Resources

• Resources
  • Doing Economics Empirical Projects
  • How economists learn from data
  • When economists disagree
  • Videos
  • Great economists
  • Find out more
  • Exercises
  • Figures
    • Unit 1
    • Unit 2
    • Unit 3
    • Unit 4
    • Unit 5
    • Unit 6
    • Unit 7
    • Unit 8
    • Unit 9
    • Unit 10
    • Unit 11
    • Unit 12

Doing Economics Empirical Projects

• Empirical Project 1: Measuring climate change
• Empirical Project 2: Collecting and analysing data from experiments
• Empirical Project 3: Measuring the effect of a sugar tax
• Empirical Project 4: Measuring wellbeing
• Empirical Project 5: Measuring inequality: Lorenz curves and Gini coefficients
• Empirical Project 6: Measuring management practices
• Empirical Project 7: Supply and demand
• Empirical Project 8: Measuring the non-monetary cost of unemployment
• Empirical Project 9: Credit-excluded households in a developing country
• Empirical Project 10: Characteristics of banking systems around the world
• Empirical Project 11: Measuring willingness to pay for climate change mitigation
• Empirical Project 12: Government policies and popularity: Hong Kong cash handout

How economists learn from data

• 2.8 Laboratory experiments
• 6.3 Managers exert power
• 6.7 How can employment rents be measured in a real (rather than a model) economy?
• 6.11 Workers speed up when the economy slows down
• 10.8 The wisdom of crowds: The weight of (live)stock and the value of shares
• 12.5 Does electoral competition affect policy?
• 12.9 Administrative infeasibility: An application from Nigeria
• 12.10 Does money talk?

When economists disagree

• 2.10 Homo economicus in question: Are people entirely selfish?
• 6.3 Coase and Marx on the firm and its employees
• 10.10 Do bubbles exist?

Videos

• Unit 1: Hans Rosling’s 200 Countries, 200 Years, 4 Minutes—The Joy of Stats
• Unit 1: Transformational technological change is still occurring. In his TED Talk, Hans Rosling claims that we should say, ‘Thank you, industrialization’ for creating the washing machine, a device that transformed the wellbeing of millions of women.
• Unit 1: In our ‘Economist in action’ video, Lisa Cook explains what promotes or kills innovation.
• Unit 1: Thomas Piketty: The long-run economics of wealth inequality
• Unit 2: A solution to a social dilemma on the show Golden Balls
• Unit 2: Juan Camilo Cárdenas: Invisible hands working together
• Unit 3: Esther Duflo: Representation for women in India
• Unit 3: Helen Miller: ‘Are the rich paying their fair share of taxes?’
• Unit 3: Petra Moser: How copyright improved Italian opera
• Unit 4: Juliet Schor: Why do we work so hard?
• Unit 5: Kevin Bales: How to combat modern slavery
• Unit 5: For more on global income inequalities have a look at Hans Rosling’s video, in which he demonstrates inequality using snowballs.
• Unit 7: Richard Freeman: You can’t outsource responsibility
• Unit 7: Kathryn Graddy: Fishing for perfect competition
• Unit 8: Van Reenen: What determines productivity?
• Unit 9: Those seeking loans to purchase a car are often required to allow a device to be installed in the vehicle that is controlled by the bank, which will disable the ignition of the car if the loan payments are not made as required, as this New York Times video shows. The practice has not made lenders very popular.
• Unit 10: Money: An Economist’s Perspective⁠—The Curious Case of the Yap Stones
• Unit 10: The crisis of credit visualized
• Unit 11: James K. Boyce discusses the assumptions and limitations of the Coase theorem.
• Unit 11: James K. Boyce discusses the difficulties in ensuring efficiency and fairness when addressing negative externalities.
• Unit 12: Alvin Roth explains how matching markets work.
• Unit 12: In our ‘Economist in action’ video, James Heckman, a Nobel-prize-winning economist from the University of Chicago and a leader in this research, explores the question of how schooling and preschool experience affects inequality.
• Unit 12: To see why many have decided that funding the full cost of higher education from general taxation is not fair, watch the video by the economist Nick Barr of the LSE: ‘Why university isn’t free’

Great economists

• 1.4 Economic growth: Adam Smith
• 1.7 The capitalist revolution: Joseph Schumpeter
• 2.8 Social preferences and the public good: Elinor Ostrom
• 2.12 Which Nash equilibrium? Conflicts of interest and bargaining: John Nash
• 3.5 Adding the option of transferring payoffs between players: Vilfredo Pareto
• 6.2 Firms, markets, and the division of labour: Herbert Simon
• 6.3 Power relations within the firm: Karl Marx
• 6.13 Another kind of business organization: Cooperative firms: John Stuart Mill
• 7.7 Price-setting, market power, and public policy: Augustin Cournot
• 7.7 Price-setting, market power, and public policy: Joan Robinson (1903–1983)
• 7.9 Buying and selling: Demand and supply in a competitive market: Alfred Marshall
• 11.4 The ‘magic of the market’: Prices are messages plus motivation: Friedrich Hayek
• 11.8 External effects and private bargaining: Ronald Coase
• 11.9 External effects: Government policies and income distribution: Arthur Pigou

