buyer willingness at each price
↗️MICROECONOMICS STUDY GUIDE
Supply, Demand, and Elasticity
Read market shifts, calculate elasticity, and connect price movement with quantity and total revenue.
8 key ideas8 flashcards5 practice questions
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Separate a curve shift from movement along a curve.
quantity demanded equals quantity supplied
seller willingness at each price
Key ideas to know
Start with the relationships between ideas. Then close the notes and explain each one from memory.
- 01
Demand records quantities buyers are willing and able to purchase at different prices.
- 02
Supply records quantities sellers are willing and able to sell at different prices.
- 03
A movement along a curve follows a price movement for that good.
- 04
A curve shift follows a nonprice determinant, including income, input costs, expectations, or related goods.
- 05
Market equilibrium occurs where quantity demanded equals quantity supplied.
- 06
A binding price ceiling sits below equilibrium and produces a shortage.
- 07
Price elasticity of demand equals percentage quantity response divided by percentage price response.
- 08
When demand is elastic, a lower price raises total revenue; when it is inelastic, a lower price reduces total revenue.
PART OF THE MICROECONOMICS GUIDE
See every set in this course and follow a focused review order.
Open the full Microeconomics guide →Two ideas worth correcting now
NOT QUITE
→A rise in demand means moving right on the same curve
USE THIS INSTEAD
A demand rise shifts the whole curve right; a price movement travels along one curve.
NOT QUITE
→Slope and elasticity are identical
USE THIS INSTEAD
Elasticity uses percentage responses and can differ along a straight line.
Flashcards
Answer before opening each card. The effort to retrieve is part of the learning.
1What causes movement along a demand curve?Show answer ＋
A price movement for the good itself.
2What can shift demand?Show answer ＋
Income, tastes, expectations, population, or prices of related goods.
3What can shift supply?Show answer ＋
Input costs, technology, taxes, expectations, weather, or number of sellers.
4What is market equilibrium?Show answer ＋
The price and quantity where quantity demanded equals quantity supplied.
5What does elasticity above one mean?Show answer ＋
Quantity responds proportionally more than price.
6Why use the midpoint formula?Show answer ＋
It gives the same percentage calculation in either direction between two points.
7What does positive cross-price elasticity indicate?Show answer ＋
The goods are substitutes.
8What does negative income elasticity indicate?Show answer ＋
The good is inferior over the measured income range.
Explain it in your own words
Use the answer as a check after you have written or spoken your response.
01What happens when demand rises while supply stays fixed?
Equilibrium price and quantity both rise.
02What happens when supply rises while demand stays fixed?
Equilibrium price falls and equilibrium quantity rises.
03Why does a binding rent ceiling produce a shortage?
At the controlled price, quantity demanded exceeds quantity supplied.
04How does elastic demand relate to total revenue?
Price and total revenue move in opposite directions.
05Why can elasticity differ along a straight demand curve?
The price-to-quantity ratio differs from point to point even when slope is constant.
Related study materials
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