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BRIEF
CONTENTS
Guide to the text xiii
Guide to the online resources xv
Preface to this edition xvii
Preface to the original edition xx
To the students xxi
About the authors xxii
Acknowledgements xxiv

Part 1 Introduction 2 Part 5 Firm behaviour and the organisation

Chapter 1 Ten principles of economics 4 of industry 278

Chapter 2 Thinking like an economist 24 Chapter 13 The costs of production 280

Chapter 3 Interdependence and the gains from Chapter 14 Firms in competitive markets 303
trade 52 Chapter 15 Monopoly 326

Part 2 Supply and demand I: How markets Chapter 16 Monopolistic competition 356
work 68 Chapter 17 Oligopoly and business strategy 375
Chapter 4 The market forces of supply and Chapter 18 Competition policy 400
demand 70
Part 6 The economics of labour markets 420
Chapter 5 Elasticity and its application 97
Chapter 19 The markets for the factors of
Chapter 6 Supply, demand and government production 422
policies 121
Chapter 20 Earnings and discrimination 446
Part 3 Supply and demand II: Markets and Chapter 21 Income inequity and poverty 468
welfare 146
Chapter 7 Consumers, producers and the efficiency Part 7 Topics for further study 490
of markets 148 Chapter 22 The theory of consumer choice 492
Chapter 8 Application: The costs of taxation 170 Chapter 23 Frontiers of microeconomics 521
Chapter 9 Application: International trade 192 Glossary 542
Suggestions for reading 546
Part 4 The economics of the public sector 216 Index 549
Chapter 10 Externalities 218
Chapter 11 Public goods and common resources 239
Chapter 12 The design of the tax system 260

v
 CONTENTS
Guide to the text xiii
Guide to the online resources xv
Preface to this edition xvii
Preface to the original edition xx
To the students xxi
About the authors xxii
Acknowledgements xxiv

Our first model: The circular-flow diagram 28

Part 1 Introduction 2
Our second model: The production possibilities
Chapter 1 Ten principles of economics 4 frontier 29
How people make decisions 5 Microeconomics and macroeconomics 31
Principle 1: People face trade-offs 5 The economist as policy adviser 33
Principle 2: The cost of something is what you give up to Positive versus normative analysis 33
get it 6 Economists in government 34
Principle 3: Rational people think at the margin 7 Why economists’ advice is not always
Principle 4: People respond to incentives 9 followed 35
Case study: Choosing when the stork comes 10 Why economists disagree 36
How people interact 11 Differences in scientific judgements 36
Principle 5: Trade can make everyone better off 11 Differences in values 36
In the news: Outsourcing your own job 12 What Australian economists think 37
Principle 6: Markets are usually a good way to organise What Australian economists think 37
economic activity 13 Let’s get going 37
FYI: Adam Smith and the role of markets 14 Summary 39
Case study: Adam Smith would have loved
Uber 15 Key concepts 39
Principle 7: Governments can sometimes improve Questions for review 39
market outcomes 15 Multiple choice 39
How the economy as a whole works 17 Problems and applications 40
Principle 8: A country’s standard of living depends on its Appendix: Graphing – a brief review 42
ability to produce goods and services 17
Graphs of a single variable 42
Principle 9: Prices rise when the government prints too
Graphs of two variables: The coordinate system 42
much money 17
Curves in the coordinate system 44
Principle 10: Society faces a short-term trade-off between
inflation and unemployment 18 Slope and elasticity 47
Cause and effect 49
Conclusion 20
Summary 21 Chapter 3 Interdependence and the gains from
Key concepts 21 trade 52
Questions for review 21 A parable for the modern economy 53
Multiple choice 21 Production possibilities 54
Specialisation and trade 55
Problems and applications 22
The principle of comparative advantage 57
Chapter 2 Thinking like an economist 24 Absolute advantage 57
The economist as scientist 25 Opportunity cost and comparative advantage 57
The scientific method: Observation, theory and more Comparative advantage and trade 58
observation 25 FYI: The legacy of Adam Smith and David
The role of assumptions 26 Ricardo 59
Economic models 27 The price of trade 60

vi
Applications of comparative advantage 60 The variety of demand curves 100
Should Roger Federer mow his own lawn? 60 FYI: The midpoint method: A better way to calculate
Should Australia trade with other countries? 61 percentage changes and elasticities 102
In the news: Who has a comparative advantage in Total revenue and the price elasticity of demand 103
slaying ogres? 62 Case study: Pricing admission to an art gallery 105
Conclusion 63 Elasticity and total revenue along a linear demand
curve 105
Summary 64
Other demand elasticities 107
Key concepts 64 The elasticity of supply 108
Questions for review 64 The price elasticity of supply and its determinants 108
Multiple choice 64 Computing the price elasticity of supply 108
Problems and applications 65 The variety of supply curves 109
Three applications of supply, demand and elasticity 109
Part 2 Supply and demand I: How markets Can good news for farming be bad news for farmers? 111
work 68 Why did OPEC fail to keep the price of oil high? 113
Do drug bans increase or decrease drug-related
Chapter 4 The market forces of supply and
crime? 114
demand 70
Conclusion 116
Markets and competition 71
Summary 117
What is a market? 71
Key concepts 117
What is competition? 71
Demand 72 Questions for review 117
The demand curve: The relationship between price and Multiple choice 118
quantity demanded 72 Problems and applications 118
Market demand versus individual demand 74
FYI: Ceteris paribus 75 Chapter 6 Supply, demand and government
Shifts in the demand curve 76 policies 121
Case study: Are smartphones and tablets substitutes or Controls on prices 122
complements? 77 How price ceilings affect market outcomes 122
Case study: Two ways to reduce the quantity of smoking Case study: Lines at the petrol station 124
demanded 78 Case study: Rent control in the short run and long
Supply 80 run 125