Find out more

• 1.4 Economic growth: Compound growth rates
• 1.4 Economic growth: The rule of 70 for growth rates
• 2.6 When self-interest doesn’t work: The prisoners’ dilemma: The prisoner’s dilemma
• 5.10 Comparing inequality across the world: The Gini coefficient as a measure of inequality
• 5.10 Comparing inequality across the world: The Lorenz curve and the Gini coefficient in a class-divided economy with a large population
• 8.5 The product market and the price-setting curve (firms and customers): The size of the markup chosen by the firm
• 10.2 Assets, money, banks, and the financial system: Present value (PV) and the price of an asset
• 10.2 Assets, money, banks, and the financial system: Bond prices and yields

Exercises

• 1.3 How did we get here? The hockey stick in real incomes: Exercise 1.1: Inequality in the fourteenth century
• 1.3 How did we get here? The hockey stick in real incomes: Exercise 1.2: Using Excel: Income data and the rich/poor ratio
• 1.3 How did we get here? The hockey stick in real incomes: Exercise 1.3: Using Excel: Looking at income distributions
• 1.4 Economic growth: Optional Exercise 1.3.1: Using Excel: Calculating compound growth rates
• 1.4 Economic growth: Exercise 1.4: Using Excel: Interpreting graphs drawn using a ratio scale
• 1.7 The capitalist revolution: Exercise 1.5: The poorest man’s cottage
• 1.7 The capitalist revolution: Exercise 1.6: Markets and social networks
• 1.7 The capitalist revolution: Exercise 1.7: Firm or not?
• 1.12 Capitalism, growth and environmental sustainability: Exercise 1.8: How much difference does a couple of degrees make?
• 1.12 Capitalism, growth and environmental sustainability: Exercise 1.9: Using Excel: Plotting line graphs of temperature over time
• 2.3 Resolving social dilemmas: Exercise 2.1: Social dilemmas
• 2.5 When self-interest works: The invisible hand: Exercise 2.2: Amoral self-interest
• 2.6 When self-interest doesn’t work: The prisoners’ dilemma: Exercise 2.3: Political advertising
• 2.8 Social preferences and the public good: Exercise 2.4: Are lab experiments a good guide to what people do?
• 2.9 Sustaining cooperation by punishing free riding: Exercise 2.5: Using Excel: Looking at differences in contributions in the public goods experiments
• 2.12 Which Nash equilibrium? Conflicts of interest and bargaining: Exercise 2.6: Conflict between Astrid and Bettina
• 3.3 Fairness and efficiency in the ultimatum game: Exercise 3.1: Acceptable offers
• 3.3 Fairness and efficiency in the ultimatum game: Exercise 3.2: Offers in the ultimatum game
• 3.6 Evaluating an outcome: Is it fair?: Exercise 3.3: Using Excel: Your ideal income distribution
• 3.7 Why are (some) economic inequalities unfair? Procedural and substantive judgements: Exercise 3.4: Substantive and procedural fairness, and the veil of ignorance
• 3.10 Unintended consequences: Policies affect preferences: Exercise 3.5: Using Excel: The effect of daycare centre fines
• 3.11 How do we find out if a policy will work?: Exercise 3.6: Food taxes and health
• 3.11 How do we find out if a policy will work?: Exercise 3.7: Effective policymaking for intellectual property rights
• 4.1 Introduction: Exercise 4.1: Working hours across countries and time
• 4.2 Economic models: How to see more by looking at less: Exercise 4.2: Designing a model
• 4.3 Decision making, trade-offs, and opportunity costs: Exercise 4.3: Opportunity costs
• 4.4 Making decisions when there are trade-offs: Exercise 4.4: Ceteris paribus assumptions
• 4.5 Preferences: Exercise 4.5: Why indifference curves never cross
• 4.5 Preferences: Exercise 4.6: Your marginal rate of substitution
• 4.7 Decision making and scarcity: Exercise 4.7: Exploring scarcity
• 4.8 Hours of work and economic growth: Exercise 4.8: Your production function
• 4.12 Extending the model: The influence of culture and politics: Exercise 4.9: Another definition of economics
• 4.14 Work and wellbeing as a social dilemma: Exercise 4.10: Tax on a positional good
• 4.14 Work and wellbeing as a social dilemma: Exercise 4.11: Using Excel: Correlation or causation?
• 4.14 Work and wellbeing as a social dilemma: Exercise 4.12: Veblen effects and policy
• 5.4 The rule of force: Bruno appears and has unlimited power over Angela: Exercise 5.1: An allocation you have known
• 5.5 Property rights and the rule of law: Exercise 5.2: Biological and economic feasibility
• 5.5 Property rights and the rule of law: Exercise 5.3: Why Angela works for 8 hours
• 5.5 Property rights and the rule of law: Exercise 5.4: Take it or leave it?
• 5.9 Measuring economic inequality: Exercise 5.5: Income inequality and its measurement
• 5.10 Comparing inequality across the world: Exercise 5.6: Comparing distributions of wealth
• 5.10 Comparing inequality across the world: Exercise 5.7: Using Excel: Inequalities among your classmates
• 6.3 Power relations within the firm: Exercise 6.1: The structure of an organization
• 6.5 Other people’s labour: The employment relationship: Exercise 6.2: Incomplete contracts
• 6.7 Employment rents: Exercise 6.3: Calculating the employment rent
• 6.9 The employer sets the wage to minimize the cost per unit of effort: Exercise 6.4: The employer sets the wage
