Definitions Microeconomics is the study of behavior of firms, individual consumers and industries and the determination of market prices and quantities of goods and services, and factors of production. Market is a situation where potential buyers and potential...
The role of the price mechanism The price mechanism moves the market into equilibrium, so that the scarce resources are reallocated. Opportunity cost: is the next best alternative forgone. When a choice is made, there is an opportunity cost. Rationing function: Prices...
Calculating and illustrating equilibrium using linear equations (HL) The graph shows that the equilibrium price and quantity are Pe, which is between $6 and $7, and Qe, which is between 10 and 20 units. However, to get more exact values calculations can be used. This...
Market equilibrium and changes in equilibrium Market equilibrium: where the quantity supplied equals the quantity demanded Excess supply: more is being supplied than demanded at P1, in order to eliminate the surplus, producer must lower the price Excess demand:...
Linear supply functions, equations and graphs (HL) Supply function: Qs = c + dP ‘C’ causes a shift in the supply curve because c = the quantity supplied when the price is 0, so, if c decreases the curve will shift to the left (non-price factors) The slope will depend...
Supply Supply: the total amount of goods and services that producers are willing and able to purchase at a given The law of supply: as the price of a product rises, the quantity supplied of the product will usually increase, ceteris paribus. The market supply gives...
These are some key words and definitions which must be learnt as in the exams you must define the terms that you use to demonstrate you true understanding. Scarcity: the condition of having unlimited wants/desires and limited resources (or distribution /dissemination...
Linear demand functions (equations), demand schedules and graphs (HL) Demand function: Qd = a – bP ‘A’ causes a shift in the demand curve because a= the quantity demanded when the price is 0, so, if a decreases the curve will shift to the left (non-price factors) The...