Economics for Today

554 Pages·2018·25.879 MB·English

by  Irvin B. Tucker

7th Asia–Pacific Edition
e
c
o
n
o
m
i economics
c
s

f
o
for today
r

t
o
d
a
y Allan Layton _ Tim Robinson _ Tommy Tang _ Dinusha Dharmaratna _ Irvin B. Tucker
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-300
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-300
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-300
77tthh AAssiiaa––PPaacciiffiicc EEddiittiioonn
e
c
o
n
o
m
i economics
c
s

f
o
for today
r

t
o
d
a
y AAllllaann LLaayyttoonn __ TTiimm RRoobbiinnssoonn __ TToommmmyy TTaanngg __ DDiinnuusshhaa DDhhaarrmmaarraattnnaa __ IIrrvviinn BB.. TTuucckkeerr
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-300
Economics for Today © 2022 Cengage Learning Australia Pty Limited
7th Edition
Alan Layton Copyright Notice
Tim Robinson This Work is copyright. No part of this Work may be reproduced, stored in a
Tommy Tang retrieval system, or transmitted in any form or by any means without prior written
Dinusha Dharmaratna permission of the Publisher. Except as permitted under the Copyright Act 1968, for
Irvin B. Tucker example any fair dealing for the purposes of private study, research, criticism or
review, subject to certain limitations. These limitations include: Restricting the
copying to a maximum of one chapter or 10% of this book, whichever is greater;
Portfolio lead: Fiona Hammond providing an appropriate notice and warning with the copies of the Work
Product manager: Rachael Pictor disseminated; taking all reasonable steps to limit access to these copies to people
Content developer: Talia Lewis authorised to receive these copies; ensuring you hold the appropriate Licences
Project editor: Alex Chambers issued by the Copyright Agency Limited (“CAL”), supply a remuneration notice to
Cover designer: Leigh Ashforth CAL and pay any required fees. For details of CAL licences and remuneration
Text designer: Rina Gargano notices please contact CAL at Level 11, 66 Goulburn Street, Sydney NSW 2000,
Editor: Jade Jakovcic Tel: [phone], Fax: [phone]
Indexer: Julie King Email: [email protected]
Proofreader: Carolyn Leslie Website: www.copyright.com.au
Permissions/Photo researcher: Catherine Kerstjens
KnowledgeWorks Global Ltd. For product information and technology assistance,
in Australia call 1300 790 853;
Any URLs contained in this publication were checked for currency in New Zealand call 0800 449 725
during the production process. Note, however, that the publisher
cannot vouch for the ongoing currency of URLs. For permission to use material from this text or product, please email
[email protected]
Sixth edition published in 2019
National Library of Australia Cataloguing-in-Publication Data
Authorised adaptation of Economics for Today 10th edition by ISBN: 9780170449021
Tucker, published by Cengage Learning 2019 [ISBN A catalogue record for this book is available from the National Library of Australia.
9781337613040].
Cengage Learning Australia
Acknowledgements Level 7, 80 Dorcas Street
Cover image courtesy Getty Images/David Malan. South Melbourne, Victoria Australia 3205
Part-opening images courtesy [1] iStock.com/aldomurillo; [2] iStock. Cengage Learning New Zealand
com/pixelfit; [3] iStock.com/Inok; [4] iStock.com/Henrik5000; [5] Unit 4B Rosedale Office Park
iStock.com/FatCamera; [6] iStock.com/Orbon Alija. 331 Rosedale Road, Albany, North Shore 0632, NZ
For learning solutions, visit cengage.com.au
Printed in Singapore by 1010 Printing International Limited.
1 2 3 4 5 6 7 25 24 23 22 21
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-300
Brief contents
PART 1 INTRODUCTION TO ECONOMICS 1
1 Thinking like an economist 2
Appendix to Chapter 1: Applying graphs to economics 21
2 Production possibilities and opportunity cost 31
3 Market demand and supply 52
4 Markets in action 81
PART 2 MICROECONOMIC FUNDAMENTALS 103
5 Elasticity of demand and supply 104
6 Production costs 129
PART 3 MARKET STRUCTURES 155
7 Perfect competition 156
8 Monopoly 185
9 Monopolistic competition and oligopoly 205
10 Microeconomic policy issues: climate change and
behavioural economics 228
PART 4 MACROECONOMIC FUNDAMENTALS 255
11 Measuring the size of the economy 256
12 Business cycles and economic growth 283
13 Inflation and unemployment 306
PART 5 MACROECONOMIC THEORY AND POLICY 339
14 A simple model of the macro economy 340
15 The monetary and financial system 369
16 Macroeconomic policy I: monetary policy 391
17 Macroeconomic policy II: fiscal policy 417
PART 6 FURTHER ASPECTS OF INTERNATIONAL ECONOMICS 447
18 International trade and finance 448
19 Macroeconomic policy issues: reflecting on economic
and debt crises 478
v
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-300
Contents
Guide to the text x
Guide to the online resources xiv
Preface xvi
Acknowledgements xix
About the authors xx
PART 1 INTRODUCTION TO ECONOMICS 1
Chapter 1 Thinking like an economist 2
1 The problem of scarcity 3
2 Macroeconomics and microeconomics 6
3 The methodology of economics 8
4 Hazards of the economic way of thinking 10
5 Why do economists disagree? 11
6 Practical applications of economics 16
Appendix to Chapter 1: Applying graphs to economics 21
1 Direct and inverse relationships 21
2 Slopes of lines in a graph 23
3 Introducing a third variable to the graph 26
