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 page i

Twelfth edition
economics
David Begg, Gianluigi Vernasca,
Stanley Fischer and Rudiger
Dornbusch
page ii
 page iii

Twelfth edition
economics
David Begg, Gianluigi Vernasca,
Stanley Fischer and Rudiger
Dornbusch
 page iv

Economics 12th Edition

David Begg, Gianluigi Vernasca, Stanley Fischer and Rudiger Dornbusch

ISBN-13 9781526847393
ISBN-10 1526847396

Published by McGraw-Hill Education

338 Euston Road
London
NW1 3BH
Telephone: +44 (0) 203 429 3400
Website: www.mheducation.co.uk

British Library Cataloguing in Publication Data

A catalogue record for this book is available from the British Library

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Congress

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Printed and bound in the United Kingdom by Bell & Bain Ltd, Glasgow

Published by McGraw-Hill Education (UK) Limited an imprint of McGraw-Hill Education,

2 Penn Plaza New York, NY 10121. Copyright © 2020 by McGraw-Hill Education (UK)
Limited. All rights reserved. No part of this publication may be reproduced or distributed in
any form or by any means, or stored in a database or retrieval system, without the prior
written consent of McGraw-Hill Education (UK) including, but not limited to, in any
network or other electronic storage or transmission, or broadcast for distance learning.

Fictitious names of companies, products, people, characters and/or data that may be used
herein (in case studies or examples) are not intended to represent any real individual,
company, product or event.

ISBN-13 9781526847393
ISBN-10 1526847396
© 2020. Exclusive rights by McGraw-Hill Education for manufacture and export. This
book cannot be re-exported from the country to which it is sold by McGraw-Hill
Education.
 page v

Dedication
For Honora, Mary and Robin – DB
To my family, to my beloved Vitalba and Francesco – GV
page vi
Brief table of contents
Preface xii
Guided Tour xv
Boxed Material xviii
Flexibility chart xxiii
Online Resources xxiv
Connect xxv
Acknowledgements xxviii
About the Authors xxix

PART ONE Introduction

1 Economics and the economy 2

2 Tools of economic analysis 19
PART TWO Positive microeconomics

3 Demand, supply and the market 38

4 Elasticities of demand and supply 55
5 Consumer choice and demand decisions 74
6 Choice under uncertainty and behavioural economics
103
 7 Introducing supply decision 122
8 Production, costs and supply 141
9 Perfect competition and pure monopoly 171
10 Market structure and imperfect competition 197
11 Labour market 219
12 Factor markets, income distribution, and inequality 246

13 The economics of information 268

PART THREE Welfare economics

14 Welfare economics 284

15 Government spending and revenue 311
16 Governing the market 334
PART FOUR Macroeconomics

17 Introduction to macroeconomics 352

18 Supply-side economics and economic growth 370
19 Output and aggregate demand 392
20 Fiscal policy and foreign trade 410
21 Money, banking and financial markets 426
22 Money demand, interest rates and monetary
transmission 443
23 Monetary and fiscal policy 460
24 Aggregate supply, prices and adjustment to shocks 477

25 Inflation, expectations and credibility 494

26 Unemployment 513
27 Exchange rates and the balance of payments 531
28 Open economy macroeconomics 550
29 Business cycles 565
PART FIVE The world economy

30 International trade 586

31 Exchange rate regimes 606
32 Globalization, national sovereignty and the world
economy 621
Appendix: Answers to activity and maths questions 638
Glossary 643
Index 653
page vii
Detailed table of contents
Preface xii
Guided Tour xv
Boxed Material xviii
Flexibility chart xxiii
Online Resources xxiv
Connect xxv
Acknowledgements xxviii
About the Authors xxix

PART ONE Introduction

1 Economics and the economy 2

1.1 How economists think about choices 4
1.2 Economic issues 6
1.3 Scarcity and the competing use of resources 9
1.4 The role of the market 13
1.5 Positive and normative 14
1.6 Micro and macro 15
Summary 16
Review questions 17

2 Tools of economic analysis 19

2.1 Economic data 20
 2.2 Economic experiments 22
2.3 Index numbers 23
2.4 Nominal and real variables 24
2.5 Measuring changes in economic variables 26
2.6 Economic models 26
2.7 Models and data 28
2.8 Diagrams, lines and equations 29
2.9 Another look at ‘other things equal’ 32
2.10 Some popular criticisms of economics and economists 32
Summary 34
Review questions 34

