Core book Principles of Economics summary
Inhoudsopgave
Unit 1. The capitalist revolu4on ...................................................................................................................... 4
1.1. Income inequality ................................................................................................................................. 4
1.2. Measuring income and living standards .............................................................................................. 4
1.3. History’s hockey s>ck: growth in income .............................................................................................. 4
1.4. The permanent technological revolu>on.............................................................................................. 4
1.5. The economy and the environment ...................................................................................................... 4
1.6. Capitalism defined: private property, markets, and firms. ................................................................... 5
1.7. Capitalism as an economic system ....................................................................................................... 5
1.8. The gains from specializa>on ............................................................................................................... 5
1.9. Capitalism causa>on and history’s hockey s>ck ................................................................................... 6
1.10. Varie>es of capitalism: ins>tu>ons, government, and the economy.................................................... 6
Unit 3. Scarcity, work, and choice .................................................................................................................... 6
3.1 Labor and produc>on ........................................................................................................................... 6
3.2 Preferences ........................................................................................................................................... 6
3.3 Opportunity costs ................................................................................................................................. 7
3.4 The feasible set ..................................................................................................................................... 7
3.5 Decision making and scarcity. .............................................................................................................. 7
3.6 Hours of work and economic growth ................................................................................................... 7
3.7 Income and subs>tu>on effects on hours of work and free >me ......................................................... 7
3.8 Is this a good model? ........................................................................................................................... 8
3.9 Explaining our working hours: changes over >me................................................................................ 8
3.10 Explaining our working hours: differences between countries ............................................................. 8
Unit 4. Social interac4ons ............................................................................................................................... 8
4.1 Social interac>ons......................................................................................................................................... 8
4.2 Equilibrium in the invisible hand game ......................................................................................................... 8
4.3 Social preferences: altruism .......................................................................................................................... 9
4.5 Altruis>c preferences in the prisoners’ dilemma........................................................................................... 9
4.6 Public goods, free riding, and repeated interac>on...................................................................................... 9
4.7 Public good contribu>ons and peer punishment .......................................................................................... 9
4.8 Behavioral experiments in the lab and in the field ....................................................................................... 9
4.9 Explaining our working hours: Changes over >me. ...................................................................................... 9
4.10 Dividing a pie (or leaving it on the table).................................................................................................... 9
4.11 ................................................................................................................................................................... 10
, 4.12 ................................................................................................................................................................... 10
4.13 ................................................................................................................................................................... 10
Unit 6. The firm: Owners, managers, and employees .................................................................................... 10
6.1 Firm, markets, and the division of labor. .................................................................................................... 10
6.2 Other people’s money: The separa>on of ownership and control .............................................................. 11
6.3 Other people’s labor ................................................................................................................................... 11
6.4 Employment rents ....................................................................................................................................... 11
6.9 Another kind of business organiza>on ....................................................................................................... 12
6.10 Principles and agents: Interac>ons under incomplete contracts .............................................................. 12
Unit 7. The firm and its customers................................................................................................................. 12
7.1 Breakfast cereal: Choosing a price.............................................................................................................. 12
7.2 Economies of scale and the cost advantages of large-scale produc>on ..................................................... 13
7.3 Produc>on: the cost func>on for beau>ful cars.......................................................................................... 14
7.4 Demand and isoprofit curves: Beau>ful Cars. ............................................................................................ 15
7.5 Se_ng price and quan>ty to maximize profit............................................................................................. 15
7.6 Looking at profit maximiza>on as marginal revenue and marginal cost. .................................................. 15
7.7 Gains from trade......................................................................................................................................... 15
7.8 The elas>city of demand............................................................................................................................. 16
7.9 Using demand elas>ci>es in government policy. ........................................................................................ 16
7.10 Price-se_ng, compe>>on, and market power. ......................................................................................... 16
7.11 Product selec>on, innova>on, and adver>sing......................................................................................... 17
7.12 Prices, costs, and market failure ............................................................................................................... 17
Unit 8. Supply and demand: price-taking and compe44ve markets ............................................................... 17
8.1 buying and selling: demand and supply. ..................................................................................................... 17
8.2 The market and the equilibrium price. ........................................................................................................ 17
8.3 Price-taking firms ........................................................................................................................................ 18
8.4 Market supply and equilibrium ................................................................................................................... 18
8.5 Compe>>ve equilibrium: gains from trade, alloca>on, and distribu>on. ................................................... 18
8.6 Changes in supply and demand .................................................................................................................. 18
8.7 The effects of taxes ..................................................................................................................................... 19
8.8 The model of perfect compe>>on............................................................................................................... 19
8.9 Looking for compe>>ve equilibria. ............................................................................................................. 19
8.10 Price-se_ng and price-taking firms. ......................................................................................................... 19
Unit 11. Rent-seeking, price-seIng, and market dynamics. .......................................................................... 20
11.1 How people changing prices to gain rents can lead to a market equilibrium. .......................................... 20
11.2 How market organiza>on can influence prices. ........................................................................................ 20
11.3 Short-run and long-run equilibria ............................................................................................................. 20
, 11.4 Prices, rent seeking, and market dynamics at work: oil prices. ................................................................ 21
11.9 non-clearing markets: Ra>oning, queuing, and secondary markets. ....................................................... 22
11.10 Markets with controlled prices ............................................................................................................... 22
11.11 The role of economic rents ..................................................................................................................... 22