• 6.11 Putting the model to work: Owners, employees, and public policy: Exercise 6.5: Effort and wages
• 6.11 Putting the model to work: Owners, employees, and public policy: Exercise 6.6: Lazear’s results
• 6.13 Another kind of business organization: Cooperative firms: Exercise 6.7: A worker-owned cooperative
• 6.13 Another kind of business organization: Cooperative firms: Exercise 6.8: Using Excel: Who owns the firms?
• 6.13 Another kind of business organization: Cooperative firms: Exercise 6.9: Was Mill wrong?
• 6.15 Principals and agents: Interactions under incomplete contracts: Exercise 6.10: Principal–agent relationships
• 7.5 The isoprofit curves and the demand curve: Exercise 7.1: Changes in the market
• 7.6 Gains from trade: Exercise 7.2: Changing the rules of the game
• 7.7 Price-setting, market power, and public policy: Exercise 7.3: Multinationals or independent retailers?
• 7.9 Buying and selling: Demand and supply in a competitive market: Exercise 7.4: Selling strategies and reservation prices
• 7.9 Buying and selling: Demand and supply in a competitive market: Exercise 7.5: Price-takers
• 7.11 Competitive equilibrium: Gains from trade, allocation, and distribution: Exercise 7.6: Surplus and deadweight loss
• 7.12 Changes in supply and demand: Exercise 7.7: The market for quinoa
• 7.12 Changes in supply and demand: Exercise 7.8: Prices, shocks, and revolutions
• 7.13 The world oil market: Exercise 7.9: The world market for oil
• 7.13 The world oil market: Exercise 7.10: The shale oil revolution
• 8.2 Measuring the economy: Employment and unemployment: Exercise 8.1: Using Excel: Employment, unemployment, and participation
• 8.4 The labour market and the wage-setting curve (firms and workers): Exercise 8.2: Shifts in the wage-setting curve
• 8.7 Unemployment as a characteristic of equilibrium: Exercise 8.3: Is this really a Nash equilibrium?
• 9.3 Borrowing: Bringing consumption forward in time: Exercise 9.1: Julia’s feasible frontier
• 9.6 Storing or lending allows smoothing and moving consumption to the future: Exercise 9.2: Marco’s feasible frontier
• 9.7 Mutual gains and conflicts over their distribution in the credit market: Exercise 9.3: Lifetime income
• 9.10 Credit market constraints: Another principal–agent problem: Exercise 9.4: How Julia paid for her Christmas presents
• 9.10 Credit market constraints: Another principal–agent problem: Exercise 9.5: Microfinance and lending to the poor
• 9.10 Credit market constraints: Another principal–agent problem: Exercise 9.6: Pawn shops as a source of credit
• 9.11 Inequality: Lenders, borrowers, and those excluded from credit markets: Exercise 9.7: Unpopular banks
• 9.11 Inequality: Lenders, borrowers, and those excluded from credit markets: Exercise 9.8: Limits on lending
• 10.3 Money and banks: Exercise 10.1: Money and its role in the economy
• 10.5 The central bank, banks, and interest rates: Exercise 10.2: Interest rate markups
• 10.8 The value of an asset: Expected return and risk: Exercise 10.3: Understanding Ayesha’s risk–return trade-offs
• 10.10 Asset market bubbles: Exercise 10.4: Markets for gems
• 10.10 Asset market bubbles: Exercise 10.5: The big ten asset price bubbles of the last 400 years
• 10.13 The role of banks in the crisis: Exercise 10.6: Behaviour in the financial crisis
• 10.14 Banking, markets, and morals: Exercise 10.7: Morals and market failure
• 11.7 Market failure: External effects of pollution: Exercise 11.1: Property rights and contracts in Madagascar
• 11.8 External effects and private bargaining: Exercise 11.2: Bargaining power
• 11.8 External effects and private bargaining: Exercise 11.3: A positive external effect
• 11.9 External effects: Government policies and income distribution: Exercise 11.4: Pigouvian subsidy
• 11.9 External effects: Government policies and income distribution: Exercise 11.5: Comparing policies
• 11.10 Property rights, contracts, and market failures: Exercise 11.6: Incomplete contracts
• 11.11 Public goods, common pool resources, and market failure: Exercise 11.7: Rivalry and excludability
• 11.12 Missing markets: Insurance and lemons: Exercise 11.8: Hidden attributes
• 11.13 Market failure and government policy: Exercise 11.9: Market failure
• 12.2 The limits of markets: Repugnant markets and merit goods: Exercise 12.1: Capitalism among consenting adults
• 12.3 The government as an economic actor: Exercise 12.2: Building self-control into government
• 12.3 The government as an economic actor: Exercise 12.3: The relationship between economic development and size of government
• 12.7 Spending by democratic governments: Priorities of a nation: Exercise 12.4: Past influences on current government spending patterns
• 12.7 Spending by democratic governments: Priorities of a nation: Exercise 12.5: Using Excel: Comparing government expenditures
• 12.13 Free tuition in higher education: Can it be fair to non-students?: Exercise 12.6: Solutions to the credit constraints problem
• 12.14 The distributional impact of public policies: Rent control: Exercise 12.7: Distribution of surplus under rent control.
• 12.14 The distributional impact of public policies: Rent control: Exercise 12.8: Implementing rent control