PART TWO Positive microeconomics

3 Demand, supply and the market 38

3.1 The market 38
3.2 Demand, supply and equilibrium 39
3.3 Demand and supply curves 41
3.4 Behind the demand curve 43
3.5 Shifts in the demand curve 44
3.6 Behind the supply curve 45
3.7 Shifts in the supply curve 47
3.8 Consumer and producer surplus 47
3.9 Free markets and price controls 49
3.10 What, how and for whom? 51
Summary 53
 Review questions 53

4 Elasticities of demand and supply 55

4.1 The price responsiveness of demand 55
4.2 Price, quantity demanded and total expenditure 60
4.3 Further applications of the price elasticity of demand 62
4.4 Short run and long run 64
4.5 The cross-price elasticity of demand 64
4.6 The effect of income on demand 65
4.7 Inflation and demand 67
4.8 Elasticity of supply 68
Summary 69
Review questions 70
Appendix 72

5 Consumer choice and demand decisions 74

5.1 Demand by a single consumer 74
5.2 Adjustment to income changes 84
5.3 Adjustment to price changes 86
5.4 The market demand curve 93
5.5 Complements and substitutes 94
5.6 Transfers in kind 94
Summary 96
Review questions 96
Appendix 99
A1. Consumer choice with measurable utility 99
 A2. Utility functions and indifference curves 101

6 Choice under uncertainty and behavioural economics

103
6.1 Individual attitudes to risk 103
6.2 Insurance and risk 105
6.3 Uncertainty and asset returns 108
6.4 Portfolio selection 110
6.5 Behavioural economics 112
6.6 Prospect theory 113

page viii

6.7 Other behavioural biases and Nudge theory 116

Summary 118
Review questions 118
Appendix 120

7 Introducing supply decision 122

7.1 Business organization 122
7.2 A firm’s accounts 123
7.3 Firms and profit maximization 126
7.4 The firm’s supply decision 127
7.5 Marginal cost and marginal revenue 129
7.6 Marginal cost and marginal revenue curves 132
Summary 135
Review questions 135
Appendix 138
8 Production, costs and supply 141
8.1 Input and output: the production function 141
8.2 Production in the short run: diminishing marginal returns 142
8.3 Short-run costs 145
8.4 A firm’s output decision in the short run 150
8.5 Production in the long run 151
8.6 Long-run total, marginal and average costs 153
8.7 Returns to scale 155
8.8 The firm’s long-run output decision 159
8.9 The relationship between short-run and long-run average costs 160
Summary 161
Review questions 162
Appendix 164
A1 Cost minimization in the short run 164
A2 Cost minimization in the long run 166

9 Perfect competition and pure monopoly 171

9.1 Perfect competition 172
9.2 A perfectly competitive firm’s supply decision 173
9.3 Industry supply curves 177
9.4 Comparative statics for a competitive industry 179
9.5 Pure monopoly: the opposite limiting case 181
9.6 Profit-maximizing output for a monopolist 182
9.7 Output and price under monopoly and competition 184
9.8 Price discrimination 187
 9.9 Monopoly and technical change 190
9.10 Natural monopoly 191
Summary 192
Review questions 193
Appendix 195

10 Market structure and imperfect competition 197

10.1 Why market structures differ 198
10.2 Monopolistic competition 200
10.3 Oligopoly and interdependence 202
10.4 Game theory and interdependent decisions 204
10.5 Reaction functions 207
10.6 Entry and potential competition 210
10.7 Strategic entry deterrence 211
10.8 Summing up 214
Summary 214
Review questions 215
Appendix 217

11 Labour market 219

11.1 The firm’s demand for factors in the long run 220
11.2 The firm’s demand for labour in the short run 221
11.3 The industry demand curve for labour 223
11.4 The supply of labour 224
11.5 Industry labour market equilibrium 229
11.6 Reservation wages and economic rents 233
 11.7 Do labour markets clear? 235
11.8 Wage discrimination 239
Summary 241
Review questions 243
Appendix 245

12 Factor markets, income distribution, and inequality 246

12.1 Physical capital 247
12.2 Rentals, interest rates and asset prices 248
12.3 Saving, investment and the real interest rate 253
12.4 The demand for capital services 253

page ix

12.5 The supply of capital services 255

12.6 Equilibrium and adjustment in the market for capital services 257
12.7 The price of capital assets 258
12.8 Land and rents 258
12.9 Income distribution 260
Summary 264
Review questions 265
Appendix 267

