Microeconomics and Behaviour, 3E

Synopsis

Microeconomics and Behaviour, third edition, is an accessible yet intellectually challenging and engaging textbook for students.

It develops core analytical and technical tools and embeds them in a collection of real-world examples and applications to illuminate the power and versatility of the economic way of thinking.

With this approach, students develop economic intuition and are stimulated to think more deeply about the technical tools they learn, and to find more interesting ways to apply them. This enables students to not just understand microeconomics, but to think like economists themselves, and to develop a lasting interest in the discipline.

Key Features
 Fully updated chapters, including new and expanded material on international labour markets, the gig economy,
behavioural game theory and nudge theory.

 Extensive pedagogical features such as examples, key terms and definitions, in-chapter exercises, chapter summaries,
and review questions and problems.

 Economic Naturalist examples that show how economic principles can be used to explain experiences and observations of everyday life. New examples include: "Why do firms benefit from the gig economy?", "Why is self-checkout becoming the norm in shops?", and "Why do online retailers have flagship stores?".

Connect® Resources
Available with McGraw-Hill Education's Connect®, the well-established online learning platform, which helps faculty and institutions improve student outcomes and course delivery efficiency. In addition to math's tutorials and SmartBook, the award winning adaptive reading experience, the new Connect® features for this edition include:
 Economic Application Based Activities that provide students with valuable practice, using problem solving skills to apply their knowledge to realistic scenarios. Students progress from understanding basic concepts to using their knowledge to analyse complex scenarios and solve problems.

 Economic Naturalist graphing questions which have been newly developed to complement this key pedagogical feature from the textbook.

 Interactive Graphs that help students see the relevance of the subject matter by providing visual displays of real data for students to manipulate. All graphs are accompanied by assignable assessment questions and feedback for students.

NEW TO CONNECT FOR 2023
In response to customer needs, 58 brand new Problems have been added to Connect to further develop students practical application skills and cement theoretical understanding.


To learn more, visit mheducation.co.uk/connect

Summary

Chapter 1: Introduction to Microeconomics

Summary:
This chapter introduces microeconomics as the study of individual behaviors and decision-making in markets. It explains the basic concepts of supply and demand, market equilibrium, and economic efficiency.

Example:
The coffee market: When the price of coffee is high, supply (coffee producers) increases while demand (coffee consumers) decreases, resulting in a market equilibrium. This equilibrium price establishes an efficient allocation of coffee resources, minimizing waste and maximizing consumer satisfaction.

Chapter 2: Consumer Behavior

Summary:
This chapter explores how consumers make decisions based on their preferences, income, and prices. It introduces utility maximization, budget constraints, and the concept of diminishing marginal utility.

Example:
A student with a budget of $100: If pizza costs $10 and soda costs $2, the student will maximize utility by spending $70 on pizza and $30 on soda, as this combination offers the highest level of satisfaction within the budget.

Chapter 3: Production and Costs

Summary:
This chapter examines how firms produce goods and services and incur costs in the process. It introduces the concepts of production functions, marginal cost, and economies of scale.

Example:
A car factory: The factory incurs fixed costs (e.g., building rent) and variable costs (e.g., labor, materials) to produce cars. As production increases, the average cost of producing each car may decrease due to economies of scale.

Chapter 4: Firm Behavior and Market Structure

Summary:
This chapter analyzes how firms make decisions in different market structures (e.g., monopoly, perfect competition). It explains the concepts of profit maximization, price discrimination, and market power.

Example:
A local grocery store monopoly: The monopoly can charge a higher price for its products because it has no direct competitors, leading to higher profits. However, government regulations may prevent excessive market power by the monopoly.

Chapter 5: Market Failures and Government Intervention

Summary:
This chapter discusses market failures such as externalities, public goods, and imperfect information. It explains how government intervention can address these failures and improve market outcomes.

Example:
Pollution: Factories can cause pollution that harms the environment and public health. Government regulations may be introduced to impose a tax on pollution, internalizing the external cost and reducing pollution.

Chapter 6: Labor Markets

Summary:
This chapter examines the dynamics of labor markets, including wage determination, labor supply, and labor unions. It explains the concepts of efficiency wages and labor market discrimination.

Example:
A skilled worker's wage: Skilled workers may earn higher wages because their skills are in high demand relative to their supply. Additionally, labor unions may negotiate with employers for higher wages and better working conditions.

Chapter 7: Capital and Financial Markets

Summary:
This chapter introduces capital and financial markets where firms raise funds for investment and individuals save and invest for future consumption. It explains the concepts of interest rates, risk, and asset pricing.

Example:
A stock market investment: Buying stocks represents an investment in capital. The return on investment depends on factors such as company performance, market demand, and the prevailing interest rates.

Chapter 8: Game Theory

Summary:
This chapter explores game theory as a tool for analyzing strategic interactions between individuals or firms. It explains the concepts of rational behavior, cooperative and non-cooperative games, and Nash equilibrium.

Example:
A prisoner's dilemma game: Two criminals decide whether to confess or remain silent in front of the police. The Nash equilibrium outcome may involve both criminals confessing even though silence would offer a collectively better outcome.