CONTENTS
The supply curve: The relationship between price and How price floors affect market outcomes 126
quantity supplied 80 Case study: Minimum wage rates 128
Market supply versus individual supply 81 What Australian economists think 130
Shifts in the supply curve 82 Evaluating price controls 130
Supply and demand together 85 Taxes 131
Equilibrium 85 How taxes on sellers affect market outcomes 132
Three steps for analysing changes in equilibrium 87 How taxes on buyers affect market outcomes 133
Conclusion: How prices allocate resources 90 Case study: Who pays the payroll tax? 135
In the news: Mother Nature shifts the supply curve 92 Elasticity and tax incidence 136
Summary 93 Subsidies 137
Key concepts 93 How subsidies affect market outcomes 138
Case study: Who gets the benefits from the First Home
Questions for review 93 Owner Grant scheme? 140
Multiple choice 94 What Australian economists think 141
Problems and applications 95 Conclusion 141
Summary 142
Chapter 5 Elasticity and its application 97
Key concepts 142
The elasticity of demand 98
Questions for review 142
The price elasticity of demand and its determinants 98
Computing the price elasticity of demand 99 Multiple choice 143
FYI: A few elasticities from the real world 100 Problems and applications 143

vii
 Chapter 9 Application: International trade 192
Part 3 Supply and demand II: Markets and
welfare 146 The determinants of trade 193
The equilibrium without trade 193
Chapter 7 Consumers, producers and the
The world price and comparative advantage 194
efficiency of markets 148
The winners and losers from trade 195
Consumer surplus 149
The gains and losses of an exporting country 195
Willingness to pay 149
The gains and losses of an importing country 198
Using the demand curve to measure consumer
The effects of a tariff 200
surplus 150
FYI: Import quotas: Another way to restrict trade 202
How a lower price raises consumer surplus 153
The lessons for trade policy 202
What does consumer surplus measure? 153
Other benefits of international trade 203
Case study: How parking meters help you find a parking
In the news: Trade as a tool for economic
space 155
development 204
Producer surplus 156
The arguments for restricting trade 205
Cost and the willingness to sell 156
The jobs argument 206
Using the supply curve to measure producer surplus 157
The national security argument 206
How a higher price raises producer surplus 158 In the news: Should the winners from free trade
Market efficiency 160 compensate the losers? 207
The benevolent social planner 160 The infant industry argument 208
Evaluating the market equilibrium 161 The unfair competition argument 208
Case study: Should there be a market for organs? 163 The protection-as-a-bargaining-chip argument 208
Conclusion: Market efficiency and market failure 164 Case study: Trade agreements and the World Trade
Summary 166 Organization 209
Conclusion 210
Key concepts 166
What Australian economists think 211
Questions for review 166
Summary 212
Multiple choice 166
Key concepts 212
Problems and applications 167
Questions for review 212
Chapter 8 Application: The costs of Multiple choice 212
taxation 170 Problems and applications 213
The deadweight loss of taxation 171
CONTENTS

How a tax affects market participants 171 Part 4 The economics of the public sector 216
Deadweight losses and the gains from trade 175
The determinants of the deadweight loss 176
Chapter 10 Externalities 218
Case study: The deadweight loss debate 178 Externalities and market inefficiency 220
Deadweight loss and tax revenue as taxes vary 179 Welfare economics: A recap 220
Case study: The Laffer curve and supply-side Negative externalities 220
economics 181 Positive externalities 222
Conclusion 183 Case study: Technology spillovers, industrial policy and
patent protection 223
Summary 184 What Australian economists think 224
Key concept 184 Public policies on externalities 225
Questions for review 184 What Australian economists think 225
Multiple choice 184 Command-and-control policies: Regulation 225
Problems and applications 185 Market-based policy 1: Corrective taxes and
subsidies 226
Appendix 188
Case study: Taking out the garbage 227
The welfare economics of subsidies 188 Market-based policy 2: Tradeable pollution permits 228
The cost of a subsidy 189 Case study: British Columbia adopts a broad-based
The deadweight loss from a subsidy 190 carbon tax 229
Understanding the deadweight loss from What Australian economists think 231
overproduction 191 Objections to the economic analysis of pollution 231

viii
Private solutions to externalities 232 Tax incidence and tax equity 273
The types of private solutions 232 Case study: Who pays company income tax? 273
The Coase theorem 232 Conclusion: The trade-off between equity and
Why private solutions do not always work 233 efficiency 274
Conclusion 234 Summary 275
Summary 235 Key concepts 275
Key concepts 235 Questions for review 275
Questions for review 235 Multiple choice 275
Multiple choice 235 Problems and applications 276
Problems and applications 236
Part 5 Firm behaviour and the organisation
Chapter 11 Public goods and common of industry 278
resources 239
Chapter 13 The costs of production 280
The different kinds of goods 240
What are costs? 281
Public goods 242
Total revenue, total cost and profit 281
The free-rider problem 242
Costs as opportunity costs 282
Some important public goods 243
The cost of capital as an opportunity cost 282
Case study: Are lighthouses public goods? 244
Economic profit versus accounting profit 283
The difficult job of cost–benefit analysis 245
Case study: How much is a life worth? 246 Production and costs 284
Private provision of public goods 247 FYI: How long is the long run? 284
Case study: Is music a public good? 248 The production function 285
Common resources 249 From the production function to the total-cost curve 287
The Tragedy of the Commons 249 The various measures of cost 288
Some important common resources 250 Fixed and variable costs 289
In the news: The case for toll roads 251 Average and marginal cost 290
What Australian economists think 253 Cost curves and their shapes 290
Case study: Why the cow is not extinct 254 Typical cost curves 292
Conclusion: The importance of property rights 255 Costs in the short run and in the long run 294
Summary 256 The relationship between short-run and long-run average
Key concepts 256 total cost 294

CONTENTS
Economies and diseconomies of scale 295
Questions for review 256
Conclusion 296
Multiple choice 256
FYI: Lessons from a pin factory 296
Problems and applications 257 Summary 298
Chapter 12 The design of the tax system 260 Key concepts 298
An overview of Australian taxation 261 Questions for review 298
Taxes collected by the federal government 261 Multiple choice 299
Taxes collected by state and local governments 264 Problems and applications 299
Taxes and efficiency 265
Deadweight losses 265 Chapter 14 Firms in competitive markets 303
Case study: Should income or consumption What is a competitive market? 304
be taxed? 266 The meaning of competition 304
Administrative burden 267 The revenue of a competitive firm 305
Marginal tax rates versus average tax rates 267 Profit maximisation and the competitive firm’s supply
Lump-sum taxes 268 curve 306
Taxes and equity 269 A simple example of profit maximisation 306
The benefits principle 269 The marginal-cost curve and the firm’s supply
The ability-to-pay principle 270 decision 307
Case study: How the tax burden is distributed 271 The firm’s short-run decision to shut down 309
Case study: Who should pay for higher education? 272 FYI: Spilt milk and sunk costs 310

