The Economics Book

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120 T here has long been something appealing for economists about the idea that the economy may behave with the same mathematica ...

121 general equilibrium theory was devised to explain the production, consumption, and prices across an entire economy. Supply a ...

122 ECONOMIC EQUILIBRIUM An auctioneer takes bids at a cattle auction. Walras imagined an auctioneer who provides perfect inform ...

123 decades after Walras’s death, his equations came under the scrutiny of the brilliant Hungarian-born American mathematician, ...

124 IF YOU GET A PAY RAISE, BUY CAVIAR NOT BREAD ELASTICITY OF DEMAND T he “elasticity” of demand is its responsiveness to chang ...

125 See also: Utility and satisfaction 114–15 ■ Spending paradoxes 116–17 ■ Supply and demand 108–13 ■ The competitive market 12 ...

126 I n the late 18th century Adam Smith (p.61) wrote about the impact of competition on firms’ abilities to set prices and make ...

127 See also: Monopolies 92–97 ■ Supply and demand 108–13 ■ Economic liberalism 172–77 ■ Price discrimination 180–81 ■ Markets a ...

128 The assumptions of Marshall’s model create certain consequences for firms in perfectly competitive industries. One of the mo ...

129 Traders determine prices of commodities such as wheat through competing with each other. In competitive markets no single tr ...

130 I n the 19th century a group of British philosophers known as the utilitarians introduced the idea that the happiness of ind ...

131 inefficient: a transfer of chicken from John to Jane would help Jane without hurting John. Often preferences aren’t so clear ...

132 See also: Diminishing returns 62 ■ The division of labor 66–67 ■ Monopolies 92–97 ■ The competitive market 126–29 F rom the ...

133 See also: Economic man 52–53 ■ The labor theory of value 106–07 ■ Utility and satisfaction 114–15^ E conomists at the end of ...

134 WORKERS MUST IMPROVE THEIR LOT TOGETHER COLLECTIVE BARGAINING T he term “collective bargaining” was coined by British social ...

135 Public sector workers demonstrate in Madrid, Spain, in 2010 to protest against job cuts. Today, trade unions are stronger in ...

136 See also: Economic man 52–53 ■ Spending paradoxes 116–17 ■ Economics and tradition 166–67 ■ Behavioral economics 266–69 T he ...

137 See also: The tax burden 64–65 ■ Markets and social outcomes 210–13 ■ The theory of the second best 220–21 ■ Economics and t ...

138 PROTESTANTISM HAS MADE US RICH RELIGION AND THE ECONOMY T he German sociologist Max Weber was interested in the contrasting ...