13 The economics of information 268

13.1 Asymmetric information 268
13.2 Moral hazard 269
13.3 Adverse selection 271
 13.4 Information and the digital economy 273
13.5 Consuming information goods 274
13.6 Supplying information goods 276
13.7 Two-sided markets 278
Summary 279
Review questions 280

PART THREE Welfare economics

14 Welfare economics 284

14.1 Equity and efficiency 284
14.2 Perfect competition and Pareto efficiency 287
14.3 Distortions and the second-best 292
14.4 Market failure 294
14.5 Externalities 295
14.6 Environmental issues and the economics of climate change 299
14.7 Other missing markets: time and risk 304
14.8 Quality, health and safety 305
Summary 306
Review questions 307
Appendix 310

15 Government spending and revenue 311

15.1 Taxation and government spending 311
15.2 The government in the market economy 314
15.3 The principles of taxation 319
 15.4 Taxation and supply-side economics 323
15.5 Local government 323
15.6 Economic sovereignty 324
15.7 Political economy: how governments decide 325
Summary 328
Review questions 329
Appendix 331

16 Governing the market 334

16.1 Competition policy and market power 334
16.2 Mergers 338
16.3 Regulation of natural monopoly 340
16.4 Liberalization and privatization in natural monopolies 344
16.5 Industrial policy 345
16.6 Government failures 348
Summary 348
Review questions 349

PART FOUR Macroeconomics

17 Introduction to macroeconomics 352

17.1 Macroeconomics: the big issues 352
17.2 Some facts and economic history 353
17.3 The circular flow 355
17.4 National income accounting 355
17.5 What GDP measures 362
 17.6 The economics of happiness 367
Summary 367
Review questions 368

18 Supply-side economics and economic growth 370

18.1 Supply-side economics 370
18.2 Economic growth: preliminary remarks 372
18.3 Growth: an overview 374
18.4 Technical knowledge 376
18.5 Growth and accumulation 377
18.6 Growth through technical progress 380
18.7 Growth in the OECD 380
18.8 Endogenous growth 385
18.9 The costs of growth 386
Summary 388
Review questions 389
Appendix 391

19 Output and aggregate demand 392

19.1 Components of aggregate demand 395
19.2 Aggregate demand 397
19.3 Equilibrium output 398
19.4 Planned saving equals planned investment 400

page x

19.5 A fall in aggregate demand 401

 19.6 The multiplier 403
19.7 The paradox of thrift 404
19.8 The role of confidence 406
Summary 407
Review questions 408

20 Fiscal policy and foreign trade 410

20.1 The scope of government activity 410
20.2 Expanding the model of aggregate demand 411
20.3 Fiscal policy and equilibrium output 413
20.4 The government budget 416
20.5 Measuring the fiscal stance 417
20.6 The national debt and the deficit 419
20.7 Foreign trade 421
Summary 423
Review questions 423
Appendix 425

21 Money, banking and financial markets 426

21.1 Money and its functions 426
21.2 Modern banking 429
21.3 How banks create money 430
21.4 The traditional theory of money supply 432
21.5 The central bank 434
21.6 Financial crises 437
Summary 440
 Review questions 441

22 Money demand, interest rates and monetary

transmission 443
22.1 The demand for money 444
22.2 Money market equilibrium 445
22.3 Monetary control 446
22.4 Targets and instruments of monetary policy 447
22.5 The transmission mechanism 448
22.6 Quantitative easing 454
Summary 456
Review questions 457
Appendix 459

23 Monetary and fiscal policy 460

23.1 Monetary policy 460
23.2 The IS–MP model 461
23.3 The IS–MP model in action 463
23.4 Shocks to money demand 465
23.5 The policy mix 465
23.6 The effect of future taxes 467
23.7 Demand management revisited 468
Summary 470
Review questions 471
Appendix 473
24 Aggregate supply, prices and adjustment to shocks 477
24.1 Inflation and aggregate demand 477
24.2 Aggregate supply 480
24.3 Equilibrium inflation 481
24.4 The labour market and wage behaviour 485
24.5 Short-run aggregate supply 485
24.6 The adjustment process 486
24.7 Sluggish adjustment to shocks 488
24.8 Trade-offs in monetary objectives 490
Summary 492
Review questions 492