ix
 Case study: Near-empty restaurants and off-season Chapter 16 Monopolistic competition 356
ski lodges 311 Between monopoly and perfect competition 357
The firm’s long-run decision to exit or enter a market 312
Competition with differentiated products 359
Measuring profit in our graph for the competitive firm 313
The monopolistically competitive firm in the short run 359
The supply curve in a competitive market 314
The long-run equilibrium 360
The short run: Market supply with a fixed number of
Monopolistic versus perfect competition 362
firms 315
Monopolistic competition and the welfare of society 364
The long run: Market supply with entry and exit 315
Advertising 365
Why do competitive firms stay in business if they make
zero profit? 317 The debate about advertising 365
A shift in demand in the short run and long run 317 Case study: Advertising and the price of glasses 366
Why the long-run supply curve might slope upwards 319 Advertising as a signal of quality 367
Brand names 368
Conclusion: Behind the supply curve 320
Conclusion 369
Summary 321
Summary 371
Key concepts 321
Key concepts 371
Questions for review 321
Questions for review 371
Multiple choice 321
Multiple choice 371
Problems and applications 322
Problems and applications 372
Chapter 15 Monopoly 326
Chapter 17 Oligopoly and business
Why monopolies arise 327
strategy 375
Monopoly resources 328
Case study: The gas industry in south-eastern Markets with only a few sellers 376
Australia 328 A duopoly example 377
Government-created monopolies 329 Competition, monopolies and cartels 377
Natural monopolies 329 The equilibrium for an oligopoly 378
How monopolies make production and pricing How the size of an oligopoly affects the market
decisions 331 outcome 379
Case study: OPEC and the world oil market 380
Monopoly versus competition 331
A monopoly’s revenue 332 The economics of cooperation 381
Profit maximisation 334 The prisoners’ dilemma 382
CONTENTS

FYI: Why a monopoly does not have a supply curve 336 Oligopolies as a prisoners’ dilemma 383
A monopoly’s profit 336 Other examples of the prisoners’ dilemma 384
Case study: Monopoly pharmaceuticals versus generic The prisoners’ dilemma and the welfare of society 385
pharmaceuticals 337 Why people sometimes cooperate 386
The welfare cost of monopoly 338 Case study: The prisoners’ dilemma tournament 387
The deadweight loss 339 Conclusion 388
The monopoly’s profit: A social cost? 341 Summary 389
Price discrimination 342 Key concepts 389
A parable about pricing 342 Questions for review 389
The moral of the story 343
Multiple choice 389
The analytics of price discrimination 344
Problems and applications 390
Examples of price discrimination 345
In the news: Why do Australians pay more for digital Appendix: Types of oligopolistic competition 394
downloads? 347 Anticipating your competitor’s response 394
Conclusion: The prevalence of monopoly 349 Cournot quantity competition 394
Summary 350 Bertrand price competition 398
Comparing Cournot and Bertrand competition 399
Key concepts 350
Questions for review 350 Chapter 18 Competition policy 400
Multiple choice 350 Public policy towards monopolies 401
Problems and applications 351 Using the law to increase competition 401

x
 What Australian economists think 402 Problems and applications 441
Case study: The ACCC – Australia’s competition Appendix: The demand for labour under imperfect
regulator 402 competition and monopoly 444
What Australian economists think 404
Regulation 404 Chapter 20 Earnings and discrimination 446
Public ownership and privatisation 405 Some determinants of equilibrium wages 447
Doing nothing 406 Compensating differentials 447
Public policy towards oligopolies 408 Human capital 448
Restraint of trade and competition laws 408 Case study: The changing value of skills 449
In the news: How to form a cartel 408 Ability, effort and chance 449
What Australian economists think 410 Case study: The benefits of beauty 450
Controversies over competition policy 410 An alternative view of education: Signalling 451
In the news: When is the price of milk too low? 411 The superstar phenomenon 452
Case study: The Baxter case 413 Above-equilibrium wages: Minimum-wage laws, unions
Conclusion 415 and efficiency wages 453
Summary 416 The economics of discrimination 454
Key concepts 416 Measuring labour-market discrimination 454
Case study: Is Jennifer more employable than
Questions for review 416
Nuying? 455
Multiple choice 416
Discrimination by employers 456
Problems and applications 417 Case study: Segregated streetcars and the profit
motive 457
Part 6 The economics of labour markets 420 Discrimination by customers and governments 457
Chapter 19 The markets for the factors of Case study: Discrimination in sports 458
production 422 Conclusion 459
The demand for labour 423 Summary 460
The competitive, profit-maximising firm 424 Key concepts 460
The production function and the marginal product Questions for review 460
of labour 425 Multiple choice 461
The value of the marginal product and the demand
Problems and applications 461
for labour 426
What causes the labour demand curve to shift? 427 Appendix: Unions and imperfect competition in labour

CONTENTS
FYI: Input demand and output supply – two sides markets 463
of the coin 428 Unions as monopolists 463
The supply of labour 429 Bilateral monopoly 465
The trade-off between work and leisure 429 Are unions good or bad for the economy? 467
What causes the labour supply curve to shift? 430 Chapter 21 Income inequity and poverty 468
In the news: The economy needs you 431
The measurement of inequality 469
Equilibrium in the labour market 432
Australian income inequality 469
Shifts in labour supply 432
Case study: The women’s movement and income
Shifts in labour demand 434 distribution 471
Case study: Productivity and wages 435
Income inequality around the world 471
The other factors of production: Land and capital 436
The poverty rate 472
Equilibrium in the markets for land and capital 436
Problems in measuring inequality 474
FYI: What is capital income? 437
Case study: Alternative measures of inequality 475
Linkages among the factors of production 438
The political philosophy of redistributing income 476
Case study: The economics of the Black Death 438
Utilitarianism 476
Conclusion 439
Liberalism 478
Summary 440
Libertarianism 479
Key concepts 440 What Australian economists think 480
Questions for review 440 Policies to reduce poverty 480
Multiple choice 440 Minimum-wage laws 480

xi
 Social security 481 Chapter 23 Frontiers of microeconomics 521
Negative income tax 481 Asymmetric information 522
In the news: Thinking innovatively about income
Hidden actions: Principals, agents and moral hazard 522
redistribution 482
FYI: Corporate management 523
In-kind transfers 483
Hidden characteristics: Adverse selection and the lemons
Antipoverty programs and work incentives 484 problem 524
Conclusion 485 Signalling to convey private information 525
Summary 486 Case study: Gifts as signals 526
Key concepts 486 Screening to induce information revelation 526
Asymmetric information and public policy 527
Questions for review 486
Political economy 528
Multiple choice 486
The Condorcet voting paradox 528
Problems and applications 487
Arrow’s impossibility theorem 529
Part 7 Topics for further study 490 The median voter is king 530
Politicians are people too 532
Chapter 22 The theory of consumer choice 492 Behavioural economics 532
The budget constraint: What the consumer can People aren’t always rational 532
afford 493 In the news: Our inertia may be costing lives 534
Preferences: What the consumer wants 495 People care about fairness 535
Representing preferences with indifference curves 495 People are inconsistent over time 536
Four properties of indifference curves 496 What Australian economists think 537
Two extreme examples of indifference curves 498 Conclusion 537
Optimisation: What the consumer chooses 500 Summary 538
The consumer’s optimum choices 500 Key concepts 538
FYI: Utility – an alternative way to describe preferences
Questions for review 538
and optimisation 500
How changes in income affect a consumer’s choices 502 Multiple choice 538
How changes in prices affect a consumer’s choices 503 Problems and applications 539
Income and substitution effects 505
Glossary 542
Deriving the demand curve 506 Suggestions for reading 546
Three applications 508 Index 549
CONTENTS

