7.16: A firm facing highly elastic demand.
• Figure 7.17: A firm facing less elastic demand.
• Figure 7.18: The elasticity of demand and the marginal revenue.
• Figure 7.19: Price elasticities of demand for different types of food. See the Calories per serving to compare high and low calorie groups of each food type.
• Figure 7.20: bicycle purchase prices in the UK (January 2014, Autotrader.com).
• Figure 7.21: Advertising expenditure and market share of breakfast cereals in Chicago (1991–92).

Unit 8

• Figure 8.1: The market demand curve for books.
• Figure 8.2: The supply curve for books.
• Figure 8.3: Equilibrium in the market for second-hand books.
• Figure 8.4: The market demand curve for bread.
• Figure 8.5: The profit-maximizing price and quantity for a bakery.
• Figure 8.6: The firm’s supply curve.
• Figure 8.7: The firm and market supply curves.
• Figure 8.8: Equilibrium in the market for bread.
• Figure 8.9a: Equilibrium in the bread market: Gains from trade.
• Figure 8.9b: Deadweight loss.
• Figure 8.10a: The production of quinoa.
• Figure 8.10b: Quinoa producer prices.
• Figure 8.10c: Global import demand for quinoa.
• Figure 8.11: An increase in the demand for books.
• Figure 8.12: An increase in the supply of bread: A fall in MC.
• Figure 8.13: An increase in the supply of bread: More firms enter.
• Figure 8.14: The effect of a 30% salt tax.
• Figure 8.15: Taxation and deadweight loss.
• Figure 8.16: The effect of a fat tax on the retail market for butter.
• Figure 8.17: The effect of a fat tax on the consumer and producer surplus for butter.
• Figure 8.18: The market for Choccos and chocolate bars.
• Figure 8.19: Differing prices for the same DVD, from UK online retailers (March 2014).
• Figure 8.20: Price-setting and price-taking firms.

Unit 9

• Figure 9.1: Real weekly earnings for males in Western Australia (left axis), world price of iron-ore and unemployment rate in Australia (right axis), (1989–2021).
• Figure 9.2: The labour market.
• Figure 9.3: Labour market statistics for Norway and Spain (averages over 2000–2015).
• Figure 9.4: The wage-setting curve: Labour discipline and unemployment in the economy as a whole.
• Figure 9.5: Deriving the wage-setting curve: Varying the unemployment rate in the economy.
• Figure 9.6: A wage-setting curve estimated for the US economy (1979–2013).
• Figure 9.7: The wage-setting curve: The wage level required to make employees work rather than shirk.
• Figure 9.8: The three departments determine the firm’s hiring.
• Figure 9.9: The firm’s profit-maximizing choice of price, quantity, and employment.
• Figure 9.10: The price-setting curve.
• Figure 9.11: The price-setting curve.
• Figure 9.12: Equilibrium in the labour market.
• Figure 9.13: Equilibrium and demand-deficient (cyclical) unemployment.
• Figure 9.14: A firm raises output and employment following a cut in wages.
• Figure 9.15: A firm raises output and employment following an increase in demand as a result of monetary or fiscal policy.
• Figure 9.16a: The firm: Adjustment to equilibrium unemployment at X via fiscal or monetary policy.
• Figure 9.16b: The firm: Adjustment to equilibrium unemployment at X via wage and price cuts.
• Figure 9.16c: Aggregate labour market: cyclical and equilibrium unemployment.
• Figure 9.17: The distribution of income at labour market equilibrium.
• Figure 9.18: The effect of an increase in the extent of competition faced by firms: The price-setting curve shifts up and inequality falls.
• Figure 9.19: The effect of immigration on unemployment.
• Figure 9.20: Share of employees whose wages are covered by collective bargaining agreements (early 2010s).
• Figure 9.21: The union sets the firm’s wage.
• Figure 9.22: The bargained wage-setting curve when there is no union voice effect.
• Figure 9.23: Collective wage bargaining coverage and unemployment across the OECD.
• Figure 9.24: Union sets the firm’s wage and employees reciprocate.
• Figure 9.25: The bargained wage-setting curve and labour market equilibrium when there is a union voice effect.
• Figure 9.26: Deriving the wage-setting curve: Varying the unemployment benefit level in the economy.
• Figure 9.27: Differences between the labour market and competitive goods markets.