25 Inflation, expectations and credibility 494

25.1 Money and inflation 494
25.2 Inflation and interest rates 497
25.3 Inflation, money and deficits 498
25.4 Inflation, unemployment and output 499
25.5 The costs of inflation 505
25.6 Controlling inflation 508
25.7 Monetary Policy Committees 510
Summary 511
Review questions 512

26 Unemployment 513
26.1 The labour market 514
26.2 Analysing unemployment
 26.3 Explaining changes in unemployment 517
520
26.4 Cyclical fluctuations in unemployment 526
26.5 The cost of unemployment 526
Summary 529
Review questions 529

27 Exchange rates and the balance of payments 531

27.1 The foreign exchange market 531
27.2 Exchange rate regimes 534

page xi

27.3 The balance of payments 535

27.4 The real exchange rate 536
27.5 Determinants of the current account 538
27.6 The financial account 538
27.7 Internal and external balance 541
27.8 The long-run equilibrium real exchange rate 542
Summary 546
Review questions 547
Appendix 549

28 Open economy macroeconomics 550

28.1 Fixed exchange rates 550
28.2 Macroeconomic policy under fixed exchange rates 554
28.3 Devaluation 555
28.4 Floating exchange rates 557
 28.5 Monetary and fiscal policy under floating exchange rates 560
Summary 562
Review questions 563

29 Business cycles 565

29.1 Trend and cycle: statistics or economics? 566
29.2 Theories of the business cycle 567
29.3 Real business cycles 571
29.4 Supply-side effects of the financial crash 573
29.5 An international business cycle? 574
29.6 Summing up: schools of macroeconomic thought 575
Summary 581
Review questions 582
Appendix 583

PART FIVE The world economy

30 International trade 586

30.1 Trade patterns 587
30.2 Comparative advantage 588
30.3 Intra-industry trade 593
30.4 The economics of tariffs 594
30.5 Good and bad arguments for tariffs 596
30.6 Other trade policies 602
Summary 603
Review questions 604
 Appendix 605

31 Exchange rate regimes 606

31.1 The gold standard 606
31.2 An adjustable peg 608
31.3 Floating exchange rates 609
31.4 Speculative attacks on fixed exchange rates 609
31.5 Antecedents of the Eurozone 612
31.6 The economics of the euro 613
Summary 618
Review questions 619
Appendix 620

32 Globalization, national sovereignty and the world

economy 621
32.1 A brief history of globalization 622
32.2 Benefits and costs of globalization 624
32.3 The nation state in the world economy 626
32.4 The European Union 627
32.5 Brexit 629
32.6 From NAFTA to USMCA 632
32.7 ASEAN 633
32.8 China and India 634
32.9 Representation in multilateral bodies 634
Summary 636
Review questions 637
Appendix: Answers to activity and maths questions 638
Glossary 643
Index 653
page xii
Preface
Economics is much too interesting to be left to professional economists. It
affects almost everything we do, not merely at work or at the shops but also
in the home and the voting booth. It influences how well we look after our
planet, the future we leave for our children, the extent to which we can care
for the poor and the disadvantaged, and the resources we have for enjoying
ourselves.
These issues are discussed daily, in bars and on buses as well as in cabinet
meetings and boardrooms. The formal study of economics is exciting because
it introduces a toolkit that allows a better understanding of the problems we
face. Everyone knows a smoky engine is a bad sign, but sometimes only a
trained mechanic can give the right advice on how to fix it.
This book is designed to teach you the toolkit and give you practice in using
it. Nobody carries an enormous toolbox very far. Useful toolkits are small
enough to be portable but contain enough proven tools to deal with both
routine problems and unforeseen circumstances. With practice, you will be
surprised at how much light this analysis can shed on daily living. This book
is designed to make economics seem as useful as it really is.

How much do economists disagree?