Do all demand curves slope downwards? 508

Case study: The search for Giffen goods 509
How do wages affect labour supply? 509
Case study: Income effects on labour supply – historical
trends, lottery winners and the Carnegie
conjecture 512
What Australian economists think 513
How do interest rates affect household saving? 513
Conclusion: Do people really think this way? 516
Summary 517
Key concepts 517
Questions for review 517
Multiple choice 518
Problems and applications 518

xii
PREFACE TO
THIS EDITION
Studying economics should invigorate and enthral. It should challenge students’ preconceptions and
provide them with a powerful, coherent framework for analysing the world they live in. Yet, all too often,
economics textbooks are dry and confusing. Rather than highlighting the important foundations of
economic analysis, these books focus on the ‘ifs’ and ‘buts’. The motto underlying this book is that it is
‘the rule, not the exception’ that is important. Our aim is to show the power of economic tools and the
importance of economic ideas.
This book has been designed particularly for students in Australia and New Zealand. However, we
are keenly aware of the diverse mix of students studying in these countries. When choosing examples
and applications, we have kept an international focus. Whether the issue is sauce tariffs in the EU, rent
control in Mumbai, road tolls in Singapore or the gas industry in Australia, examples have been chosen
for their relevance and to highlight that the same economic questions are being asked in many
countries. The specific context in which economics is applied may vary, but the lessons and insights
offered by the economic way of thinking are universal.
To boil economics down to its essentials, we had to consider what is truly important for students to
learn in their first course in economics. As a result, this book differs from others not only in its length
but also in its orientation.
It is tempting for professional economists writing a textbook to take the economist’s point of view
and to emphasise those topics that fascinate them and other economists. We have done our best to
avoid that temptation. We have tried to put ourselves in the position of students seeing economics for
the first time. Our goal is to emphasise the material that students should and do find interesting about
the study of the economy.
One result is that more of this book is devoted to applications and policy, and less is devoted to
formal economic theory, than is the case with many other books written for the principles course. For
example, after students learn about the market forces of supply and demand in Chapters 4 to 6, they
immediately apply these tools in Chapters 7 to 9 to consider three important questions facing our
society: Why is the free market a good way to organise economic activity? How does taxation interfere
with the market mechanism? Who are the winners and losers from international trade? These kinds of
questions resonate with the concerns and interests that students hear about in the news and bring from
their own lives.
Throughout this book, we have tried to return to applications and policy questions as often as
possible. Most chapters include case studies illustrating how the principles of economics are applied. In
addition, ‘In the news’ boxes offer excerpts from newspaper and magazine articles showing how
economic ideas shed light on the current issues facing society. It is our hope that after students finish
their first course in economics, they will think about news stories from a new perspective and with
greater insight.

xvii
 To write a brief and student-friendly book, we had to consider new ways to organise the material.
This book includes all the topics that are central to a first course in economics, but the topics are not
always arranged in the traditional order. What follows is a whirlwind tour of this text. This tour will, we
hope, give instructors some sense of how the pieces fit together.
Chapter 1, ‘Ten principles of economics’, introduces students to the economist’s view of the world. It
previews some of the big ideas that recur throughout economics, such as opportunity cost, marginal
decision making, the role of incentives, the gains from trade and the efficiency of market allocations.
Throughout the book, we refer regularly to the Ten Principles of Economics in Chapter 1 to remind
students that these principles are the foundation for most economic analysis. A key icon in the margin
calls attention to these references.
Chapter 2, ‘Thinking like an economist’, examines how economists approach their field of study. It
discusses the role of assumptions in developing a theory and introduces the concept of an economic
model. It also discusses the role of economists in making policy. The appendix to this chapter offers a
brief refresher course on how graphs are used and how they can be abused.
Chapter 3, ‘Interdependence and the gains from trade’, presents the theory of comparative
advantage. This theory explains why individuals trade with their neighbours, and why nations trade
with other nations. Much of economics is about the coordination of economic activity through market
forces. As a starting point for this analysis, students see in this chapter why economic interdependence
can benefit everyone. This is done using a familiar example of trade in household chores among
flatmates.
The next three chapters introduce the basic tools of supply and demand. Chapter 4, ‘The market
PREFACE TO THIS EDITION

forces of supply and demand’, develops the supply curve, the demand curve and the notion of market
equilibrium. Chapter 5, ‘Elasticity and its application’, introduces the concept of elasticity and uses it in
three applications to quite different markets. Chapter 6, ‘Supply, demand and government policies’,
uses these tools to examine price controls, such as rent control, the award wage system, tax incidence
and subsidies.
Attention then turns to welfare analysis using the tools of supply and demand. Chapter 7,
‘Consumers, producers and the efficiency of markets’, extends the analysis of supply and demand using
the concepts of consumer surplus and producer surplus. It begins by developing the link between
consumers’ willingness to pay and the demand curve and the link between producers’ costs of
production and the supply curve. It then shows that the market equilibrium maximises the sum of the
producer and consumer surplus. In this book, students learn about the efficiency of market allocations
early in their studies.
The next two chapters apply the concepts of producer and consumer surplus to questions of policy.
Chapter 8, ‘Application: The costs of taxation’, examines the deadweight loss of taxation. Chapter 9,
‘Application: International trade’, examines the winners and losers from international trade and the
debate about protectionist trade policies.
Having examined why market allocations are often desirable, the book then considers how the
government can sometimes improve on market allocations. Chapter 10, ‘Externalities’, examines why
external effects such as pollution can render market outcomes inefficient. It also examines the possible
public and private solutions to those inefficiencies. This has become highly relevant as policymakers
attempt to deal with mitigating the causes of climate change. Chapter 11, ‘Public goods and common
resources’, considers the inefficiencies that arise for goods that have no market price, such as national
defence. Chapter 12, ‘The design of the tax system’, examines how the government raises the revenue