Unit 10

• Figure 10.1: Wealth, income, depreciation, and consumption: The bathtub analogy.
• Figure 10.2: Borrowing, the interest rate, and the feasible set.
• Figure 10.3a: Consumption smoothing: Diminishing marginal returns to consumption.
• Figure 10.3b: Pure impatience.
• Figure 10.4: Moving consumption over time by borrowing.
• Figure 10.5: Reservation indifference curves and endowments.
• Figure 10.6: Smoothing consumption by storing and lending.
• Figure 10.7: Investing in a high-return project.
• Figure 10.8: Borrowing to invest in a high-return project.
• Figure 10.9: Storage, lending, investment, and borrowing provide Marco with many feasible sets.
• Figure 10.10: Options for the individual (Marco) who starts with assets.
• Figure 10.11: A balance sheet.
• Figure 10.12: Julia’s balance sheets.
• Figure 10.13a: Marco deposits $100 in Abacus Bank.
• Figure 10.13b: Marco pays $20 to Gino.
• Figure 10.13c: Bonus Bank gives Gino a loan of $100.
• Figure 10.13d: Gino pays Marco $10.
• Figure 10.13e: The total money in the banking system has grown.
• Figure 10.13f: Bonus Bank does not have enough base money to pay $50 to Abacus Bank.
• Figure 10.14: Banks, the central bank, borrowers, and savers.
• Figure 10.15: A simplified bank balance sheet.
• Figure 10.16: Barclays Bank’s balance sheet in 2006 (£m).
• Figure 10.17: Honda Motor Company’s balance sheet in 2013 (¥m).
• Figure 10.18: Interest rates and consumption spending.
• Figure 10.19: Principal–agent problems: The credit market and the labour market.
• Figure 10.20: Wealth, project quality, and credit.
• Figure 10.21: Inequality in a borrowing and lending economy. Note: The Gini coefficient when there are no borrowers excluded is 0.57; when 40 are excluded, it is 0.70.

Unit 11

• Figure 11.1: Bargaining power and prices in the Kerala wholesale fish market (14 January 1997). (Note: Two markets had the same outcome, with a price of Rs6.2 per kg.)
• Figure 11.2: An increase in demand in a competitive market: Opportunities for rent-seeking.
• Figure 11.3: Vernon Smith’s experimental results.
• Figure 11.4: The price-quantity relationship for a single buyer in the Ancona fish market.
• Figure 11.5: The aggregate price-quantity relationship in the Ancona market.
• Figure 11.6: The market for bread in the short run and the long run.
• Figure 11.7: World oil prices in constant prices (1861–2020) and global oil consumption (1965–2020).
• Figure 11.8: The world market for oil.
• Figure 11.9: The OPEC oil price shocks of the 1970s: OPEC decreases output.
• Figure 11.10: The oil price shocks of 2000–8: Economic growth increases world demand.
• Figure 11.11: News Corp’s share price and volume traded (7 May 2014).
• Figure 11.12: Good news about profitability.
• Figure 11.13: A continuous double auction order book: Bid and ask prices for News Corp (NWS) shares.
• Figure 11.14: The tech bubble: Nasdaq Composite Index (1995–2004).
• Figure 11.15: The beginning of a bubble in FCC shares.
• Figure 11.16: Positive vs negative feedback.
• Figure 11.17: A stable equilibrium in the market for FCC shares.
• Figure 11.18: An unstable equilibrium.
• Figure 11.19: The collapse of FCC’s share price.
• Figure 11.20: The value of Bitcoin (2013–2021).
• Figure 11.21: Excess demand for tickets.
• Figure 11.22: Housing rents and economic rents.
• Figure 11.23: Examples of stationary rents.

