Preface ix

Introduction xi

CHAPTER 1 Incentives Matter 1

1.1 Managerial Individualism 2

1.2 Demand Curves 5

1.3 Elasticity 12

Notes 16

CHAPTER 2 Cost and Choice 19

2.1 Opportunity Cost 20

2.2 Diminishing Marginal Returns 22

2.3 The Planning Horizon 26

2.4 Cost vs. Waste 28

Notes 29

CHAPTER 3 Market Exchange 33

3.1 Market Equilibrium 33

3.2 Comparative Statics 36

3.3 Information Economics 41

Notes 44

CHAPTER 4 Prices and Economic Calculation 47

4.1 Entrepreneurship 48

4.2 The Firm 52

4.3 Price Discrimination 54

4.4 The Knowledge Problem 58

4.5 Internal Markets 60

Notes 63

CHAPTER 5 Competition and the Market Process 67

5.1 Market Concentration 67

5.2 Collusion 69

5.3 Market Contestability 72

5.4 Monopoly Power 77

Notes 78

CHAPTER 6 Capital Theory and Recalculation 81

6.1 Microclimate 82

6.2 Unemployment 84

6.3 Recalculation 90

Notes 93

CHAPTER 7 Public Finance 97

7.1 Taxation 97

7.2 Bonds 101

7.3 Banking 104

7.4 Saving 107

7.5 Real Business Cycles 108

7.6 National Income Accounting 109

Notes 112

CHAPTER 8 Monetary Theory 117

8.1 Inflation 118

8.2 Monetary Policy 126

8.3 Monetary Regimes 133

8.4 Macroeconomic Fluctuations 135

Notes 137

CHAPTER 9 Fiscal Policy 141

9.1 The Great Depression 142

9.2 Fiscal Stimulus 144

9.3 Expansionary Fiscal Contractions 150

9.4 Confidence 153

9.5 Laissez-faire 155

9.6 The Phillips Curve 156

Notes 158

CHAPTER 10 International Economics 163

10.1 Globalisation and Trade Theory 164

10.2 Balance of Payments 168

10.3 Foreign Exchange Markets 170

10.4 Currency Regimes 175

Notes 179

CHAPTER 11 Behavioural Economics 183

11.1 Behavioural Anomalies 184

11.2 Market Efficiency 188

Notes 194

CHAPTER 12 Global Prosperity 199

12.1 Growth Theory 199

12.2 Happiness 202

12.3 Economic Freedom 206

12.4 Public Choice Theory 208

12.5 Transition Economics 215

Notes 223

Bibliography 231

Index 000