... THE
RISK OF THIS
,
BUTAT
WHATCOST
?
238 PART FOUR THE ECONOMICS OF THE PUBLIC SECTOR
CASE STUDY
WHY THE COW IS NOT EXTINCT
Throughout history, many species of animals have been threatened with ... some-
times used by courts to award damages in wrongful-death suits, is to look at the
total amount of money a person would have earned if he or she had lived.
Economists are often cri...
... various mixes of output
that an economy can produce. It illustrates one of the Ten Principles of Economics in
Chapter 1: People face tradeoffs. Here the farmer faces a tradeoff between produc-
ing meat ... case of babies and mini-
vans. Couples often buy a minivan in anticipation of the birth of a child. The
Violent
Crimes
(per 1,000
people)
Police Officers
(per 1,000 peopl...
... sum of all the
individual demands for a particular good or service.
Catherine’s Demand
Price of
Ice-Cream
Cone
Price of
Ice-Cream
Cone
Nicholas’s Demand
0 1 2 3 4 5 6 7 8 9 10 11 12
Quantity of
Ice-Cream ... of
Ice-Cream Cones
$3.00
1.50
2.00
2.50
1.00
0.50
0
1234 56789101112
Quantity of
Ice-Cream Cones
$3.00
1.50
2.00
2.50
1.00
0.50
؉
demand curve
a graph of the relationship b...
... considered a 40 per-
cent fall.
Because the midpoint method gives the same answer regardless of the direc-
tion of change, it is often used when calculating the price elasticity of demand be-
tween two ... together, such as comput-
ers and software. In this case, the cross-price elasticity is negative, indicating that
an increase in the price of computers reduces the quantity of sof...
... on labor-force participation.
The labor-force participation rate measures the percentage of the total adult pop-
ulation of the United States that is in the labor force:
Labor-force participation ... million, the labor-force participation
rate was
Labor-force participation rate ϭ (137.7/205.2) ϫ 100 ϭ 67.1 percent.
Hence, in 1998, two-thirds of the U.S. adult population were participati...
... has a fifty-fifty chance of hiring the compe-
tent one. By contrast, if the firm offers any lower wage, it is sure to hire the incom-
petent worker.
In many situations in life, in-
formation ... 601
was profitable for the firm. Henry Ford himself called the $5-a-day wage “one
of the finest cost-cutting moves we ever made.”
Historical accounts of this episode are also consistent with ......
... head of the central bank
said today that the bank intends to bail
out many of the nation’s bankrupt finan-
cial institutions by buying back their
multibillion-ruble portfolios of Govern-
ment ... quantity of money sup-
plied. This equilibrium of money supply and money demand determines the value
of money and the price level.
Quantity fixed
by the Fed
Quantity of
Money
Value of...
... outcomes:
efficiency
the property of a resource allocation
of maximizing the total surplus
received by all members of society
equity
the fairness of the distribution of
well-being among the members of
society
CHAPTER ... planner. The benevolent social planner is an
all-knowing, all-powerful, well-intentioned dictator. The planner wants to maxi-
mize the economic well-being of ev...
... that part of the disagree-
ment may rest on different views about the elasticity of labor supply and the
deadweight loss of taxation.
“L
ET ME TELL YOU WHAT
I
THINK ABOUT THE ELASTICITY OF LABORSUPPLY
.”
QUICK ... tax revenue.
This chapter has shed some light on how high the price of civilized society can
be. One of the Ten Principles of Economics discussed in Chapter 1...