Unit 12

• Figure 12.1: Marginal costs of banana production using Weevokil.
• Figure 12.2: The plantations’ choice of banana output.
• Figure 12.3: Market failure: Water pollution.
• Figure 12.4: The gains from bargaining.
• Figure 12.5: Using a tax to achieve Pareto efficiency.
• Figure 12.6: The plantations compensate the fishermen.
• Figure 12.7: Water pollution market failure, with remedies.
• Figure 12.8: Private goods and public goods.
• Figure 12.9: Examples of market failure, with remedies.
• Figure 12.10: Asymmetric-information market failures, with remedies.
• Figure 12.11: Project quality and wealth of borrower.
• Figure 12.12: Credit market failures, with remedies.
• Figure 12.13: Market failures with remedies.
• Figure 12.14: Market failures and information problems.

Unit 13

• Figure 13.1: Changes in unemployment and wellbeing during the financial crisis: Evidence from the US states (2007–2010).
• Figure 13.2: UK GDP per capita (1875–2014).
• Figure 13.3: UK GDP growth and unemployment rate (1875–2020).
• Figure 13.4a: The ratio scale and an exponential function.
• Figure 13.4b: The linear scale in natural logs and a linear function.
• Figure 13.5: Okun’s law for selected economies.
• Figure 13.6: The circular flow model: Three ways to measure GDP.
• Figure 13.7: Decomposition of GDP in 2013 for the US, the Eurozone, and China.
• Figure 13.8: Contributions to percentage change in real GDP in the US in 2009.
• Figure 13.9a: The role of agriculture in the fluctuations of the aggregate economy in Britain (1550–1700).
• Figure 13.9b: The role of agriculture in the fluctuations of the aggregate economy in India (1961–2020).
• Figure 13.10: Consumption smoothing through our lifetime.
• Figure 13.11: Consumption when credit constraints bind: An anticipated rise in income.
• Figure 13.12: Credit-constrained and unconstrained households: An unanticipated temporary fall in income.
• Figure 13.13: Consumption when households are weak-willed: An anticipated fall in income.
• Figure 13.14: Investment in new technologies and the dotcom bubble (1991–2020).
• Figure 13.15: Negative expectations of future demand create a vicious circle.
• Figure 13.16: Positive expectations of future demand create a virtuous circle.
• Figure 13.17: Investment decisions as a coordination game.
• Figure 13.18: Investment and business confidence in the Eurozone (1996–2020).
• Figure 13.19a: Growth rates of consumption, investment, and GDP in the UK and US, per cent per annum (1956–2020).
• Figure 13.19b: Growth rates of consumption, investment, and GDP in Mexico and South Africa (1961–2020).
• Figure 13.20a: UK GDP growth (1875–2020).
• Figure 13.20b: UK unemployment rate (1875–2020).
• Figure 13.20c: UK inflation rate (1875–2020).
• Figure 13.21: Inflation levels and volatility in high- and low-income economies.

