Midterm Microeconomics
Chapter 1 Adventures in Microeconomics
Microeconomics studies the specific choices made by consumers and producers.
Lecture 1:
Always label the graphs! Demand & inverse demand curve.
Change in quantity demanded – a movement along the demand curve in response to a
price change, with everything else held constant
Change in demand – a shift of the entire demand curve caused by a change in a non-price
factor that affects demand
When price elasticity of demand is high…
• Relatively small increases in price result in relatively large drops in quantity
demanded
When price elasticity of demand is low…
• Relatively large increases in price result in relatively small drops in quantity
demanded
Chapter 2 Supply and demand
2.1 Markets and Models
What does the term market mean? In the strictest version a market is defined by the specific product
being bought and sold. In practice we use the term more broadly than that. Broader is terms of
product, location or a time period.
Key assumptions of the supply and demand model are:
1. Restrict to supply and demand in a single market
2. All good bought and sold in the market are identical. Commodities are a good example.
These are goods where different varieties of the good are viewed as interchangeable (such as
wheat, soybean, oil)
3. All goods in the market sell for the same price and everyone has the same information about
price, quality and so on.
4. There are many buyers and sellers in the market.
Chapter 1 Adventures in Microeconomics
Microeconomics studies the specific choices made by consumers and producers.
Lecture 1:
Always label the graphs! Demand & inverse demand curve.
Change in quantity demanded – a movement along the demand curve in response to a
price change, with everything else held constant
Change in demand – a shift of the entire demand curve caused by a change in a non-price
factor that affects demand
When price elasticity of demand is high…
• Relatively small increases in price result in relatively large drops in quantity
demanded
When price elasticity of demand is low…
• Relatively large increases in price result in relatively small drops in quantity
demanded
Chapter 2 Supply and demand
2.1 Markets and Models
What does the term market mean? In the strictest version a market is defined by the specific product
being bought and sold. In practice we use the term more broadly than that. Broader is terms of
product, location or a time period.
Key assumptions of the supply and demand model are:
1. Restrict to supply and demand in a single market
2. All good bought and sold in the market are identical. Commodities are a good example.
These are goods where different varieties of the good are viewed as interchangeable (such as
wheat, soybean, oil)
3. All goods in the market sell for the same price and everyone has the same information about
price, quality and so on.
4. There are many buyers and sellers in the market.
