Micro economics summary
Week 1: supply and demand & week 2: economic policy
(chapter 2 and 3)
Market: specific product is bought and sold on a certain location and time.
- Four assumptions:
Single market
Products identical
Same price & full information
Many consumers and producers
Supply curve: QS = p + …
Demand curve: QD = … - p
If income rises:
- Demand curve shifts to the right if normal
good
- Demand curve shift to the left if inferior
Market equilibrium for Qs = QD
Where P* is price equilibrium & Q* is quantity equilibrium
For P > P* , excess supply
For P < p* , excess
demand
Price elastics
Of demand curve: ED = (∂QD / ∂PD )(P / QD)
elastic if between -∞ and -1 & inelastic if between -1 and ∞
Of two functions: EKL = (∂QDK / ∂PL)(PL / QDK) , where QDK is demand curve of
K
substitutes if positive & complement is negative
Of income: EI = (∂QD / ∂I)(I/QD)
Inferior good is negative, normal good is positive & luxury if above 1
Policies that effect economic welfare (surplus)
Week 1: supply and demand & week 2: economic policy
(chapter 2 and 3)
Market: specific product is bought and sold on a certain location and time.
- Four assumptions:
Single market
Products identical
Same price & full information
Many consumers and producers
Supply curve: QS = p + …
Demand curve: QD = … - p
If income rises:
- Demand curve shifts to the right if normal
good
- Demand curve shift to the left if inferior
Market equilibrium for Qs = QD
Where P* is price equilibrium & Q* is quantity equilibrium
For P > P* , excess supply
For P < p* , excess
demand
Price elastics
Of demand curve: ED = (∂QD / ∂PD )(P / QD)
elastic if between -∞ and -1 & inelastic if between -1 and ∞
Of two functions: EKL = (∂QDK / ∂PL)(PL / QDK) , where QDK is demand curve of
K
substitutes if positive & complement is negative
Of income: EI = (∂QD / ∂I)(I/QD)
Inferior good is negative, normal good is positive & luxury if above 1
Policies that effect economic welfare (surplus)