Unit 14

• Figure 14.1: Fluctuations in output and the size of government in the US (1870–2019).
• Figure 14.2: The aggregate consumption function.
• Figure 14.3: Fear and household consumption in the US during the global financial crisis (2008 Q1–2009 Q4).
• Figure 14.4: Goods market equilibrium: The multiplier diagram.
• Figure 14.5: The multiplier in action: An investment-led recession.
• Figure 14.6: Aggregate demand in the Great Depression
• Figure 14.7: Household wealth: Key concepts.
• Figure 14.8: The Great Depression: Households cut consumption to restore their target broad wealth.
• Figure 14.9: Investment, expected rate of profit, and the interest rate in an economy with two firms.
• Figure 14.10a: The aggregate economy, where the expected rate of profit rises for a given set of projects (supply effect).
• Figure 14.10b: The aggregate economy, where the desired capacity rises for each project (demand effect).
• Figure 14.10c: Aggregate investment function: Effects of the interest rate and profit expectations.
• Figure 14.11a: Fiscal expansion can offset a decline in private consumption.
• Figure 14.11b: Government austerity can worsen a recession.
• Figure 14.12: The role of the private sector and the government in the business cycle.
• Figure 14.13: Using Mafia proximity to estimate the multiplier.
• Figure 14.14: Using US stimulus highway spending to estimate the multiplier.
• Figure 14.15: UK government debt as a percentage of GDP (1700–2020).
• Figure 14.16: Successes and failures of the French fiscal stimulus (1980–1983).
• Figure 14.17: The supply side of the aggregate economy: The labour market.
• Figure 14.18: The supply side and the demand side of the aggregate economy.
• Figure 14.19: Business cycle fluctuations around equilibrium unemployment.
• Figure 14.20: Models to study the aggregate economy.

Unit 15

• Figure 15.1: Inflation and presidential election victory in the US (1912–2020).
• Figure 15.2: Three causes of inflation: changes in bargaining power.
• Figure 15.3: Phillips’s original curve: Wage inflation and unemployment (1861–1913).
• Figure 15.4a: Inflation and conflict over the pie: Stable price level at labour market equilibrium.
• Figure 15.4b: Inflation and conflict over the pie at low and high unemployment.
• Figure 15.4c: Bargaining gaps, inflation, and the Phillips curve.
• Figure 15.4d: The short- and medium-run models: Aggregate demand, employment, and inflation.
• Figure 15.5: The Phillips curve and the policymaker’s preferences.
• Figure 15.6: Phillips curves in the US (1960–2020).
• Figure 15.7: Bargaining gaps, expected inflation, and the Phillips curve.
• Figure 15.8: Unstable Phillips curves: Expected inflation and the bargaining gap.
• Figure 15.9: Inflation expectations and Phillips curves.
• Figure 15.10: Inflation, expected inflation, and the bargaining gap.
• Figure 15.11: An oil shock and the price-setting curve.
• Figure 15.12: UK GDP growth and real oil prices (1950–2020).
• Figure 15.13: UK inflation and unemployment rate (1950–2020).
• Figure 15.14: Monetary policy transmission mechanisms.
• Figure 15.15: The use of monetary policy to stabilize the economy in a recession.
• Figure 15.16: A cut in Australia’s interest rate.
• Figure 15.17: The policy mix: Fiscal and monetary policy in the US following the collapse of the tech bubble.
• Figure 15.18: A policy intervention to restore employment and output after a fall in investment.
• Figure 15.19: Countries who had inflation-targeting central banks by 2012.
• Figure 15.20: Inflation and central bank independence: OECD countries.
• Figure 15.21: The economy’s inflation-stabilizing unemployment rate.
• Figure 15.22: Price responses to rising employment and capacity utilization.