Figures

Unit 1

• Figure 1.1: World income distribution in 2014: Countries are ranked by average incomes in US dollars at PPP (adjusting for the spending power of a dollar in different countries) from left to right. For each country the heights of the bars show average income for deciles of the population, from the poorest 10% in the front, to the richest 10% at the back. The width of the bar indicates the country’s population.
• Figure 1.1a: Dissecting the global income distribution.
• Figure 1.2: History’s hockey stick: Real gross domestic product per capita in five countries (1000–2018).
• Figure 1.3: Walk-through: Income data and the rich/poor ratio.
• Figure 1.4: Walk-through: Mean and median, and bar chart.
• Figure 1.5: Walk-through: Calculating CAGR in Excel.
• Figure 1.6: History’s hockey stick: Living standards in five countries (1000–2018) using the ratio scale.
• Figure 1.7: Real GDP per capita: Linear scale.
• Figure 1.8: Real GDP per capita: Ratio scale.
• Figure 1.9: Hours of work required to produce 1,000 lumen-hours (roughly equal to the hourly light output of an 18 watt low-energy bulb). Note that the ratio scale is used for the horizontal axis as well as the vertical axis in this figure. This allows us to see more clearly what has happened in the last 200 years.
• Figure 1.10: The productivity of labour in producing light.
• Figure 1.11: The hockey stick and the accumulation of capital.
• Figure 1.12: Capitalism: Private property, markets and firms.
• Figure 1.13: A possible explanation of the causes of growing affluence in the eighteenth and nineteenth centuries in Europe.
• Figure 1.14: The logic of a natural experiment: East and West Germany.
• Figure 1.15: The two Germanies: Planning and capitalism (1950–89). West German real GDP grew faster than East German GDP between 1950 and 1989.
• Figure 1.16: Divergence of GDP per capita among latecomers to the capitalist revolution (1928–2018). Between 1928 and 2018, the GDP of South Korea grew much more than that of Argentina, Russia and the former Soviet Union, Brazil, Botswana, and Nigeria.
• Figure 1.17: Share of total wealth held by the richest 1% (1740–2021).
• Figure 1.18: The advance of democracy in the world.
• Figure 1.19: The economy is part of society, which is part of the biosphere.
• Figure 1.20: The global population hockey stick.
• Figure 1.21: Northern hemisphere temperatures over the long run (1000–2019).
• Figure 1.22: Carbon dioxide in the atmosphere (1010–2020) and global carbon emissions from burning fossil fuels (1750–2018).
• Figure 1.23: Walk-through: Plotting line graphs of temperature over time.