Inhoudsopgave
Unit 1. The capitalist revolu4on ...................................................................................................................... 4
1.1. Income inequality ................................................................................................................................. 4
1.2. Measuring income and living standards .............................................................................................. 4
1.3. History’s hockey s>ck: growth in income .............................................................................................. 4
1.4. The permanent technological revolu>on.............................................................................................. 4
1.5. The economy and the environment ...................................................................................................... 4
1.6. Capitalism defined: private property, markets, and firms. ................................................................... 5
1.7. Capitalism as an economic system ....................................................................................................... 5
1.8. The gains from specializa>on ............................................................................................................... 5
1.9. Capitalism causa>on and history’s hockey s>ck ................................................................................... 6
1.10. Varie>es of capitalism: ins>tu>ons, government, and the economy.................................................... 6
Unit 3. Scarcity, work, and choice .................................................................................................................... 6
3.1 Labor and produc>on ........................................................................................................................... 6
3.2 Preferences ........................................................................................................................................... 6
3.3 Opportunity costs ................................................................................................................................. 7
3.4 The feasible set ..................................................................................................................................... 7
3.5 Decision making and scarcity. .............................................................................................................. 7
3.6 Hours of work and economic growth ................................................................................................... 7
3.7 Income and subs>tu>on effects on hours of work and free >me ......................................................... 7
3.8 Is this a good model? ........................................................................................................................... 8
3.9 Explaining our working hours: changes over >me................................................................................ 8
3.10 Explaining our working hours: differences between countries ............................................................. 8
Unit 4. Social interac4ons ............................................................................................................................... 8
4.1 Social interac>ons......................................................................................................................................... 8
4.2 Equilibrium in the invisible hand game ......................................................................................................... 8
4.3 Social preferences: altruism .......................................................................................................................... 9
4.5 Altruis>c preferences in the prisoners’ dilemma........................................................................................... 9
4.6 Public goods, free riding, and repeated interac>on...................................................................................... 9
4.7 Public good contribu>ons and peer punishment .......................................................................................... 9
4.8 Behavioral experiments in the lab and in the field ....................................................................................... 9
4.9 Explaining our working hours: Changes over >me. ...................................................................................... 9
4.10 Dividing a pie (or leaving it on the table).................................................................................................... 9
4.11 ................................................................................................................................................................... 10
, 4.12 ................................................................................................................................................................... 10
4.13 ................................................................................................................................................................... 10
Unit 6. The firm: Owners, managers, and employees .................................................................................... 10
6.1 Firm, markets, and the division of labor. .................................................................................................... 10
6.2 Other people’s money: The separa>on of ownership and control .............................................................. 11
6.3 Other people’s labor ................................................................................................................................... 11
6.4 Employment rents ....................................................................................................................................... 11
6.9 Another kind of business organiza>on ....................................................................................................... 12
6.10 Principles and agents: Interac>ons under incomplete contracts .............................................................. 12
Unit 7. The firm and its customers................................................................................................................. 12
7.1 Breakfast cereal: Choosing a price.............................................................................................................. 12
7.2 Economies of scale and the cost advantages of large-scale produc>on ..................................................... 13
7.3 Produc>on: the cost func>on for beau>ful cars.......................................................................................... 14
7.4 Demand and isoprofit curves: Beau>ful Cars. ............................................................................................ 15
7.5 Se_ng price and quan>ty to maximize profit............................................................................................. 15
7.6 Looking at profit maximiza>on as marginal revenue and marginal cost. .................................................. 15
7.7 Gains from trade......................................................................................................................................... 15
7.8 The elas>city of demand............................................................................................................................. 16
7.9 Using demand elas>ci>es in government policy. ........................................................................................ 16
7.10 Price-se_ng, compe>>on, and market power. ......................................................................................... 16
7.11 Product selec>on, innova>on, and adver>sing......................................................................................... 17
7.12 Prices, costs, and market failure ............................................................................................................... 17
Unit 8. Supply and demand: price-taking and compe44ve markets ............................................................... 17
8.1 buying and selling: demand and supply. ..................................................................................................... 17
8.2 The market and the equilibrium price. ........................................................................................................ 17
8.3 Price-taking firms ........................................................................................................................................ 18
8.4 Market supply and equilibrium ................................................................................................................... 18
8.5 Compe>>ve equilibrium: gains from trade, alloca>on, and distribu>on. ................................................... 18
8.6 Changes in supply and demand .................................................................................................................. 18
8.7 The effects of taxes ..................................................................................................................................... 19
8.8 The model of perfect compe>>on............................................................................................................... 19
8.9 Looking for compe>>ve equilibria. ............................................................................................................. 19
8.10 Price-se_ng and price-taking firms. ......................................................................................................... 19
Unit 11. Rent-seeking, price-seIng, and market dynamics. .......................................................................... 20
11.1 How people changing prices to gain rents can lead to a market equilibrium. .......................................... 20
11.2 How market organiza>on can influence prices. ........................................................................................ 20
11.3 Short-run and long-run equilibria ............................................................................................................. 20
, 11.4 Prices, rent seeking, and market dynamics at work: oil prices. ................................................................ 21
11.9 non-clearing markets: Ra>oning, queuing, and secondary markets. ....................................................... 22
11.10 Markets with controlled prices ............................................................................................................... 22
11.11 The role of economic rents ..................................................................................................................... 22