Unit 16

• Figure 16.1: Unemployment rates in selected OECD countries (1960–2019).
• Figure 16.2: The economy’s production function and technological progress.
• Figure 16.3: Long-run growth trajectories of selected economies.
• Figure 16.4: Job destruction, job creation, and net employment across countries.
• Figure 16.5: Job creation and destruction during business cycles in the US (2000 Q1–2010 Q2).
• Figure 16.6: Beveridge curves for the US and Germany (2001 Q1–2021 Q2).
• Figure 16.7a: Firm entry, exit, and the equilibrium markup.
• Figure 16.7b: An improvement in conditions for doing business: Firm entry, exit, and the equilibrium markup.
• Figure 16.8: Changes in the long-run markup shift the price-setting curve.
• Figure 16.9a: The long-run unemployment rate and new technology.
• Figure 16.9b: The long-run unemployment rate and new technology.
• Figure 16.10: Effects of technological improvements on the labour market model: Short and long run.
• Figure 16.11: Effects of a new technology on inequality: Short and long run.
• Figure 16.12: Long-run unemployment and real wage growth across the OECD (1970–2018).
• Figure 16.13: Unemployment rates of two high and two low labour market performers (1960–2019).
• Figure 16.14: Union wage bargaining coverage and unemployment across the OECD (2000–2020).
• Figure 16.15: Beveridge curves for Spain and Norway (2001 Q1 – 2021 Q2).
• Figure 16.16: Unemployment benefit generosity and unemployment rates across the OECD (2001–2020).
• Figure 16.17: Different ways of pushing down the wage-setting curve: The Netherlands and the UK.
• Figure 16.18: The rise and fall of the share of employment in industry (1870–2019).
• Figure 16.19: Increased productivity in goods production raises the fraction of workers in services.
• Figure 16.20: Determinants of the unemployment rate and the growth rate of real wages in the long run.
• Figure 16.21: The institutions, policies, and shocks that can influence unemployment and real wages.

Unit 17

• Figure 17.1a: The Great Depression and the global financial crisis: Industrial production.
• Figure 17.1b: The Great Depression and the global financial crisis: Monetary policy.
• Figure 17.1c: The Great Depression and the global financial crisis: Fiscal policy.
• Figure 17.2: Unemployment, productivity growth, and inequality in the US (1914–2015).
• Figure 17.3: Upper panel: Capital stock growth and profit rates for US non-financial corporations (1927–2015). Lower panel: Effective tax rate on profits for US non-financial corporations (1929–2015).
• Figure 17.4: Debt as a percentage of GDP in the US: Households, non-financial business sector, financial business sector, and the government (1945–2020).
• Figure 17.5a: The performance of the US economy over a century.
• Figure 17.5b: A cross-national comparison of the Great Depression, the golden age, and the financial crisis: Distinctive features of the US.
• Figure 17.6: The effect of the Great Depression on the US economy (1928–1941).
• Figure 17.7: Changes in the components of aggregate demand during upswings and downswings (1924 Q3–1941 Q4).
• Figure 17.8: Policy choices in the Great Depression: The US (1921–1941).
• Figure 17.9: The Great Depression and recovery: Households cut consumption to restore target wealth in the depression; and increased consumption from 1933.
• Figure 17.10: The golden age of capitalism in historical perspective.
• Figure 17.11: Catching up to the US during the golden age and beyond (1950–2021).
• Figure 17.12: The golden age: Using the wage- and price-setting curves.
• Figure 17.13: Trade union membership and the size of government in the US (1913–2020).
• Figure 17.14: The end of the golden age: Strikes and wages relative to share prices in advanced economies (1950–2002).
• Figure 17.15: The end of the golden age: Using the wage and price-setting curves. (Note that the real wage on the vertical axis is measured post-tax and in terms of consumer prices.)
• Figure 17.16: After the golden age: Unemployment and inflation in advanced economies (1960–2020).
• Figure 17.17: The golden age and its aftermath: Real wages and output per production worker in manufacturing in the US (1949–2019).
• Figure 17.18: The housing market on the way up and on the way down.
• Figure 17.19: The household debt-to-income ratio and house prices in the US (1950–2020).
• Figure 17.20: Household wealth and debt in the US: Poorest and richest quintiles by net worth (2007).
• Figure 17.21: Leverage ratio of banks in the UK and US (1960–2018).
• Figure 17.22: Unstable and stable equilibria in the housing market.
• Figure 17.23: Unstable and stable equilibria in the housing market: The S-shaped PDC.
• Figure 17.24: A tipping point in the housing market.
• Figure 17.25: The financial crisis: The US housing price collapse.
• Figure 17.26: Aggregate demand and the financial crisis in the US (2006 Q2–2010 Q4).
• Figure 17.27: The financial crisis: Housing boom, household debt, and house price crash.
• Figure 17.28: Policy choices during the end of the golden age: The US (1960–79).
• Figure 17.29: The economy as teacher: What economists learned in the three epochs.