xviii
necessary to pay for public goods. It presents some institutional background about the tax system and
then discusses how the goals of efficiency and equity come into play in the design of a tax system.
The next six chapters examine firm behaviour and industrial organisation. Chapter 13, ‘The costs of
production’, discusses what to include in a firm’s costs and introduces cost curves. Chapter 14, ‘Firms
in competitive markets’, analyses the behaviour of price-taking firms and derives the market supply
curve. Chapter 15, ‘Monopoly’, discusses the behaviour of a firm that is the sole seller in its market. It
discusses the inefficiency of monopoly pricing and the value of price discrimination. Chapter 16,
‘Monopolistic competition’, examines behaviour in a market in which many sellers offer similar but
differentiated products. It also discusses the debate about the effects of advertising. Chapter 17,
‘Oligopoly and business strategy’, examines markets when there are only a few sellers and so strategic
interactions are important. It uses the prisoners’ dilemma as the model for examining strategic
interaction. Chapter 18, ‘Competition policy’, describes the policy instruments used by governments to
control monopoly power and preserve competition in markets.
Microeconomic reform is discussed throughout the chapters on firm behaviour and industrial
organisation rather than as a separate topic. For instance, the role of privatisation is included in Chapter
15, and competition and trade practices issues are discussed in Chapter 18. Also, note that Chapter 17
includes an appendix that can be used to teach students about the differences between price and
quantity competition in oligopoly. This appendix makes the latest game-theoretic thinking on these
issues accessible to introductory economics students.
The next three chapters examine issues related to labour markets. Chapter 19, ‘The markets for the

PREFACE TO THIS EDITION

factors of production’, emphasises the link between factor prices and marginal productivity. It includes
an appendix on the firm demand for labour under imperfect competition and monopoly. Chapter 20,
‘Earnings and discrimination’, discusses the determinants of equilibrium wages, including
compensating differentials, human capital, unions, efficiency wages and discrimination. The union
discussion goes beyond simplistic analyses of unions and monopolists, introducing union behaviour as
part of a bargaining equilibrium in bilateral monopoly. The discussion of human capital and efficiency
wages proves a convenient point to introduce students to the concepts of signalling and asymmetric
information. Chapter 21, ‘Income inequity and poverty,’ examines the degree of inequality in Australian
society, the alternative views about the government’s role in changing the distribution of income, and
the various policies aimed at helping society’s poorest members.
Chapter 22, ‘The theory of consumer choice’, analyses individual decision making using budget
constraints and indifference curves. Finally, Chapter 23, ‘Frontiers of microeconomics’, goes beyond
standard microeconomics to examine cutting-edge issues such as the role of information, political
economy and behavioural economics; all of which help explain more of what happens in the real world.
These last two chapters cover material that is somewhat more advanced than the rest of the book.
Some instructors may want to skip the last chapter, depending on the emphases of their courses and
the interests of their students. Instructors who do cover this material may want to move it earlier, and
we have written this chapter so that it can be covered any time after the basics of supply and demand
have been introduced.

Joshua S. Gans
Stephen P. King
Martin C. Byford

xix
 PREFACE TO THE
ORIGINAL EDITION
During my twenty-year career as a student, the course that excited me most was the two-semester
sequence on the principles of economics I took during my freshman year in college. It is no
exaggeration to say that it changed my life.
I had grown up in a family that often discussed politics over the dinner table. The pros and cons of
various solutions to society’s problems generated fervent debate. But, in school, I had been drawn to the
sciences. Whereas politics seemed vague, rambling and subjective, science was analytic, systematic
and objective. While political debate continued without end, science made progress.
My freshman course on the principles of economics opened my eyes to a new way of thinking.
Economics combines the virtues of politics and science. It is, truly, a social science. Its subject matter is
society – how people choose to lead their lives and how they interact with one another. But it
approaches its subject with the dispassion of a science. By bringing the methods of science to the
questions of politics, economics tries to make progress on the fundamental challenges that all societies
face.
I was drawn to write this book in the hope that I could convey some of the excitement about
economics that I felt as a student in my first economics course. Economics is a subject in which a little
knowledge goes a long way. (The same cannot be said, for instance, of the study of physics or the
Japanese language.) Economists have a unique way of viewing the world, much of which can be taught
in one or two semesters. My goal in this book is to transmit this way of thinking to the widest possible
audience and to convince readers that it illuminates much about the world around them.
I am a firm believer that everyone should study the fundamental ideas that economics has to offer.
One of the purposes of general education is to make people more informed about the world in order to
make them better citizens. The study of economics, as much as any discipline, serves this goal. Writing
an economics textbook is, therefore, a great honour and a great responsibility. It is one way that
economists can help promote better government and a more prosperous future. As the great economist
Paul Samuelson put it, ‘I don’t care who writes a nation’s laws, or crafts its advanced treaties, if I can
write its economics textbooks.’

N. Gregory Mankiw
July 2000

xx
Another random document with
no related content on Scribd:
 Well, right under your eyes will happen one of the strangest things
I have ever seen.
From the row of dark spots along the leaf’s edge, springs a row of
tiny, perfect plants (Fig. 132).
And when these tiny plants are fairly started, if you lay the leaf on
moist earth, they will send their roots into the ground, break away
from the fading leaf, and form a whole colony of new plants.
Now, those dark spots along the leaf’s edge were tiny buds; and
the thick leaf was so full of rich food, that when it was broken off from
the parent plant, and all of this food was forced into the buds, these
were strong enough to send out roots and leaves, and to set up in
life for themselves.
It will not be difficult for your teacher to secure some of these
leaves of the Bryophyllum, and to show you in the schoolroom this
strange performance.
All children enjoy wonderful tricks, and I know of nothing much
prettier or more astonishing than this trick of the Bryophyllum.
 Part V—Leaves

HOW TO LOOK AT A LEAF

T O-DAY we begin to learn what we can about the leaves of

plants. I hope that enough fresh green leaves have been brought
to school to allow every child here to have one on the desk before
him, so that he may see, as far as is possible, just what is being
talked about.
This picture (Fig. 133) shows you the leaf of the quince. Now,
suppose you held in your hand a leaf fresh from the quince tree, and
were asked to describe it to a blind person, how would you tell about
it?

Fig. 133

You would begin, I fancy, by saying, “This leaf is green,” for the
color of an object is one of the things we notice first.
Next perhaps you would describe its shape. “This quince leaf is
rounded, yet it is too long to be called a round leaf.” So you would
use the word “oblong.”
Like most leaves, then, it is green; and like some other leaves, it is
oblong.
Now look at this picture (Fig. 134) of the maple leaf. This, you see,
is not oblong, but three-pointed.
What other differences do you notice between these two leaves?
You do not seem quite sure as to whether there are any other
differences. But do you not notice that the edge of the maple leaf is
cut into little teeth, like the edge of a saw, while the edge of the
quince leaf is smooth?
And let me tell you here, that when I speak of a leaf, I speak not
only of the enlarged flat surface we call the “leaf blade,” but also of
the “leafstalk.” A leaf usually consists of a leafstalk and a leaf blade,
though some leaves are set so close to the stem that they have no
room for any stalks of their own.