Unit 2

• Figure 2.1: Social interactions in the invisible hand game.
• Figure 2.2a: The payoffs in the invisible hand game.
• Figure 2.2b: The payoff matrix in the invisible hand game.
• Figure 2.3a: Social interactions in the pest control game.
• Figure 2.3b: Payoff matrix for the pest control game.
• Figure 2.4: Snooker or film?
• Figure 2.5: Deny or confess?
• Figure 2.6: Prisoners’ dilemma (payoffs are years in prison).
• Figure 2.7: Example: When two others contribute, Kim’s payoff is lower if she contributes too.
• Figure 2.8: Kim’s payoffs in the public goods game.
• Figure 2.9a: Worldwide public goods experiments: Contributions over 10 periods.
• Figure 2.9b: Worldwide public goods experiments with opportunities for peer punishment.
• Figure 2.10: Walk-through: Plotting a line chart with multiple variables.
• Figure 2.11: A division of labour problem with more than one Nash equilibrium.
• Figure 2.12a: Interactions in the choice of programming language.
• Figure 2.12b: Payoffs (thousands of dollars to complete the project) according to the choice of programming language.
• Figure 2.13: Opera or football?
• Figure 2.14a: The climate change game: Outcomes from the two strategies, Restrict and Business as usual (BAU).
• Figure 2.14b: The climate change hawk–dove game: Payoffs from the two strategies of Restrict and BAU (Business as usual).
• Figure 2.15: A model of the economy: Households and firms.

Unit 3

• Figure 3.1: Game tree for the ultimatum game in which the only choices open to the Proposer are an even split, or to keep 80 while giving 20 to the Responder.
• Figure 3.2: Acceptable offers in the ultimatum game.
• Figure 3.3: Actual offers and expected rejections in the ultimatum game.
• Figure 3.4: Description of allocations and their evaluation in terms of efficiency and fairness.
• Figure 3.5: Pareto-efficient allocations: All of the allocations, except mutual use of the pesticide (T, T), are Pareto efficient.
• Figure 3.6: Americans’ ideal, estimated, and actual distribution of wealth.
• Figure 3.7: How Americans’ beliefs about what it takes to get ahead predict their support or opposition to government programs to redistribute income to the poor.
• Figure 3.8: Walk-through: Making a stacked bar chart.
• Figure 3.9: Pareto efficiency and Nash equilibrium contrasted, using two games.
• Figure 3.10: Overgrazing the commons.
• Figure 3.11: An overgrazing tax averts the tragedy of the commons.
• Figure 3.12: Payoffs in the tax avoidance game.
• Figure 3.13: Payoffs in the tax avoidance game: How higher taxes may lead to less redistribution.
• Figure 3.14: Average number of late-coming parents, per week.
• Figure 3.15: Walk-through: Making a line chart with labels.
• Figure 3.16: Identifying the causes of reduced consumption of sugary drinks: Prices or information?
• Figure 3.17: Price elasticities of demand for different types of food. (Each food type is listed twice. See the ‘Calories per serving’ column to compare high- and low-calorie groups of each food type.)

Unit 4

• Figure 4.1: Annual hours of work (1900–2020).
• Figure 4.2: Annual hours of work and real income (1870–2018).
• Figure 4.3: Average annual hours of free time per worker and real income (2020).
• Figure 4.4: Opportunity costs and decision making: Which concert will you choose?
• Figure 4.5: Study time and grades.
• Figure 4.6: Average GPA in good and poor study environments.
• Figure 4.7: How does the amount of time spent studying affect Alexei’s grade?
• Figure 4.8: Mapping Alexei’s preferences.
• Figure 4.9: The marginal rate of substitution.
• Figure 4.10: The trade-off between grades and work.
• Figure 4.11: How does Alexei’s choice of free time affect his grade?
• Figure 4.12a: How many hours does Alexei decide to study?
• Figure 4.12b: How many hours does Alexei decide to study?
• Figure 4.13: Alexei’s trade-offs.
• Figure 4.14: How technological change affects the production function.
• Figure 4.15: An improvement in technology expands Angela’s feasible set.
• Figure 4.16: Angela’s choice between free time and grain.
• Figure 4.17: A farmer’s choice between free time and grain.
• Figure 4.18: Estimated lifetime hours of work and leisure (1880, 1995, 2040).
• Figure 4.19: Free time and consumption per day across countries (2013).
• Figure 4.20: Total time spent doing unpaid care work by men and women in Belgium, Finland and the US (latest year of available data).
• Figure 4.21: Keeping up with the Joneses.
• Figure 4.22: The relationship between average annual work hours and income share of the very rich (twentieth century).
• Figure 4.23: Walk-through: Making a colour-coded scatterplot.