Unit 18

• Figure 18.1: Bullit employees across the world in 2014.
• Figure 18.2: World merchandise exports as a share of world GDP (1820–2020).
• Figure 18.3: The market for bicycles: Price gaps reflect trade costs.
• Figure 18.4: The Anglo-American wheat trade (1800–1914).
• Figure 18.5: Commodity price gaps between the US and UK (1870–1913).
• Figure 18.6: Impediments to trade (1870–2000).
• Figure 18.7: Average tariff rates, per cent (1982–2015).
• Figure 18.8: International capital flows (1870–2017).
• Figure 18.9: International asset holdings (1900–2020).
• Figure 18.10: Foreign direct investment: Investment by US firms in other countries according to whether wages are lower or higher than in the US (2001–2012).
• Figure 18.11: Immigration into the US as a percentage of the change in US population (1820–1998).
• Figure 18.12: Manufacturing wages relative to the US (1975–79 and 2016).
• Figure 18.13: Economies of scale in the production of wheat and apples. Note that the entries in the ‘Apples’ row are just the square of the amount of land devoted to the production of apples, and the ‘Wheat’ row is just one-tenth of the number of apples produced in each column.
• Figure 18.14: Between-country cost differences, specialization, and trade.
• Figure 18.15: Absolute and comparative advantage in the production of apples and wheat.
• Figure 18.16a: Carlos’ (Apple Island’s) and Greta’s (Wheat Island’s) feasible production frontiers.
• Figure 18.16b: Carlos’ (Apple Island’s) and Greta’s (Wheat Island’s) utility-maximizing choices of consumption.
• Figure 18.17: An island has a comparative advantage in producing a good when it is relatively cheaper in their economy (in the absence of trade).
• Figure 18.18: The effect of trade and specialization on Carlos’ and Greta’s feasible consumption frontiers.
• Figure 18.19: The effect of trade and specialization on the feasible consumption frontiers for Carlos and Greta, when Greta is able to dictate the price.
• Figure 18.20: The winners and losers from trade between the US and China.
• Figure 18.21: The long-run effect of specialization on unemployment in the US.
• Figure 18.22: Rodrik’s political trilemma.
• Figure 18.23: Catching up and stagnating: Manufacturing wages relative to the US (1950–2016).