Fig. 134

“Oh! then,” you answer, “the leafstalk of the maple is much longer
than that of the quince, and there are little bits of leaves at the foot of
the quince leafstalk which the maple is without.”
You have done very well, and have noticed just those things which
you should.
The shape of the leaf blade, whether the edge of this is toothed,
the length of the leafstalk, and whether this has any little leaves at its
foot where it joins the stem, are things always worth noticing.
Now take your leaves and hold them up against the light, or else
look at the picture of the quince leaf, and study carefully the make-up
of the blade.
You see that this is divided lengthwise by a heavy rib which juts
out on the lower side. From this “midrib,” as it is called, run a great
many smaller lines. These are called “veins.” And from these branch
off still smaller veins that bear the name of “veinlets.” And somewhat
as the paper is stretched over the sticks of a kite, so from the leaf’s
midrib to its edge, and from vein to vein, is drawn the delicate green
material which makes up the greater part of the leaf.
What I wish you to learn this morning is, how to look at a leaf.
Before using our brains rightly, we must know how to use our
eyes. If we see a thing as it really is, the chances are that our
thoughts about it will be fairly correct.
But it is surprising how often our eyes see wrong.
If you doubt this, ask four or five of your playmates to describe the
same thing,—some street accident, or a quarrel in the playground,
which all have seen, or something of the sort,—and then I think you
will understand what I mean by saying that few people see correctly.
 THE MOST WONDERFUL THING IN THE
WORLD

I T would be quite a simple matter to interest you children in plants

and their lives, if always it were possible to talk only about the
things which you can see with your own unaided eyes.
I think a bright child sees better than many a grown person, and I
think that it is easier to interest him in what he sees.
And then plants in themselves are so interesting and surprising,
that one must be stupid indeed if he or she finds it impossible to take
pleasure in watching their ways.
But about these plants there are many things which you cannot
see without the help of a microscope, and these things it is difficult to
describe in simple words. Yet it is necessary to learn about them if
you wish really to feel at home in this beautiful world of plants.
After all, whatever is worth having is worth taking some trouble for;
and nothing worth having can be had without trouble. So I hope
when you children come to parts of this book that seem at first a little
dull, you will say to yourselves, “Well, if we wish really to know
plants, to be able to tell their names, to understand their habits, we
must try to be a little patient when we come to the things that are
difficult.”
For even in your games you boys have to use some patience; and
you are quite willing to run the risk of being hurt for the sake of a little
fun.
And you girls will take no end of trouble if you happen to be
sewing for your dolls, or playing at cooking over the kitchen stove, or
doing something to which you give the name “play” instead of “work.”
I only ask for just as much patience in your study of plants; and I
think I can safely promise you that plants will prove delightful
playthings long after you have put aside the games which please you
now.
So we must begin to talk about some of the things which you are
not likely to see now with your own eyes, but which, when possible, I
will show you by means of pictures, and which, when you are older,
some of you may see with the help of a microscope.
Every living thing is made up of one or more little objects called
“cells.”
Usually a cell may be likened to a tiny bag which holds a bit of that
material which is the most wonderful thing in the whole world, for this
is the material which has life.
Occasionally a cell is nothing but a naked bit of this wonderful
substance, for it is not always held in a tiny bag.

Fig. 135

This picture (Fig. 135) shows you a naked plant cell, much
magnified, that swims about in the water by means of the two long
hairs which grow from one end of the speck of life-giving material.
The next picture (Fig. 136) shows you a seed cut across, and so
magnified that you can see plainly its many cells.
In the middle portion of the seed the cells are six-sided, and laid
against one another in an orderly and beautiful fashion, while the
outer ones are mostly round.
All animals, we ourselves, all plants, began life as a single cell.
Sometimes a cell will spend its life alone. When the time comes for
it to add to the life of the world, it divides into two or more “daughter
cells,” as they are called. These break away from one another, and
in like manner divide again.
But usually the single cell which marks the beginning of a new life
adds to itself other cells; that is, the different cells do not break away
from one another, but all cling together, and so build up the perfect
plant or animal.
By just such additions the greatest tree in the forest grew from a
single tiny cell.

Fig. 136

By just such additions you children have grown to be what you

are, and in the same way you will continue to grow.
Every living thing must eat and breathe, and so all living cells must
have food and air. These they take in through their delicate cell
walls. The power to do this comes from the bit of living substance
which lies within these walls.
This strange, wonderful material within the little cell is what is alive
in every man and woman, in every boy and girl, in every living thing,
whether plant or animal.
We know this much about it, and not the wisest man that ever
lived knows much more.
For though the wise men know just what things go to make up this
material, and though they themselves can put together these same
things, they can no more make life, or understand the making of it,
than can you or I.
But when we get a good hold of the idea that this material is
contained in all living things, then we begin to feel this; we begin to
feel that men and women, boys and girls, big animals and little
insects, trees and flowers, wayside weeds and grasses, the ferns
and rushes of the forest, the gray lichens of the cliffs and fences, the
seaweeds that sway in the green rock pools, and living things so tiny
that our eyes must fail to see them,—that all these are bound into
one by the tie of that strange and wonderful thing called life; that they
are all different expressions of one mysterious, magnificent idea.
While writing that last sentence, I almost forgot that I was writing
for boys and girls, or indeed for any one but myself; and I am afraid
that perhaps you have very little idea of what I am talking about.
But I will not cross it out. Why not, do you suppose?
Because I feel almost sure that here and there among you is a girl
or boy who will get just a little glimmering idea of what I mean; and
perhaps as the years go by, that glimmer will change into a light so
bright and clear as to become a help in dark places.
But the thought that I hope each one of you will carry home is this,
—that because this strange something found in your body is also
found in every other living thing, you may learn to feel that you are in
a way a sister or brother, not only to all other boys and girls, but to all
the animals and to every plant about you.
 HOW A PLANT IS BUILT

