Understanding Microeconomic Market Dynamics

Microeconomics: Supply, Demand, and Elasticity - Revision Sheet

1. 📌 Essentials

• Demand: Quantity consumers are willing to buy at various prices; inverse relationship with price.
• Supply: Quantity producers willing to sell at various prices; direct relationship with price.
• Price elasticity of demand (PED): Measures responsiveness of quantity demanded to price changes.
• Elastic demand: PED > 1; sensitive to price changes.
• Inelastic demand: PED < 1; less sensitive to price changes.
• Unitary elasticity: PED = 1; proportional change in demand and price.
• Income elasticity (YED): How demand varies with income; positive for normal goods, negative for inferior.
• Cross-price elasticity (XED): Demand change of one good due to price change of another; positive for substitutes, negative for complements.
• Market types: Elastic markets are highly responsive; inelastic markets are less responsive.
• Public goods: Non-rival, non-excludable; provided by government, not profit-driven.
• Demand and supply formulas: QD = 200 - 10P; QS = 50 + 20P (examples).

2. 🧩 Key Structures & Components