Unit 19

• Figure 19.1: Inequality in wealth, earnings, and disposable income: US, Sweden, and Japan (2000s).
• Figure 19.2: Share of total wealth held by the richest 1% (1740–2021).
• Figure 19.3: The share of total income received by the top 1% (1913–2020).
• Figure 19.4: Declining share of the top 1% in some European economies and Japan (1900–2020).
• Figure 19.5: Global and between-country income inequality (1952–2020).
• Figure 19.6: The missing middle in the US (2014–24): Occupations forecast to undergo job changes of 10,000 employees or more.
• Figure 19.7: The missing middle in the US (2014–24): Job growth is highest in the top fifth and bottom fifth of occupations in the US, by mean annual earnings.
• Figure 19.8: Categorical inequality: Schooling and lifetime earnings for men and women in the US.
• Figure 19.9: Categorical inequality: Average years of schooling, girls relative to boys (1970–2010).
• Figure 19.10: Intergenerational inequality in earnings: The US and Denmark.
• Figure 19.11: Intergenerational and cross-sectional inequality.
• Figure 19.12: Inequality is one of the main problems that students think economics should address.
• Figure 19.13: Ideal, estimated, and actual distribution of wealth for people in the US.
• Figure 19.14: How beliefs about what it takes to get ahead predict whether people in the US support or oppose government programs to redistribute income to the poor.
• Figure 19.15: Choosing between feasible income distributions.
• Figure 19.16: The causal relationships between technology, institutions and policies, endowments, and inequality.
• Figure 19.17: Inequality: Endowments, reservation options, conflicts, institutions, and technologies.
• Figure 19.18: Economic inequality over time. The red arrows show that economic inequality in one period has effects on technologies, institutions and policies, and differences in endowments in the future.
• Figure 19.19: The credit and labour markets shape the relationships between groups with different endowments.
• Figure 19.20: The effect of a more educated workforce on inequality among employers, employees, and the unemployed: The economy-wide labour market and the Lorenz curve.
• Figure 19.21: The effect of labour market segmentation.
• Figure 19.22: The effect of robots on inequality: polarization of the labour market.
• Figure 19.23: Predistribution policies that can reduce inequality in market incomes.
• Figure 19.24: Using economic models to explain trends in inequality in market income.
• Figure 19.25: The ‘world’ as a unified capitalist economy with a segmented labour market. The red segment shows the impact of globalization increasing inequality by reducing wages in the rich countries relative to their employers while the green part shows the effects of greater incomes among poor employees in ‘China’.
• Figure 19.26: Different income concepts.
• Figure 19.27: Gini coefficients for market income, disposable income, and final income.
• Figure 19.28: Average household market and disposable income of households with primary earners in different age groups.
• Figure 19.29a: Distribution of taxation and public spending (average pesos per person). Deciles of households ordered by per capita net market income, Mexico 2014.
• Figure 19.29b: Distribution of taxation and public spending as a share of market income. Deciles of households ordered by per capita net market income, Mexico 2014.
• Figure 19.30a: The cost of inequality: Inequality and growth in living standards among rich countries.
• Figure 19.30b: The cost of inequality: Inequality and growth in living standards among catch-up countries.
• Figure 19.30c: The cost of inequality: Economic disparity and the fraction of workers employed as guards.

Unit 20

• Figure 20.1: Global commodity prices (1960–2020).
• Figure 20.2: The Grand Banks fishing schooner, The Bluenose.
• Figure 20.3: The amount of cod caught in the Grand Banks (North Atlantic) fisheries (1851–2021).
• Figure 20.4: Positive feedback processes and deforestation in the Amazon.
• Figure 20.5: External environmental effects.
• Figure 20.6: Global atmospheric concentration of carbon dioxide and global temperatures (1750–2019).
• Figure 20.7: Another bathtub model: The stock of atmospheric CO₂.
• Figure 20.8: Carbon dioxide contained in fossil fuel reserves and resources, relative to the atmospheric capacity of the earth.
• Figure 20.9: The cost of potential global greenhouse abatement in 2030 (compared with business as usual), using different policies.
• Figure 20.10: The least-cost abatement curve: How total abatement (at least cost) depends on total abatement expenditures.
• Figure 20.11: The least-cost abatement curve: The trade-off between total cost of abatement and amount of abatement.
• Figure 20.12: An abatement cost curve in which more costly technologies are adopted first.
• Figure 20.13: Feasible consumption and environmental quality.
• Figure 20.14: The ideal policymaker’s choice of the abatement level.
• Figure 20.15: Conflicts of interest over wages and abatement.
• Figure 20.16: Cap and trade: Buying and selling permits to pollute.
• Figure 20.17: Permit prices in the European Union Emissions Trading Scheme (EU ETS).
• Figure 20.18: The abatement technology changes.
• Figure 20.19a: Cost of generating electricity (new capacity) using photovoltaic cells in the US (1976–2019).
• Figure 20.19b: Cost of generating electricity (new capacity) from different sources in the US (2008–2020).
• Figure 20.20: Olympiad Industries’ choice of technology: The effect of an environmental tax on firm behaviour.
• Figure 20.21: Omar’s choice: The effect of an environmental tax on choices of air travel and free time.
• Figure 20.22: Arctic sea ice coverage (1935–2020).
• Figure 20.23: The environmental dynamics curve and the environmental tipping point.
• Figure 20.24: Climate change and irreversible loss of summer Arctic sea ice.
• Figure 20.25a: Carbon dioxide emissions are higher in richer countries …
• Figure 20.25b: … but so is the quality of their local environment.
• Figure 20.26: Global greenhouse gas abatement curve: Abatement in 2030, compared with business as usual.
• Figure 20.27: Is there always a trade-off between consumption and environmental quality?

