INSTRUCTOR’S MANUAL
Christopher T.S. Ragan
McGill University
Microeconomics
Sixteenth Canadian Edition
Christopher T.S. Ragan
ISBN: 978-0-13-523343-6
Copyright © 2020 Pearson Canada Inc., Toronto, Ontario. All rights reserved. This work is protected by Canadian copyright laws
and is provided solely for the use of instructors in teaching their courses and assessing student learning. Dissemination or sale of
any part of this work (including on the Internet) will destroy the integrity of the work and is not permitted. The copyright holder
grants permission to instructors who have adopted Microeconomics, by Christopher T. S. Ragan to post this material online only
if the use of the website is restricted by access codes to students in the instructor’s class that is using the textbook and provided
the reproduced material bears this copyright notice.
Copyright © 2020 Pearson Canada Inc.
,ii Instructor‘s Manual for Ragan, Economics, Sixteenth Canadian Edition
Contents
Part One: What Is Economics? 1
Chapter 1: Economic Issues and Concepts 3
Chapter 2: Economic Theories, Data, and Graphs 13
Part Two: An Introduction to Demand and Supply 26
Chapter 3: Demand, Supply, and Price 27
Chapter 4: Elasticity 39
Chapter 5: Price Controls and Market Efficiency 52
Part Three: Consumers and Producers 62
Chapter 6: Consumer Behaviour 63
Chapter 7: Producers in the Short Run 78
Chapter 8: Producers in the Long Run 91
Part Four: Market Structure and Efficiency 100
Chapter 9: Competitive Markets 101
Chapter 10: Monopoly, Cartels, and Price Discrimination 111
Chapter 11: Imperfect Competition and Strategic Behaviour 125
Chapter 12: Economic Efficiency and Public Policy 134
Part Five: Factor Markets 144
Chapter 13: How Factor Markets Work 146
Chapter 14: Labour Markets and Income Inequality 155
Chapter 15: Interest Rates and the Capital Market 167
Part Six: Government in the Market Economy 175
Chapter 16: Market Failures and Government Intervention 177
Chapter 17: The Economics of Environmental Protection 188
Chapter 18: Taxation and Public Expenditure 200
Part Twelve: Canada in the Global Economy 335
Chapter 32: The Gains from International Trade 336
Chapter 33: Trade Policy 345
________________________________________
Part One
Copyright © 2020 Pearson Canada Inc.
, Chapter 1: Economic Issues and Concepts iii
What Is Economics?
________________________________________
This opening Part of the book provides an introduction to economics. The central themes of
Chapter 1 are scarcity, choice, opportunity cost, and the self-organizing role of markets. The
chapter also examines the gains from specialization and trade, the role of money, the effects of
globalization, and ends with a discussion of the various types of economic systems. Chapter 2
examines how economists build their models and test their theories. It also addresses central
methodological issues, the most important being the idea that the progress of economics (like all
scientific disciplines) depends on relating our theories to what we observe in the world around us.
Finally, the chapter has an extensive section on graphing.
***
Chapter 1 opens with a brief tour of some key economic issues in Canada and other countries—
from rising protectionism and the dangers of climate change to accelerating technological change
and growing income inequality. The purpose is to whet the reader‘s appetite for the kinds of issues
economists are thinking about today. This offers a natural segue to the discussion of scarcity,
without which few of these issues would be very interesting. The chapter addresses the
fundamental concepts of scarcity, choice, and opportunity cost, illustrating these ideas with a
production possibilities boundary. (It is worth noting that these concepts are relevant to all
economies, whether they are organized by central planning or by free markets.) We then examine
the complexity of modern market economies, examining the decision makers, production, trade,
money, and globalization. Finally, we examine different types of economic systems, including
traditional, command, and free-market systems. We emphasize that all actual economies are
mixtures, containing elements of all three pure systems.
Chapter 2 provides a longer introduction to the methodological issues of economics than is
usually included in introductory texts. We do this because most students believe that the scientific method
is limited to the natural sciences. But to appreciate economics, they must understand that its theories are
also open to empirical testing and that these theories continually change as a result of what the empirical
evidence shows. We understand that some instructors feel their time is so limited that they cannot spend
class time on Chapter 2. We believe that even if it is not covered in class, students‘ attention should be
called to the issues addressed in the chapter. Our experience is that students benefit from some discussion
of the scientific method and from the insight that the social sciences are not all that different from the
―hard‖ sciences, at least in their basic approaches.
Copyright © 2020 Pearson Canada Inc.
, iv Instructor‘s Manual for Ragan, Economics, Sixteenth Canadian Edition
The chapter begins by making the distinction between positive and normative statements. We then work
carefully through the various elements of economic theories, including definitions, assumptions, and
predictions. Testing theories is as important as developing them, so we emphasize the interaction between
theorizing and empirical observation. We then present various types of economic data, and this gets us
into a detailed discussion of index numbers, time-series and cross-section data, and graphs. The final
section of the chapter goes through graphing in detail.
Copyright © 2020 Pearson Canada Inc.
