, Pearson’s Commitment
to Diversity, Equity,
and Inclusion
Pearson is dedicated to creating bias-free content that re昀氀ects the diversity,
depth, and breadth of all learners’ lived experiences.
We embrace the many dimensions of diversity, including but not limited to race, ethnicity, gender,
sex, sexual orientation, socioeconomic status, ability, age, and religious or political beliefs.
Education is a powerful force for equity and change in our world. It has the potential to deliver
opportunities that improve lives and enable economic mobility. As we work with authors to create
content for every product and service, we acknowledge our responsibility to demonstrate inclusivity
and incorporate diverse scholarship so that everyone can achieve their potential through learning.
As the world’s leading learning company, we have a duty to help drive change and live up to our
purpose to help more people create a better life for themselves and to create a better world.
Our ambition is to purposefully contribute to a world where
• Everyone has an equitable and lifelong opportunity • Our educational products and services are inclusive
to succeed through learning. and represent the rich diversity of learners.
• Our educational content accurately re昀氀ects the • Our educational content prompts deeper discussions
histories and lived experiences of the learners with students and motivates them to expand their
we serve. own learning (and worldview).
Accessibility Contact Us
We are also committed to providing products that While we work hard to present unbiased, fully
are fully accessible to all learners. As per Pearson’s accessible content, we want to hear from you about
guidelines for accessible educational Web media, any concerns or needs with this Pearson product so
we test and retest the capabilities of our products that we can investigate and address them.
against the highest standards for every release,
Please contact us with concerns about any
following the WCAG guidelines in developing new
potential bias at
products for copyright year 2022 and beyond.
https://www.pearson.com/report-bias.html.
You can learn more about Pearson’s
For accessibility-related issues, such as using
commitment to accessibility at
assistive technology with Pearson products,
https://www.pearson.com/us/accessibility.html.
alternative text requests, or accessibility
documentation, email the Pearson Disability Support
team at .
,Brief Contents
PART 1 What Is Economics? 1 Chapter 12 Economic Efficiency and
Chapter 1 Economic Issues and Concepts 1 Public Policy 282
Chapter 2 Economic Theories, Data,
and Graphs 27 PART 5 Factor Markets 310
Chapter 13 How Factor Markets Work 310
PART 2 An Introduction to Demand and Supply 51 Chapter 14 Labour Markets and Income
Chapter 3 Demand, Supply, and Price 51 Inequality 335
Chapter 4 Elasticity 78 Chapter 15 Interest Rates and the
Chapter 5 Price Controls and Market Capital Market 365
Efficiency 102
PART 6 Government in the Market Economy 388
PART 3 Consumers and Producers 124 Chapter 16 Market Failures and Government
Chapter 6 Consumer Behaviour 124 Intervention 388
Chapter 7 Producers in the Short Run 156 Chapter 17 The Economics of Environmental
Chapter 8 Producers in the Long Run 181 Protection 420
Chapter 18 Taxation and Public Expenditure 447
PART 4 Market Structure and Efficiency 203
PART 7 Canada in the Global Economy 475
Chapter 9 Competitive Markets 203
Chapter 10 Monopoly, Cartels, and Price Chapter 19 The Gains from International
Discrimination 231 Trade 475
Chapter 11 Imperfect Competition and Chapter 20 Trade Policy 501
Strategic Behaviour 258
iv
, Contents
Preface x 2.4 Graphing Economic Theories 41
Common Abbreviations xvi Functions 41
Graphing Functions 42
A Final Word 46
PART 1
Summary 46
What Is Economics? 1
Key Concepts 47
Chapter 1 Economic Issues and Concepts 1 Study Exercises 47
1.1 What Is Economics? 3
Resources 4 PART 2
Scarcity and Choice 4 An Introduction to Demand and Supply 51
Opportunity Cost 5 Chapter 3 Demand, Supply, and Price 51
Production Possibilities Boundary 6 3.1 Demand 52
Four Key Economic Problems 8 Quantity Demanded 52
Microeconomics and Quantity Demanded and Price 53
Macroeconomics 9 Demand Schedules and Demand Curves 54
Economics and Government Policy 10 3.2 Supply 59
1.2 The Complexity of Modern Quantity Supplied 59
Economies 10 Quantity Supplied and Price 60
The Nature of Market Economies 11 Supply Schedules and Supply Curves 60
The Decision Makers and 3.3 The Determination of Price 65
Their Choices 13 The Concept of a Market 65
Production and Trade 15 Market Equilibrium 66
1.3 Is There an Alternative to the Changes in Market Equilibrium 68
Market Economy? 17 A Numerical Example 70
Types of Economic Systems 17 Relative Prices 71
The Great Debate 19 A Crucial Caveat 71
Economics in the Social Sciences 20 Summary 72
Government in the Modern Mixed Key Concepts 73
Economy 20 Study Exercises 73
Summary 22
Key Concepts 23 Chapter 4 Elasticity 78
Study Exercises 23 4.1 Price Elasticity of Demand 79
The Measurement of Price Elasticity 80
Chapter 2 Economic Theories, Data, and Graphs 27 What Determines Elasticity of Demand? 83
2.1 Positive and Normative Elasticity and Total Expenditure 85
Statements 28 4.2 Price Elasticity of Supply 87
Disagreements Among Economists 29 Determinants of Supply Elasticity 88
2.2 Building and Testing Economic 4.3 Elasticity Matters for Excise Taxes 90
Theories 31 4.4 Other Demand Elasticities 92
What Are Theories? 31 Income Elasticity of Demand 92
Testing Theories 32 Cross Elasticity of Demand 95
2.3 Economic Data 36 Summary 97
Index Numbers 36 Key Concepts 98
Graphing Economic Data 39 Study Exercises 98
v
to Diversity, Equity,
and Inclusion
Pearson is dedicated to creating bias-free content that re昀氀ects the diversity,
depth, and breadth of all learners’ lived experiences.