N OW we know that the plant, like yourself, began life as a single

cell; and we know that the perfect plant was built up by the
power which this cell had of giving birth to other cells with like power.
Suppose that a brick were laid upon the earth as the foundation of
a wall; and suppose that this brick were able to change into two
bricks. Suppose that the new brick were able to form another brick in
the same manner, and that this power should pass from brick to
brick; and suppose that all these bricks were able to arrange
themselves one upon another in an orderly fashion, so that they
could not easily be moved from their places.
Now, if you can see this brick wall growing up, you can see
something of how the cells of a plant grow up and arrange
themselves.
But though it is fairly easy to see how the plant cells form one from
another, that does not explain how they come to make a plant, with
its many different parts, with its root and stem, its branches, leaves,
and flowers.
One thing can divide and make two things of the same sort; but it
is not easy to see how it can make things that are quite different from
itself.
Now, if this difficulty as to the building-up of plants and animals
has come into your minds, you are only puzzled by what has puzzled
hundreds of people before you; and all these hundreds of people
have found the puzzle quite as impossible to solve as the king’s
horses and the king’s men found it impossible to put Humpty Dumpty
together again.
A good many questions that we cannot answer come into our
minds; but if we look honestly for the answers and do not find them,
then we can be pretty sure that for the present it is safe to leave
them unanswered.
As cell is added to cell in the building-up of plant life, some
wonderful power forces each new cell to do the special work which is
most needed by the growing plant.
Sometimes this new cell is needed to help do the work of a root,
and so it begins to do this work, and becomes part of the root; or
else it is needed to do stem work, and goes to make up the stem, or
leaf work, and is turned over into the leaf.
A healthy cell is born with the power to do whatever is most
needed.
 HOW A PLANT’S FOOD IS COOKED

S OME time ago we learned that the little root hairs, by means of
their acid, are able to make a sort of broth from the earthy
materials which they could not swallow in a solid state.
But before this broth is really quite fit for plant food, it needs even
more preparation.
Why do we eat and drink, do you suppose?
“Because we are hungry.” That is the direct reason, of course. But
we are made hungry so that we shall be forced to eat; for when we
eat, we take into our bodies the material that is needed to build them
up,—to feed the cells which make the flesh and bone and muscle.
And this is just why the plant eats and drinks. It needs constantly
fresh nourishment for its little cells, so that these can live, and grow
strong enough to make the new cells which go to form, not bone and
flesh and muscle, as with you children, but fresh roots and stem and
leaves and flowers and fruits.
If these little cells were not fed, they would die, and the plant
would cease to live also.
And now what do you think happens to the broth that has been
taken in from the earth by the root hairs?
As we have said, this broth needs a little more preparation before
it is quite fit for plant food. What it really wants is some cooking.
Perhaps you can guess that the great fire before which all plant
food is cooked is the sun.
But how are the hot rays of the sun to pierce the earth, and reach
the broth which is buried in the plant’s root?
Of course, if it remains in the root, the earth broth will not get the
needed cooking. It must be carried to some more get-at-able
position.
 Now, what part of a plant is usually best fitted to receive the sun’s
rays?
Its leaves, to be sure. The thin, flat leaf blades are spread out on
all sides, so that they fairly bathe themselves in sunshine.
So if the broth is to be cooked in the sun, up to the leaves it must
be carried.
And how is this managed? Water does not run uphill, as you know.
Yet this watery broth must mount the stem before it can enter the
leaves.
Water does not run uphill ordinarily, it is true; yet, if you dip a towel
in a basin of water, the water rises along the threads, and the towel
is wet far above the level of the basin.
And if you dip the lower end of a lump of sugar in a cup of coffee,
the coffee rises in the lump, and stains it brown.
And the oil in the lamp mounts high into the wick.
Perhaps when you are older you will be able somewhat to
understand the reason of this rise of liquid in the towel, in the lump of
sugar, in the lamp wick. The same reason accounts partly for the rise
of the broth in the stem. But it is thought that the force which sends
the oil up the wick would not send the water far up the stem. And you
know that some stems are very tall indeed. The distance, for
example, to be traveled by water or broth which is sucked in by the
roots of an oak tree, and which must reach the top-most leaves of
the oak, is very great.
Yet the earth broth seems to have no difficulty in making this long,
steep climb.
Now, even wise men have to do some guessing about this matter,
and I fear you will find it a little hard to understand.
But it is believed that the roots drink in the earth broth so eagerly
and so quickly, that before they know it they are full to overflowing. It
is easier, however, to enter a root than it is to leave it by the same
door; and the result is, that the broth is forced upward into the stem
by the pressure of more water or broth behind.
 Of course, if the stem and branches and leaves above are already
full of liquid, unless they have some way of disposing of the supply
on hand, they cannot take in any more; and the roots below would
then be forced to stop drinking, for when a thing is already quite full
to overflowing, it cannot be made to hold more.
But leaves have a habit of getting rid of what they do not need.
When the watery broth is cooked in the sun, the heat of the sun’s
rays causes the water to pass off through the little leaf mouths. Thus
the broth is made fit for plant food, and at the same time room is
provided for fresh supplies from the root.

Fig. 137

If you should examine the lower side of a leaf through a

microscope, you would find hundreds and thousands of tiny mouths,
looking like the little mouths in this picture (Fig. 137).
Some of the water from the earth broth is constantly passing
through these mouths out of the plant, into the air.
 A STEEP CLIMB

I T is all very well, you may think, to say that the pressure from the
root sends the water up through the stem; but when we cut across
such a stem as a tree trunk, one finds it full of wood, with a little
tightly packed soft stuff in the center, and not hollow like a water
pipe, as one would suppose from all that has been said about the
way the water rises in the stem.
No, a stem is not a hollow pipe, or even a bunch of hollow pipes, it
is true; and it does seem something of a question, how the water can
force its way through all this wood; and even if one hears how it is
done, it is not an easy thing to make clear either to grown people or
to children. But I will see what I can do; and I know that you really
love these plants and trees, and will try to be a little patient with them
and with me.
The water, or liquid, when it mounts a stem or tree trunk, takes a
path that leads through the new-made cells. Each young cell wall is
made of such delicate material that it allows the water, or broth, to
filter through it, just as it would pass through a piece of thin cloth.
And so it makes its way from cell to cell, along the stem, more slowly
than if it were passing through a hollow tube, but almost as surely. It
is true, the earth broth does not reach the leaves above without
having given up something to the little cells along the road. These
seem to lay hold of what they specially need for their support, while
the rest is allowed to pass on.
I want your teacher to prove to you by a little experiment that water
makes its way up a stem.
If she will place in colored water the stem of a large white tulip,
cutting off its lower end under the liquid, those parts whose little cells
are in closest connection with the stem will soon begin to change
color, taking the red or blue of the water; for a freshly cut stem has
the same power as the root to suck in water eagerly and quickly.
 HOW A PLANT PERSPIRES

