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D. Curtis & I. Irvine with Open Texts Principles of Microeconomics D. Curtis & I. Irvine with Open Texts Open Texts and Editorial Support Digital access to our high-quality Access to our in-house support team texts is entirely FREE! All content is is available 7 days/week to provide reviewed and updated regularly by prompt resolution to both student and subject matter experts, and the instructor inquiries. In addition, we texts are adaptable; custom edi- work one-on-one with instructors to tions can be produced by the Lyryx provide a comprehensive system, cus- editorial team for those adopting tomized for their course. This can Lyryx assessment. Access to the include managing multiple sections, original source files is also open to assistance with preparing online anyone! examinations, help with LMS integra- tion, and much more! Online Assessment Instructor Supplements Lyryx has been developing online for- Additional instructor resources that mative and summative assessment are integrated with each text are also (homework and exams) for more than freely accessible. Product dependent, 20 years, and as with the textbook include: full sets of adaptable slides/ content, questions and problems are lecture notes, solutions manuals, and regularly reviewed and updated. Stu- multiple choice question banks with dents receive immediate personalized an exam building tool. feedback to guide their learning. Stu- dent grade reports and performance statistics are also provided, and full LMS integration, including gradebook Contact Lyryx Today! synchronization, is available. [email protected] PRINCIPLES OF MICROECONOMICS an Open Text by Douglas Curtis and Ian Irvine Version 2021 — Revision A BE A CHAMPION OF OER! Contribute suggestions for improvements, new content, or errata: • A new topic • A new example • An interesting new question • Any other suggestions to improve the material Contact Lyryx at [email protected] with your ideas. Creative Commons License (CC BY-NC-SA): This text, including the art and illustrations, are available under the Creative Commons license (CC BY-NC-SA), allowing anyone to reuse, revise, remix and redistribute the text. To view a copy of this license, visit http://creativecommons.org/licenses/by-nc-sa/3.0/ PRINCIPLES OF MICROECONOMICS an Open Text Version 2021 — Revision A Attribution To redistribute all of this book in its original form, please follow the guide below: The front matter of the text should include a “License” page that includes the following statement. This text is Principles of Microeconomics by I. Irvine and D. Curtis and Lyryx Learning Inc. View the text for free at https:// lyryx.com/subjects/economics/principles-of-microeconomics/ To redistribute part of this book in its original form, please follow the guide below. Clearly indicate which content has been redistributed The front matter of the text should include a “License” page that includes the following statement. This text includes the following content from Principles of Microeconomics by I. Irvine and D. Curtis and Lyryx Learning Inc. View the entire text for free at https://lyryx.com/subjects/economics/principles-of-microeconomics/. <List of content from the original text> The following must also be included at the beginning of the applicable content. Please clearly indicate which content has been redistributed from the Lyryx text. This chapter is redistributed from the original Principles of Microeconomics by I. Irvine and D. Curtis and Lyryx Learning Inc. View the original text for free at https://lyryx.com/subjects/economics/principles-of-microeconomics/. To adapt and redistribute all or part of this book in its original form, please follow the guide below. Clearly indicate which content has been adapted/redistributed and summarize the changes made. The front matter of the text should include a “License” page that includes the following statement. This text contains content adapted from the original Principles of Microeconomics by I. Irvine and D. Curtis and Lyryx Learning Inc. View the original text for free at https://lyryx.com/subjects/economics/principles-of-microeconomics/. <List of content and summary of changes> The following must also be included at the beginning of the applicable content. Please clearly indicate which content has been adapted from the Lyryx text. This chapter was adapted from the original Principles of Microeconomics by I. Irvine and D. Curtis and Lyryx Learning Inc. View the original text for free at https://lyryx.com/subjects/economics/principles-of-microeconomics/. Citation Use the information below to create a citation: Author: I. Irvine and D. Curtis Publisher: Lyryx Learning Inc. Book title: Principles of Microeconomics Book version: 2021A Publication date: March 15, 2021 Location: Calgary, Alberta, Canada Book URL: https://lyryx.com/subjects/economics/principles-of-microeconomics/ For questions or comments please contact [email protected] PRINCIPLES OF MICROECONOMICS an Open Text by Douglas Curtis and Ian Irvine Base Text Revision History Current Revision: Version 2021 — Revision A Edits and revisions have been completed by the authors together with the editorial staff at Lyryx Learning. All new content (text and images) is released under the same license as noted above. 