We embrace the many dimensions of diversity, including but not limited to race, ethnicity, gender,
sex, sexual orientation, socioeconomic status, ability, age, and religious or political beliefs.
Education is a powerful force for equity and change in our world. It has the potential to deliver
opportunities that improve lives and enable economic mobility. As we work with authors to create
content for every product and service, we acknowledge our responsibility to demonstrate inclusivity
and incorporate diverse scholarship so that everyone can achieve their potential through learning.
As the world’s leading learning company, we have a duty to help drive change and live up to our
purpose to help more people create a better life for themselves and to create a better world.
Our ambition is to purposefully contribute to a world where
• Everyone has an equitable and lifelong opportunity • Our educational products and services are inclusive
to succeed through learning. and represent the rich diversity of learners.
• Our educational content accurately re昀氀ects the • Our educational content prompts deeper discussions
histories and lived experiences of the learners with students and motivates them to expand their
we serve. own learning (and worldview).
Accessibility Contact Us
We are also committed to providing products that While we work hard to present unbiased, fully
are fully accessible to all learners. As per Pearson’s accessible content, we want to hear from you about
guidelines for accessible educational Web media, any concerns or needs with this Pearson product so
we test and retest the capabilities of our products that we can investigate and address them.
against the highest standards for every release,
Please contact us with concerns about any
following the WCAG guidelines in developing new
potential bias at
products for copyright year 2022 and beyond.
https://www.pearson.com/report-bias.html.
You can learn more about Pearson’s
For accessibility-related issues, such as using
commitment to accessibility at
assistive technology with Pearson products,
https://www.pearson.com/us/accessibility.html.
alternative text requests, or accessibility
documentation, email the Pearson Disability Support
team at .
,Brief Contents
PART 1 What Is Economics? 1 Chapter 12 Economic Efficiency and
Chapter 1 Economic Issues and Concepts 1 Public Policy 282
Chapter 2 Economic Theories, Data,
and Graphs 27 PART 5 Factor Markets 310
Chapter 13 How Factor Markets Work 310
PART 2 An Introduction to Demand and Supply 51 Chapter 14 Labour Markets and Income
Chapter 3 Demand, Supply, and Price 51 Inequality 335
Chapter 4 Elasticity 78 Chapter 15 Interest Rates and the
Chapter 5 Price Controls and Market Capital Market 365
Efficiency 102
PART 6 Government in the Market Economy 388
PART 3 Consumers and Producers 124 Chapter 16 Market Failures and Government
Chapter 6 Consumer Behaviour 124 Intervention 388
Chapter 7 Producers in the Short Run 156 Chapter 17 The Economics of Environmental
Chapter 8 Producers in the Long Run 181 Protection 420
Chapter 18 Taxation and Public Expenditure 447
PART 4 Market Structure and Efficiency 203
PART 7 Canada in the Global Economy 475
Chapter 9 Competitive Markets 203
Chapter 10 Monopoly, Cartels, and Price Chapter 19 The Gains from International
Discrimination 231 Trade 475
Chapter 11 Imperfect Competition and Chapter 20 Trade Policy 501
Strategic Behaviour 258
iv
, Contents
Preface x 2.4 Graphing Economic Theories 41
Common Abbreviations xvi Functions 41
Graphing Functions 42
A Final Word 46
PART 1
Summary 46
What Is Economics? 1
Key Concepts 47
Chapter 1 Economic Issues and Concepts 1 Study Exercises 47
1.1 What Is Economics? 3
Resources 4 PART 2
Scarcity and Choice 4 An Introduction to Demand and Supply 51
Opportunity Cost 5 Chapter 3 Demand, Supply, and Price 51
Production Possibilities Boundary 6 3.1 Demand 52
Four Key Economic Problems 8 Quantity Demanded 52
Microeconomics and Quantity Demanded and Price 53
Macroeconomics 9 Demand Schedules and Demand Curves 54
Economics and Government Policy 10 3.2 Supply 59
1.2 The Complexity of Modern Quantity Supplied 59
Economies 10 Quantity Supplied and Price 60
The Nature of Market Economies 11 Supply Schedules and Supply Curves 60
The Decision Makers and 3.3 The Determination of Price 65
Their Choices 13 The Concept of a Market 65
Production and Trade 15 Market Equilibrium 66
1.3 Is There an Alternative to the Changes in Market Equilibrium 68
Market Economy? 17 A Numerical Example 70
Types of Economic Systems 17 Relative Prices 71
The Great Debate 19 A Crucial Caveat 71
Economics in the Social Sciences 20 Summary 72
Government in the Modern Mixed Key Concepts 73
Economy 20 Study Exercises 73
Summary 22
Key Concepts 23 Chapter 4 Elasticity 78
Study Exercises 23 4.1 Price Elasticity of Demand 79
The Measurement of Price Elasticity 80
Chapter 2 Economic Theories, Data, and Graphs 27 What Determines Elasticity of Demand? 83
2.1 Positive and Normative Elasticity and Total Expenditure 85
Statements 28 4.2 Price Elasticity of Supply 87
Disagreements Among Economists 29 Determinants of Supply Elasticity 88
2.2 Building and Testing Economic 4.3 Elasticity Matters for Excise Taxes 90
Theories 31 4.4 Other Demand Elasticities 92
What Are Theories? 31 Income Elasticity of Demand 92
Testing Theories 32 Cross Elasticity of Demand 95
2.3 Economic Data 36 Summary 97
Index Numbers 36 Key Concepts 98
Graphing Economic Data 39 Study Exercises 98
v