People often complain that economists never agree about anything. This is
simply not true. The media, taxi-drivers and politicians love to talk about
topics on which there is disagreement; it would be boring TV if all
participants in a panel discussion held identical views. But economics is not a
subject on which there is always an argument for everything. There are
answers to many questions.
We aim to show where economists agree – on what and for what reason – and
why they sometimes disagree.
Economics in the twenty-first century
Our aim is to allow students to understand today’s economic environment.
This requires mastering the theory and practising its application. Just as the
theory of genetics or of information technology is slowly progressing, so the
theory of economics continues to make progress, sometimes in dramatic and
exciting ways. Sometimes this is prompted by theoretical reasoning;
sometimes it is a response to a dramatic new event, such as the banking crash
and subsequent financial meltdown around the world.
We believe in introducing students immediately to the latest ideas in
economics. If these can be conveyed simply, why force students to use older
approaches that work less well? Recent developments in economics underlie
much of what we do. One is the role of information and the digital economy,
the other is globalization.
How information is transmitted and manipulated is central to many issues
concerning incentives and competition, including the recent boom in the
digitization of the economy. Ease of information, coupled with lower
transport costs, also explains trends towards globalization, and associated
reductions in national sovereignty, especially in smaller countries. Modern
economics helps us make sense of our changing world, think about where it
may go next, and evaluate choices that we currently face.

Changes to the twelfth edition

After more than 30 years at the top, we wanted to ensure that the book
remains as relevant for the next 30 years as it has been in the past. Those
familiar with previous editions will continue to recognize the underlying
structure and approach, a window on the latest thinking about our evolving
world and the way in which economics can make sense of it.
The twelfth edition has been thoroughly revised both in content and structure,
using feedback from a broad range of actual and potential adopters. A lot has
changed since the last edition and it is all reflected in the text. The main
changes to the new edition include:
Three new chapters have been added: Chapter 6, Chapter 16 and Chapter
 32. Chapter 6 introduces choice under uncertainty and the main features of
behavioural economics. Chapter 16 analyses how governments intervene in
markets through competition policy, regulation and industrial policy.
Chapter 32 analyses the macroeconomic aspects of globalization and
national sovereignty.
Chapter 11 now includes a new section on the effects of immigration on
labour market outcomes.
page xiii
Chapter 12 includes a more comprehensive analysis of income
inequality.
Chapter 13 includes a more detailed analysis of asymmetric information
and an entire new part on the digital economy.
Chapters 21 and 22 have been reordered, with the former focusing
exclusively on money supply, and the latter dealing with money demand
and the transmission mechanism of monetary policy.
The Trump tax cuts are discussed in Chapter 20, and the trade war with
China is discussed in Chapter 30.
Chapter 32 deals not just with the economics of Brexit but with other
tensions between national sovereignty and globalization.
Full updates throughout to include the most recent data available in graphs
and tables.
Over 180 contemporary case studies, activities, concepts and math boxes.
The majority of those are new and updated.
Important new pedagogical features, including topical case studies, boxes
on economic concepts and activity applications, and optional maths boxes
for the technically minded. To improve the flow of each chapter, many of
the optional math boxes are now included in end of chapter Appendices.
Overall the twelfth edition has 45 more of these pedagogical features
compared to the last edition.
Updated digital resources for both students and lecturers.
With all this change, the book’s structure is a bit different from the last
edition. The main changes are listed below:
 Part I now includes only Chapters 1 and 2, while Part III includes Chapters
14, 15 and 16.
Chapter 28 in the eleventh edition is now Chapter 18. Similarly, Chapter 26
is now Chapter 31.
Part V now includes Chapters 30, 31 and 32.

Learning by doing
‘I hear and I forget. I see and I remember. I do and I understand’,
(Confucius, 551 bc to 479 bc)
Few people practise for a driving test just by reading a book. Even when you
think you understand how to do a hill start, it takes a lot of practice to master
the finer points. In the same way, we give you lots of examples and real-
world applications not just to emphasize the relevance of economics but also
to help you master it for yourself. We start at square one and take you slowly
through the tools of theoretical reasoning and how to apply them. We use
algebra and equations sparingly, more often than not in separate boxes and
appendices so they can be skipped or used depending on how technically
minded you are. The best ideas are simple and robust, and can usually be
explained quite easily.

How to study
Don’t just read about economics, try to do it! It is easy, but a mistake, to read
on cruise control, highlighting the odd sentence and gliding through
paragraphs we have worked hard to simplify. Active learning needs to be
interactive. When the text says ‘clearly’, ask yourself ‘why’ it is clear. See if
you can construct the diagram before you look at it. As soon as you don’t
follow something, go back and read it again. Try to think of other examples
to which the theory could be applied. The only way to check you really
understand things is to test yourself. There are opportunities to do this in the
book through activity and review questions, as well as online through
Connect Economics.
To assist you in working through this text, we have developed a number of
distinctive study and design features. To familiarize yourself with these
features, please turn to the Guided Tour on pages xv–xvii.