Unit 5

• Figure 5.1: The Royal Rover’s Articles.
• Figure 5.2: Institutional arrangements in a model and in the world.
• Figure 5.3: Bruno’s bargaining power over Angela depends on the institutions in force in the four scenarios.
• Figure 5.4: Scenario A: Independent farmer Angela’s feasible frontier, best feasible indifference curve, and choice of hours of work.
• Figure 5.5: Feasible outcomes of the interaction between Angela and Bruno.
• Figure 5.6: Technically feasible allocations.
• Figure 5.7: Scenario B: Coercion. The maximum technically feasible transfer from Angela to Bruno.
• Figure 5.8: Economically feasible allocations when exchange is voluntary.
• Figure 5.9a: Scenario C: Bruno’s take-it-or-leave-it proposal when Angela can refuse.
• Figure 5.9b: Scenario C: Bruno’s take-it-or-leave-it proposal when Angela can refuse.
• Figure 5.10: Pareto-efficient allocations and the distribution of the surplus.
• Figure 5.11: Scenario D: The effect of an increase in Angela’s bargaining power through legislation.
• Figure 5.12: Bargaining to restore Pareto efficiency.
• Figure 5.13: The fundamental determinants of economic outcomes.
• Figure 5.14: Income differences among pairs of households.
• Figure 5.15: A Lorenz curve for wealth ownership.
• Figure 5.16: The distribution of spoils: Pirates and the Royal Navy.
• Figure 5.17a: The Lorenz curve and Gini coefficient for wealth ownership.
• Figure 5.17b: Comparing Gini coefficients.
• Figure 5.18: Two societies with the same Gini coefficient but different Lorenz curves.
• Figure 5.19: The difference between market and disposable income.
• Figure 5.20: Distribution of market and disposable income in the Netherlands (2010).
• Figure 5.21: Income inequality in market and disposable income across the world.
• Figure 5.22: Three distributions of wealth (100 hectares of land).
• Figure 5.23: Walk-through: Drawing a Lorenz curve.
• Figure 5.24: Bargaining in practice: How a land tenure reform in West Bengal reduced the Gini coefficient.
• Figure 5.25: The Lorenz curve and the perfect equality line.

Unit 6

• Figure 6.1: The firm’s actors and its decision-making and information structures.
• Figure 6.2: The daily costs and benefits of having and losing a job.
• Figure 6.3: Employment rents: Maria compares her income from employment with what it would be, should she lose her job and be unemployed for 44 weeks (the employment rents shown are those at point J in Figure 6.5).
• Figure 6.4: Maria’s employment rent is higher when the wage doubles to $48 per hour (the employment rents shown for the $48 wage are those at point K in Figure 6.5).
• Figure 6.5: Maria’s best response to the wage. Points J and K refer to the information in Figures 6.3 and 6.4.
• Figure 6.6: The employer’s indifference curves: Isocost curves for effort.
• Figure 6.7: The employer sets the wage to minimize the cost of getting the worker to provide effort.
• Figure 6.8: The effect on employment rent of a rise in the duration of unemployment.
• Figure 6.9: The best response curve depends on the level of unemployment and the unemployment benefit.
• Figure 6.10: Hidden action problems.
• Figure 6.11: The labour discipline model.

Unit 7

• Figure 7.1: Firm size in the US: Number of employees (1900–2021).
• Figure 7.2: Sales of major ready-to-eat breakfast cereals in the US (1992).
• Figure 7.3: Estimated demand for Apple Cinnamon Cheerios.
• Figure 7.4: The demand for LP’s Spanish-language courses.
• Figure 7.5: Two demand curves.
• Figure 7.6: Isoprofit curves for the production of LP Spanish-language courses.
• Figure 7.7: The profit-maximizing choice of price and quantity for LP Spanish-language courses.
• Figure 7.8: Gains from trade.
• Figure 7.9: Deadweight loss.
• Figure 7.10: Advertising expenditure and market share of breakfast cereals in Chicago (1991–1992).
• Figure 7.11: The market demand curve for books.
• Figure 7.12: The supply curve for books.
• Figure 7.13: Equilibrium in the market for second-hand books.
• Figure 7.14: Supply and demand for textbooks.
• Figure 7.15: The market demand curve for bread.
• Figure 7.16: The profit-maximizing price and quantity.
• Figure 7.17: The market supply curve: 20 firms.
• Figure 7.18: The market supply curve: Many bakeries.
• Figure 7.19: Equilibrium in the market for bread.
• Figure 7.20: Equilibrium in the bread market: Gains from trade.
• Figure 7.21a: The production of quinoa.
• Figure 7.21b: Quinoa real producer prices in Peru.
• Figure 7.21c: Global import demand for quinoa.
• Figure 7.22: Disequilibrium in demand for quinoa.
• Figure 7.23: An increase in the demand for quinoa.
• Figure 7.24: An increase in demand for quinoa.
• Figure 7.25: Average and peak prices of wheat in Europe, 1838–1845.
• Figure 7.26: World oil prices in constant prices (1861–2020) and global oil consumption (1965–2020).
• Figure 7.27: The world market for oil.
• Figure 7.28: The OPEC oil price shocks of the 1970s: OPEC decreases output.
• Figure 7.29: The oil price shocks of 2000–2008: Economic growth increases world demand.
• Figure 7.30: The price- and wage-setting firm’s decisions.