Unit 21

• Figure 21.1: Concepts relevant to innovation that you have studied.
• Figure 21.2: The costs and rents associated with innovations.
• Figure 21.3: Innovation in computing power: Index of computing speed. Particular examples are shown in colour and labelled.
• Figure 21.4: The growth rate of productivity over the long run (1400–2021).
• Figure 21.5: Two innovation systems: Silicon Valley and Germany.
• Figure 21.6: The decision to innovate when products are complements.
• Figure 21.7: The decision to innovate when products are substitutes.
• Figure 21.8: A knowledge-intensive good: Marginal, average, and first copy costs.
• Figure 21.9: The average cost curve, economic profits, and competition.
• Figure 21.10: The net value of becoming part of a network.
• Figure 21.11a: A two-sided matching market: The case of Airbnb.
• Figure 21.11b: A two-sided matching market: The case of Airbnb.
• Figure 21.12: Patents and the production of new knowledge.
• Figure 21.13: Costs and rents associated with innovation for the inventor and others.
• Figure 21.14: Isototal benefits curves: The trade-off between the benefits of invention and diffusion.
• Figure 21.15: Patent duration and probability of innovation.
• Figure 21.16: The feasible set: Innovation probability and benefits to others.
• Figure 21.17: The optimal probability of innovation for society.
• Figure 21.18: The optimal patent duration.

Unit 22

• Figure 22.1: Apartheid and its demise: The value of South Africa’s old age pension (1965–2009).
• Figure 22.2: The growth of government in the UK (1500–2021).
• Figure 22.3: Economic policies aimed at mitigating market failures or addressing unfairness, discussed in earlier units.
• Figure 22.4: The forward-looking dictator contemplates the total political rent he will get with two different levels of annual taxation.
• Figure 22.5: The duration curve: The dictator sets the tax given the cost of the public service.
• Figure 22.6: The dictator chooses a tax level to maximize his political rents.
• Figure 22.7: Examples of governing elites, their period of rule, and reasons for their end.
• Figure 22.8: The feasible set for taxes and government duration in a relatively uncompetitive and competitive political system.
• Figure 22.9: Choice of taxes under less and more competitive conditions.
• Figure 22.10: Effect of greater stability and competition: A case where the elite gains.
• Figure 22.11: Ice cream sellers at the beach: The median voter model of electoral competition and party platforms.
• Figure 22.12: Comparison between models of monopolistic and competitive firms and governments. Notation: T = total taxes raised in a year; C = cost of providing the public good for a year; P = price of the good; MC = marginal cost of the good.
• Figure 22.13: The advance of democracy in the world.
• Figure 22.14: Patterns of public expenditure in Finland, the US, and South Korea (2019).
• Figure 22.15: Democratic accountability and transfers of power.
• Figure 22.16: The duration of democracy and working hours (2014).
• Figure 22.17: The duration of democracy and inequality in disposable income (2015).
• Figure 22.18a: Introducing an unemployment benefit: Short- and long-run effects.
• Figure 22.18b: Combining the introduction of an unemployment benefit with a solidarity wage policy.
• Figure 22.19: Stock market prices in Chile: The election of a socialist president, 1970.
• Figure 22.20a: Stock market prices in Chile: The military overthrow of the socialist government, 1973.
• Figure 22.20b: Stock market prices in Chile: The 1988 referendum, ending military rule.