4 The importance of index numbers 28
Chapter 2 Production possibilities and opportunity cost 31
1 The three fundamental economic questions 32
2 Opportunity cost 33
3 Marginal analysis 35
4 The production possibilities frontier 36
5 Shifting the production possibilities frontier 40
6 Present investment and the future production possibilities frontier 43
7 Trade and production possibility frontier 45
Chapter 3 Market demand and supply 52
1 The law of demand 53
2 Non-price determinants of demand 58
3 The law of supply 62
4 Non-price determinants of supply 66
5 Market supply and demand analysis 68
vi
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-300
CONTENTS
Chapter 4 Markets in action 81
1 Changes in market equilibrium 82
2 Can the laws of supply and demand be repealed? 86
3 Market failure 91
PART 2 MICROECONOMIC FUNDAMENTALS 103
Chapter 5 Elasticity of demand and supply 104
1 Price elasticity of demand 105
2 Price elasticity of demand variations along a straight-line
demand curve 111
3 Determinants of price elasticity of demand 113
4 Other measures of demand elasticity 116
5 Price elasticity of supply 120
6 Price elasticity of demand and the impact of taxation 122
Chapter 6 Production costs 129
1 Costs and profit 130
2 Short-run production theory 133
3 Short-run cost concepts 136
4 Marginal cost relationships 140
PART 3 5 Long-run production costs 143
MARKET STRUCTURES 155
Chapter 7 Perfect competition 156
1 Market structures 157
2 Perfect competition 158
3 Short-run profit maximisation for a competitive firm 160
4 Short-run loss minimisation for a competitive firm 165
5 Short-run supply curves under perfect competition 168
6 Short-run and long-run equilibrium for a competitive firm 170
7 Three types of long-run supply curve under perfect competition 174
Chapter 8 Monopoly 185
1 The monopoly market structure 186
2 Price and output decision for a monopolist 190
3 Price discrimination 194
4 Comparing monopoly and perfect competition: the case against
and for monopoly 197
vii
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-300
CONTENTS
Chapter 9 Monopolistic competition and oligopoly 205
1 The monopolistic competition market structure 206
2 The monopolistically competitive firm as a price maker 207
3 Price and output decisions for a monopolistically competitive firm 209
4 Comparing monopolistic competition and perfect competition 212
5 The oligopoly market structure 213
6 Price and output decisions for an oligopolist 215
Chapter 10 Microeconomic policy issues: climate change and
behavioural economics 228
1 Climate change 229
2 Behavioural economics 238
3 Behaviours violating the rational choice model 242
PART 4 MACROECONOMIC FUNDAMENTALS 255
Chapter 11 Measuring the size of the economy 256
1 The concept of gross domestic product: the basics 257
2 Measuring GDP 259
3 GDP shortcomings as a measure of economic welfare 268
4 Changing nominal GDP to real GDP 273
5 Relationship between national saving and investment in an open economy 276
Chapter 12 Business cycles and economic growth 283
1 The business cycle rollercoaster 284
2 Business cycle indicators 289
3 Total spending and the business cycle 291
4 Economic growth in the longer term 292
5 The goals of macroeconomic policy 299
Chapter 13 Inflation and unemployment 306
1 Meaning and measurement of inflation 307
2 Consequences of inflation 313
3 The meaning and measurement of unemployment 319
4 Types of unemployment 323
5 Inflation and unemployment: is there a relationship? 331
PART 5 MACROECONOMIC THEORY AND POLICY 339
Chapter 14 A simple model of the macro economy 340
1 Economic determinants of the four key expenditure components of
aggregate demand 341
2 The aggregate demand–aggregate supply model 348
3 Changes in the AD–AS macroeconomic equilibrium 357
viii
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-300
CONTENTS
Chapter 15 The monetary and financial system 369
1 Some monetary fundamentals 369
2 The determination of interest rates 374
3 A modern financial system 379
Chapter 16 Macroeconomic policy I: monetary policy 391
1 What is monetary policy and how is it thought to affect the economy? 391
2 Modern monetary policy implementation: the case of Australia 398
3 An alternative view of the monetary policy transmission mechanism 401
4 The appropriate role for monetary policy: the rules versus discretion
debate 408
Chapter 17 Macroeconomic policy II: fiscal policy 417
1 Discretionary demand-side fiscal policy 418
2 Supply-side fiscal policy 426
3 The macroeconomic significance of the federal budget 430
4 Implications of the budget outcome for government debt levels 437
PART 6 FURTHER ASPECTS OF INTERNATIONAL ECONOMICS 447
Chapter 18 International trade and finance 448
1 Why nations benefit from trade 448
2 Free trade, fair trade and protectionism 455
3 The balance of payments 463
4 The exchange rate and its economic impact 469
Chapter 19 Macroeconomic policy issues: reflecting on
economic and debt crises 478
1 The unfolding of a worldwide financial maelstrom 479
2 The economic consequences of the GFEC 483
3 Macroeconomic policy responses to the crisis 488
4 The European sovereign debt – and banking – crisis 495
5 The COVID-19 pandemic economic impacts and policy
responses in Australia 497
Glossary 505
Index 517
ix
Copyright 2022 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-300