Unit 8

• Figure 8.1: Real weekly earnings for males in Western Australia (left-hand axis), world price of iron ore and unemployment rate in Australia (right-hand axis), (1989–2021).
• Figure 8.2: The labour market.
• Figure 8.3: Labour market statistics for Australia, Germany, Norway, and Spain (averages over 2000–2016).
• Figure 8.4: The wage-setting (WS) curve: Labour discipline and unemployment in the economy as a whole.
• Figure 8.5: Deriving the wage-setting curve: Varying the unemployment rate in the economy.
• Figure 8.6: A wage-setting curve estimated for the US economy (1979–2013).
• Figure 8.7: The wage-setting curve: The wage level required to make employees work rather than shirk.
• Figure 8.8: Shifts in the wage-setting curve.
• Figure 8.9: The firm sets the profit-maximizing price, P; given the nominal wage, W, this gives the real wage on the price-setting curve, W/P.
• Figure 8.10: The firm sets the profit-maximizing price at A.
• Figure 8.11: The price-setting real wage at point A.
• Figure 8.12: The price-setting curve: The effect of an increase in economy-wide demand for goods and services.
• Figure 8.13: Determinants of the price-setting curve.
• Figure 8.14: The two departments in each firm determine the wage and price set by the firm.
• Figure 8.15: Can anybody do better? The HR and marketing departments of the firm.
• Figure 8.16: Equilibrium in the economy: Structural unemployment at X.
• Figure 8.17: Unemployment in Spain and Germany (1960–2019).
• Figure 8.18: Determinants of structural unemployment in Spain and Germany (1976–2011).
• Figure 8.19: Using the model to compare structural unemployment in Spain and Germany.
• Figure 8.20: The estimated average markup for firms in the US (1955–2016).
• Figure 8.21: The share of economic profits in income in the US (1984–2014).
• Figure 8.22: The Gini coefficient for market income in the US (1970-2019).
• Figure 8.23: The distribution of income at labour and product market equilibrium.
• Figure 8.24: The effect of an increase in the extent of competition faced by firms: The price-setting curve shifts upwards and inequality falls.
• Figure 8.25: Share of employees whose wages are covered by collective bargaining agreements (early 2010s).
• Figure 8.26: If the union sets the wage.
• Figure 8.27: If the union sets the firm’s wage instead of the employer.
• Figure 8.28: The bargained wage-setting curve when there is union wage-setting.
• Figure 8.29: Collective wage bargaining coverage and unemployment across the OECD.
• Figure 8.30: The union sets the firm’s wage, and employees reciprocate.
• Figure 8.31: The bargained wage-setting curve and equilibrium when there is a union voice effect.
• Figure 8.32: Rising monopoly power (the product market) and declining worker power (the labour market)—a new equilibrium.
• Figure 8.33: Rising monopoly power (the product market) and declining worker power (the labour market)—higher inequality in the new equilibrium.
• Figure 8.34: Short- and long-run effects of introducing an unemployment benefit.
• Figure 8.35: Unemployment benefit generosity and unemployment rates across the OECD (2001–2020).
• Figure 8.36: Combining the introduction of an unemployment benefit with a solidarity wage policy to raise productivity in the economy.
• Figure 8.37: Differences between the labour market and competitive (price-taking) product markets.
• Figure 8.38: Equilibrium (structural) and demand-deficient (cyclical) unemployment.
• Figure 8.39: The WS/PS model: Actors and their decisions.

Unit 9

• Figure 9.1: Wealth, income, depreciation, and consumption: The bathtub analogy.
• Figure 9.2: Borrowing, the interest rate, and the feasible set.
• Figure 9.3: Consumption smoothing: Diminishing marginal returns to consumption.
• Figure 9.4: Julia’s indifference curves.
• Figure 9.5: Moving consumption over time by borrowing.
• Figure 9.6: Smoothing consumption by storing.
• Figure 9.7: Smoothing consumption by storing and lending.
• Figure 9.8: On opposite sides of the market: An increase in the interest rate improves Marco’s welfare and reduces Julia’s.
• Figure 9.9: Options for the individual (Julia) who starts without assets but can borrow and invest.
• Figure 9.10: A balance sheet.
• Figure 9.11: Liabilities and net worth (Barclays and Honda).
• Figure 9.12: Julia’s balance sheets.
• Figure 9.13: Julia’s consumption choices.
• Figure 9.14: Principal–agent problems: The credit market and the labour market.
• Figure 9.15: Wealth, project quality, and credit.
• Figure 9.16: Inequality in a borrowing and lending economy. The Gini coefficient when everyone in the population can borrow is 0.57. When 40% of would-be borrowers are excluded from the credit market, it is 0.70.
• Figure 9.17: The credit and labour markets shape the relationships between groups with different endowments.