W E cannot see the water as it passes from the tiny leaf mouths
into the air. Neither can we see the water that is being
constantly carried from the surface of our bodies into the air. But if
we breathe against a window pane, the scattered water in our breath
is collected by the cold of the glass in a little cloud; and if we place
the warm palms of our hands against this window pane, in the same
way the cold collects the water that is passing from the little mouths
in our skin, and shows it to us as a cloud on the glass.
Heat scatters water so that we cannot see it, any more than we
can see the lump of sugar when its little grains are scattered in hot
water; but cold gathers together the water drops so that we are able
to see them.
This is why you can “see your breath,” as you say, on a cold day.
The cold outside air gathers together the water which was scattered
by the heat of your body.
If you place against the window pane the under side of the leaves
of a growing plant, the water passing from the tiny leaf mouths
collects on the glass in just such a damp cloud as is made by the
moist palms of your warm hands.
When water passes from your hands, you say that you are
perspiring; and when water passes away from the plant, we can say
that the plant perspires. Some plants perspire more freely than
others. A sunflower plant has been known to give off more than three
tumblers of water a day by this act of perspiration.
There is a tree, called the Eucalyptus, whose leaves perspire so
freely that it is planted in swampy places in order to drain away the
water.
Of course, the more quickly the leaves throw off water, the faster
the fresh supply pushes up the stem.
 If the leaves do their work more quickly than the roots make good
the loss, then the plant wilts.
When a leaf is broken from a plant, it soon fades. Its water supply
being cut off, it has no way of making good the loss through the leaf
mouths.
Just as the air in a balloon keeps its walls firm, so the water in the
leaf cells keeps the cell walls firm.
As a balloon collapses if you prick it with a pin, and let out the air,
so the cell walls collapse when the cells lose their water; and when
the cell walls of a leaf collapse, the leaf itself collapses.
 HOW A PLANT STORES ITS FOOD

W E see that the water is drawn away from the earth broth into
the air by the heat of the sun, just as water is drawn from the
broth we place on the stove by the heat of the fire; and that when
this has happened, the plant’s food is cooked, and is in condition to
be eaten.
But this broth does not lose all its water. There is still enough left
to carry it back through the leaf into the branches and stem, and
even down into the root once more.
In fact, the prepared food is now sent to just those parts of the
plant which most need it.
Perhaps it is laid up beneath the bark, to help make new buds
which will burst into leaf and flower another year.
Or perhaps it goes down to help the roots put out new branches
and fresh root hairs.
Or possibly it is stowed away in such an underground stem as that
of the lily, or the crocus bulb, and is saved for next year’s food. Once
in a while some of this prepared food is stored in the leaf itself.
When a leaf is thick and juicy (“fleshy,” the books call it), we can
guess that it is full of plant food.
Do you recall the Bryophyllum,—the plant we talked about a few
days ago? Its wonderful leaves, you remember, gave birth to a whole
colony of new plants.
You may be sure that these leaves had refused to give up all the
food sent to them for cooking in the sun. You can guess this from
their thick, fleshy look, and you can be sure of this when you see the
baby plants spring from their edges; for without plenty of
nourishment stored away, these leaves could never manage to
support such a quantity of young ones.
 LEAF GREEN AND SUNBEAM

B UT the earth broth which the roots supply is not the only article
of importance in the plant’s bill of fare.
The air about us holds one thing that every plant needs as food.
This air is a mixture of several things. Just as the tea we drink is a
mixture of tea and water, and milk and sugar, so the air is a mixture
of oxygen and nitrogen, and water and carbonic-acid gas.
Oxygen, nitrogen, and carbonic-acid gas,—each one of these
three things that help to make the air is what we call a gas, and one
of these gases is made of two things. Carbonic-acid gas is made of
oxygen and carbon.
Now, carbon is the food which is needed by every plant. But the
carbon in the air is held tightly in the grasp of the oxygen, with which
it makes the gas called carbonic-acid gas.
To get possession of this carbon, the plant must contrive to break
up the gas, and then to seize and keep by force the carbon.
This seems like a rather difficult performance, does it not? For
when a gas is made of two different things, you can be pretty sure
that these keep a firm hold on each other, and that it is not altogether
easy to tear them apart.
Now, how does the plant meet this difficulty?
You cannot guess by yourselves how this is done, so I must tell
you the whole story.
Certain cells in the plant are trained from birth for this special
work,—the work of getting possession of the carbon needed for plant
food. These little cells take in the carbonic-acid gas from the air; then
they break it up, tearing the carbon from the close embrace of the
oxygen, pushing the oxygen back into the air it came from, and
turning the carbon over to the plant to be stored away till needed as
food.
 Only certain cells can do this special piece of work. Only the cells
which hold the green substance that colors the leaf can tear apart
carbonic-acid gas. Every little cell which holds a bit of this leaf green
devotes itself to separating the carbon from the oxygen.
Why this special power lies in a tiny speck of leaf green we do not
know. We only know that a cell without such an occupant is quite
unable to break up carbonic-acid gas.
But even the bit of leaf green in a tiny cell needs some help in its
task. What aid does it call in, do you suppose, when it works to
wrench apart the gas?
In this work the partner of the bit of leaf green is nothing more or
less than a sunbeam. Without the aid of a sunbeam, the imprisoned
leaf green is as helpless to steal the carbon as you or I would be.
It sounds a good deal like a fairy story, does it not,—this story of
Leaf Green and Sunbeam?
Charcoal is made of carbon. About one half of every plant is
carbon.
The coal we burn in our fireplaces is the carbon left upon the earth
by plants that lived and died thousands of years ago. It is the carbon
that Leaf Green and Sunbeam together stole from the air, and turned
over into the plant.
If one looks at a piece of coal with the eyes which one keeps for
the little picture gallery all children carry in their heads, one sees
more than just a shining, black lump. One sees a plant that grew
upon the earth thousands of years ago, with its bright green leaves
dancing in the sunlight; for without those green leaves and that
sunlight, there could be no coal for burning to-day. And when we
light our coal fire, what we really do is to set free the sunbeams that
worked their way so long ago into the plant cells.
It is more like a fairy story than ever. Sunbeam is the noble knight
who fought his way into the cell where Leaf Green lay imprisoned,
doomed to perform a task which was beyond her power. But with the
aid of the noble Sunbeam, she did this piece of work, and then both
fell asleep, and slept for a thousand years. Awakening at last,
together they made their joyful escape in the flame that leaps from
out the black coal.
In truth, a sunbeam and a flame are not so unlike as to make this
story as improbable as many others that we read.
And because I have told it to you in the shape of a fairy story, you
must not think it is not true. It is indeed true. Everywhere in the
sunshiny woods and fields of summer, the story of Leaf Green and
Sunbeam is being lived. But when the day is cloudy or the sun sets,
then there is no Sunbeam to help the Princess, and then no carbon
is stolen from the air.