Christopher T.S. Ragan
McGill University
Microeconomics
Sixteenth Canadian Edition
Christopher T.S. Ragan
ISBN: 978-0-13-523343-6
Copyright © 2020 Pearson Canada Inc., Toronto, Ontario. All rights reserved. This work is protected by Canadian copyright laws
and is provided solely for the use of instructors in teaching their courses and assessing student learning. Dissemination or sale of
any part of this work (including on the Internet) will destroy the integrity of the work and is not permitted. The copyright holder
grants permission to instructors who have adopted Microeconomics, by Christopher T. S. Ragan to post this material online only
if the use of the website is restricted by access codes to students in the instructor’s class that is using the textbook and provided
the reproduced material bears this copyright notice.
Copyright © 2020 Pearson Canada Inc.
,ii Instructor‘s Manual for Ragan, Economics, Sixteenth Canadian Edition
Contents
Part One: What Is Economics? 1
Chapter 1: Economic Issues and Concepts 3
Chapter 2: Economic Theories, Data, and Graphs 13
Part Two: An Introduction to Demand and Supply 26
Chapter 3: Demand, Supply, and Price 27
Chapter 4: Elasticity 39
Chapter 5: Price Controls and Market Efficiency 52
Part Three: Consumers and Producers 62
Chapter 6: Consumer Behaviour 63
Chapter 7: Producers in the Short Run 78
Chapter 8: Producers in the Long Run 91
Part Four: Market Structure and Efficiency 100
Chapter 9: Competitive Markets 101
Chapter 10: Monopoly, Cartels, and Price Discrimination 111
Chapter 11: Imperfect Competition and Strategic Behaviour 125
Chapter 12: Economic Efficiency and Public Policy 134
Part Five: Factor Markets 144
Chapter 13: How Factor Markets Work 146
Chapter 14: Labour Markets and Income Inequality 155
Chapter 15: Interest Rates and the Capital Market 167
Part Six: Government in the Market Economy 175
Chapter 16: Market Failures and Government Intervention 177
Chapter 17: The Economics of Environmental Protection 188
Chapter 18: Taxation and Public Expenditure 200
Part Twelve: Canada in the Global Economy 335
Chapter 32: The Gains from International Trade 336
Chapter 33: Trade Policy 345
________________________________________
Part One
Copyright © 2020 Pearson Canada Inc.
, Chapter 1: Economic Issues and Concepts iii
What Is Economics?
________________________________________
This opening Part of the book provides an introduction to economics. The central themes of
Chapter 1 are scarcity, choice, opportunity cost, and the self-organizing role of markets. The
chapter also examines the gains from specialization and trade, the role of money, the effects of
globalization, and ends with a discussion of the various types of economic systems. Chapter 2
examines how economists build their models and test their theories. It also addresses central
methodological issues, the most important being the idea that the progress of economics (like all
scientific disciplines) depends on relating our theories to what we observe in the world around us.
Finally, the chapter has an extensive section on graphing.
***
Chapter 1 opens with a brief tour of some key economic issues in Canada and other countries—
from rising protectionism and the dangers of climate change to accelerating technological change
and growing income inequality. The purpose is to whet the reader‘s appetite for the kinds of issues
economists are thinking about today. This offers a natural segue to the discussion of scarcity,
without which few of these issues would be very interesting. The chapter addresses the
fundamental concepts of scarcity, choice, and opportunity cost, illustrating these ideas with a
production possibilities boundary. (It is worth noting that these concepts are relevant to all
economies, whether they are organized by central planning or by free markets.) We then examine
the complexity of modern market economies, examining the decision makers, production, trade,
money, and globalization. Finally, we examine different types of economic systems, including
traditional, command, and free-market systems. We emphasize that all actual economies are
mixtures, containing elements of all three pure systems.
Chapter 2 provides a longer introduction to the methodological issues of economics than is
usually included in introductory texts. We do this because most students believe that the scientific method
is limited to the natural sciences. But to appreciate economics, they must understand that its theories are
also open to empirical testing and that these theories continually change as a result of what the empirical
evidence shows. We understand that some instructors feel their time is so limited that they cannot spend
class time on Chapter 2. We believe that even if it is not covered in class, students‘ attention should be
called to the issues addressed in the chapter. Our experience is that students benefit from some discussion
of the scientific method and from the insight that the social sciences are not all that different from the
―hard‖ sciences, at least in their basic approaches.
Copyright © 2020 Pearson Canada Inc.
, iv Instructor‘s Manual for Ragan, Economics, Sixteenth Canadian Edition
The chapter begins by making the distinction between positive and normative statements. We then work
carefully through the various elements of economic theories, including definitions, assumptions, and
predictions. Testing theories is as important as developing them, so we emphasize the interaction between
theorizing and empirical observation. We then present various types of economic data, and this gets us
into a detailed discussion of index numbers, time-series and cross-section data, and graphs. The final
section of the chapter goes through graphing in detail.
Copyright © 2020 Pearson Canada Inc.