Supplementary resources
Economics, twelfth edition offers a comprehensive package of resources for
the teaching and learning of economics. The resources offered with the new
edition have been developed in response to feedback from current users in
order to provide lecturers with a variety of teaching resources for class
teaching, lectures and assessment. Students are also offered a range of extra
materials to assist in learning, revising and applying the principles of
economics.

Connect
Connect Economics is a digital teaching and learning environment that
improves performance over a variety of critical outcomes. It gives lecturers
and tutors the power to create assignments, tests and quizzes online. Easily
accessible grade reports allow you to track your students’ progress. Students
get feedback on each individual question and immediate grading on both
assignments and independent revision questions, which makes it the perfect
platform to test your knowledge. Videos, animated graphs, case page xiv
studies and vignettes allow students to explore complicated
graphs and concepts in more detail.
To learn more about Connect, turn to page xxv or visit
mheducation.co.uk/connect.

Online Learning Centre

An accompanying Online Learning Centre website has been developed to
provide an unrivalled package of flexible, high-quality resources for
lecturers. To access all of the free Online Learning Centre resources and to
find out about enhanced options, simply visit the website at
www.mheducation.co.uk/textbooks/begg12
To learn more about the resources available to lecturers and students online,
go to our tour of the resources on page xv.
page xv
Guided tour

PRACTICE AND
TESTING

Review questions
encourage you to
apply the
knowledge you
have acquired from
each chapter. The
questions are graded
by difficulty,
allowing you to
stretch yourself
further once you
have mastered the
topic at a basic
level. These
questions are all
integrated into
Connect, through
which your lecturer
can set homework
assignments.

page xvi

APPLICATION

Each chapter
includes a number
of boxed examples.
These aim to show
how a particular
economic example
can be applied in
practice. They are
explained in further
detail on page xviii.
Connect also
provides helpful
tools to relate what
is learnt in the book
to real life,
including case study
questions,
interactive graphs,
application based
activities and a
range of videos.

page xvii
AIDING
UNDERSTANDING

Each chapter offers

extensive pedagogy
to aid your
understanding of the
topics. This includes
Learning Outcomes,
Key Terms,
Summaries and
extensive tables and
figures. On Connect,
students can use
SmartBook, an
adaptive reading
platform which
actively tailors key
topics for students to
focus on and
prompts students
with questions based
on the material they
are studying.
page xviii
Boxed material
The text offers a wealth of boxed material to help explain how a particular
economic principle can be applied in practice. There are four different types
of box:
Case: These draw on topical events and recent economic research to help
illustrate economics in action.
Concept: These contain content that is slightly more complex and provide
some additional, more challenging, topics for you to explore.
Activity: Similar to those in the last edition, these illustrate key economic
concepts and then ask you to apply them to the real world. There are
questions at the end of each activity and you can find the answers at the
back of the book.
Maths: These boxes highlight key mathematical formulae and present
them in a digestible format. They can easily be skipped without
interrupting the flow of the chapter, if necessary.

Chapter Title Type Page

1 Oil price shocks and what, how and for Case 3
whom to produce
Opportunity costs and choices: an Concept 5
example
Sunk costs and decision making Concept 6
Most output is service Activity 12
State capitalism in China Case 15
2 Big data and machine learning Concept 21
Should we pay students to improve their Case 22
academic performances?
 Money illusion Concept 26
Causation vs correlation Concept 29
Landing the big job Activity 31
Get a Becker view: Use an economist’s Case 33
spectacles
3 Demand, willingness to pay and Concept 41
marginal benefits
Market equilibrium with linear demand Maths 42
and supply
The demand for mobile apps Case 44
Movement along a curve vs shifts of a Activity 46
curve
Graphical derivation of consumer and Concept 48
producer surplus
Consumer surplus: The case of Uber Case 49
Price controls in Venezuela Case 50
Anatomy of price and quantity changes Case 52
4 Calculating elasticities Maths 57
Internet and the elasticity of demand Case 60
The price of the iPhone and the Case 61
elasticity of demand
Easy profits Case 63
Car crazy Case 67
Houses’ elasticity of supply Case 68
The point elasticity Maths 72
5 Other contour maps Concept 78
The budget constraint and the budget Maths 80
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