2021 A • Cover page updated, attribution page added. 2020 A • This edition has been revised and updated from the 2017 edition to cover the evolution of the Canadian micro-economy from both a technological and policy standpoint. The new edition also contains applications that are set in the context of the COVID-19 crisis. • Our objectiveis to presentideas andmodelsthataccurately describe the functioningof the modern economy. This means that we need explanations for multi-product firms that operate off a single platform; we need to understand the power of global firms to deter entry into the sector of the economy they dominate; we need to understand the power wielded by firms such as Google, Amazon, Microsoft and Facebook. • The text still develops the traditional models of demand and supply, welfare economics and choice, perfect competition and monopoly and various imperfect competition models. A new section on matching markets - those where money does not lubricate the exchange - is developed in the chapter on imperfect competition. • Where international trade is concerned we explore traditional models of comparative advantage and increasing returns, and also formulate policies for pandemics. • Tables, figures and underlying data throughout the text have been updated to the latest available as of 2020. • In sum, this edition aims to develop simple models of behaviour that accord with and explain the structure of the markets we observe in the modern economy. • Chapters 1, 2, and 4 have new Applications incorporating current events such as the COVID-19 pandemic, the 2020 US Presidential campaign, and changes to the price of oil. • Chapter 1 includes a new subsection: Aggregate Output in a National Economy. • Chapter 7 has an expanded discussion of risk pooling, including an exploration of start-ups and their investors. • Chapter 11 includes a new section: Economies of Scope and Platforms. Chapter 11 has an ex- panded section on strategic barriers to entry as well as a section on matching markets. • In Chapter 15, topics of internationaltradeare expandedto include the updates regarding NAFTA, the USMCA, the EU, CETA, and the TPP. A discussion of protectionism in a time of pandemics is included. ii 2017 B • Data, tables, and figures have been updated to the latest available data. Applications and discus- sions have been edited to discuss and comment on these current observations. • New content added including zero-sum games, teams and services, market design and matching, and returns to scale for the production of intermediate goods. • Discussion of climate change in relation to externalities is expanded and updated to reflect current events. 2017 A • Front matter has been updated including cover, copyright, and revision pages. TABLE OF CONTENTS Table of Contents iii About the Authors 1 Part One: The Building Blocks 3 1 Introduction to key ideas 5 1.1 What’s it all about? .................................. 5 1.2 Understanding through the use of models ...................... 10 1.3 Opportunity cost and the market ........................... 11 1.4 A model of exchange and specialization ....................... 12 1.5 Economy-wide production possibilities ....................... 16 1.6 Aggregate output, growth and business cycles .................... 18 Conclusion ......................................... 23 Key Terms .......................................... 24 Exercises for Chapter 1 ................................... 25 2 Theories, data and beliefs 27 2.1 Data analysis ..................................... 27 iii iv Table of Contents 2.2 Data, theory and economic models .......................... 33 2.3 Ethics, efficiency and beliefs ............................. 37 Key Terms .......................................... 41 Exercises for Chapter 2 ................................... 42 3 The classical marketplace – demand and supply 45 3.1 The marketplace – trading .............................. 45 3.2 The market’s building blocks ............................. 46 3.3 Demand and supply curves .............................. 50 3.4 Non-price influences on demand ........................... 51 3.5 Non-price influences on supply ............................ 56 3.6 Simultaneous supply and demand impacts ...................... 59 3.7 Market interventions – governments and interest
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