Unit 10

• Figure 10.1a: Marco deposits $100 in Abacus Bank.
• Figure 10.1b: Marco pays $20 to Gino.
• Figure 10.1c: Marco pays $20 to Gino (end of transaction).
• Figure 10.1d: Bonus Bank gives Gino a loan of $100.
• Figure 10.1e: The total money in the banking system has grown.
• Figure 10.2: A bank’s balance sheet.
• Figure 10.1f: Bonus Bank does not have enough base money to pay $50 to Abacus Bank.
• Figure 10.3: Banks, the central bank, borrowers, and savers.
• Figure 10.4: A simplified bank balance sheet.
• Figure 10.5: Barclays Bank’s balance sheet in 2006 (£m).
• Figure 10.6: Honda Motor Company’s balance sheet in 2013 (¥m).
• Figure 10.7: A commercial bank’s balance sheet.
• Figure 10.8a: The trade-off between risk and return: The feasible set.
• Figure 10.8b: The trade-off between risk and return: Ayesha’s preferences.
• Figure 10.8c: Ayesha’s choice: MRS = MRT.
• Figure 10.9: News Corp’s share price and volume traded (7 May 2014).
• Figure 10.10: Information technology and rising prices for tech shares: Nasdaq Composite Index (1995–1999).
• Figure 10.11: Positive vs negative feedback.
• Figure 10.12: The tech bubble: Nasdaq Composite Index (1995–2004).
• Figure 10.13: The housing market on the way up and on the way down.
• Figure 10.14: The household debt-to-income ratio and house prices in the US (1950–2020).
• Figure 10.15: Leverage ratio of banks in the UK and US (1960–2018).
• Figure 10.16: Principal–agent problems: The credit market and the labour market.

Unit 11

• Figure 11.1: Bargaining power and prices in the Kerala wholesale fish market (14 January 1997). (Note: Two markets had the same outcome, with a price of Rs6.2 per kg.)
• Figure 11.2: Marginal costs of banana production using Weevokil.
• Figure 11.3: The plantations’ choice of banana output.
• Figure 11.4: Market failure: Water pollution.
• Figure 11.5: The gains from bargaining.
• Figure 11.6: Robot factory production.
• Figure 11.7: Using a tax to achieve Pareto efficiency.
• Figure 11.8: The plantation owners compensate the fishermen.
• Figure 11.9: Water pollution market failure, with remedies.
• Figure 11.10: How external costs and benefits occur.
• Figure 11.11: Private goods and public goods.
• Figure 11.12: Examples of market failure, with remedies.
• Figure 11.13: The market for lemons.
• Figure 11.14: Asymmetric information, market failures, with remedies.
• Figure 11.15: Market failures with remedies.
• Figure 11.16: Market failures and information problems.

Unit 12

• Figure 12.1: The growth of government in the UK (1500–2015).
• Figure 12.2: The forward-looking dictator contemplates the total political rent he will get with two different levels of annual taxation.
• Figure 12.3: The duration curve: The dictator sets the tax given the cost of the public service.
• Figure 12.4: The dictator’s isorent curves.
• Figure 12.5: The dictator chooses a tax level to maximize his political rents.
• Figure 12.6: Examples of governing elites, their period of rule, and reasons for their end (where applicable).
• Figure 12.7: The feasible set for taxes and government duration in a relatively uncompetitive and competitive political system.
• Figure 12.8: Choice of taxes under less and more competitive conditions.
• Figure 12.9: Political and economic rents under competition and monopoly.
• Figure 12.10: Patterns of public expenditure in Finland, the US, and South Korea (2019) measured as a percentage of total spending by government.
• Figure 12.11: Stock market prices in Chile: The election of a socialist president, 1970.
• Figure 12.12: Stock market prices in Chile: The military overthrow of the socialist government, 1973.
• Figure 12.13: Carbon dioxide emissions are greater in richer countries, but countries of the same level of income differ greatly in how much they emit.
• Figure 12.14: Greater equality in disposable income is not associated with slower growth in average income.
• Figure 12.15: Financing higher education.
• Figure 12.16: The rental market after rent control.
• Figure 12.17: Monthly gains and losses compared to the no rent control market equilibrium. (Entries in the table are based on Figure 12.16, with p₀ = $1,500, p_R = $1,000, X₀ = 500,000, X_R = 350,000, and the price at A = $2,000.)