Microeconomics

Table of Contents

1. Topic pack - Microeconomics - introduction
2. 1.1 Competitive Markets: Demand and Supply
3. 1.1 Competitive Markets: Demand and Supply - notes
   1. The nature of markets
   2. Types of markets
   3. Market structure
   4. Spectrum of competition
   5. Demand
   6. The law of demand
   7. Individual and market demand
   8. Non-price determinants of demand
   9. Movements along the demand curve
   10. Shifts in the demand curve
   11. Example - shifts and movements along a demand curve
   12. Exceptions to the normal law of demand
   13. Linear demand functions
   14. Linear demand functions - example
   15. The law of supply
   16. Non-price determinants of supply
   17. Movements along the supply curve
   18. Shifts in the supply curve
   19. Shifts and moves of supply curve
   20. The real supply curve?
   21. Linear supply functions
   22. Linear supply functions - example
   23. Market equilibrium
   24. Market equilibrium - notes
   25. Excess demand and excess supply
   26. Example 1 - the market for DVD players
   27. Example 2 - the market for fish
   28. Applications of demand and supply
   29. Calculating market equilibrium
   30. Calculating equilibrium - example
   31. Scarcity and choice
   32. Choice and opportunity cost
   33. Price signalling
   34. Market efficiency - consumer surplus
   35. Market efficiency - producer surplus
   36. Allocative efficiency
4. 1.1 Competitive markets - questions
5. 1.1 Competitive markets - simulations and activities
6. 1.2 Elasticities
7. 1.2 Elasticities - notes
8. Section 1.2 Elasticities - questions
9. Section 1.2 Elasticities - simulations and activities
10. 1.3 Government intervention
11. 1.3 Government Intervention - notes
12. 1.3 Government intervention - questions
13. 1.3 Government intervention - simulations and activities
14. 1.4 Market failure
15. 1.4 Market failure - notes
16. Section 1.4 Market failure - questions
17. Section 1.4 Market failure - simulations and activities
18. 1.5 Theory of the firm
19. 1.5 Theory of the firm - notes (HL only)
20. Section 1.5 Theory of the firm - questions
21. Section 1.5 Theory of the firm - simulations and activities
22. Print View

Market equilibrium

In the previous section we explained markets and the rules of supply and demand. We now move on to examine market equilibrium, the price mechanism and market efficiency.

.

By the end of this section you should be able to:

• Explain, using diagrams, how demand and supply interact to produce market equilibrium.
• Analyse, using diagrams and with reference to excess demand or excess supply, how changes in the determinants of demand and/or supply result in a new market equilibrium.
• Explain why scarcity necessitates choices that answer the "What to produce?" question.
• Explain why choice results in an opportunity cost.
• Explain, using diagrams, that price has a signalling function and an incentive function, which result in a reallocation of resources when prices change as a result of a change in demand or supply conditions.
• Explain the concept of consumer surplus.
• Identify consumer surplus on a demand and supply diagram.
• Explain the concept of producer surplus.
• Identify producer surplus on a demand and supply diagram.
• Explain that the best allocation of resources from society's point of view is at competitive market equilibrium, where social (community) surplus (consumer surplus and producer surplus) is maximized (marginal benefit = marginal cost).

• Calculate the equilibrium price and equilibrium quantity from linear demand and supply functions.
• Plot demand and supply curves from linear functions, and identify the equilibrium price and equilibrium quantity.
• State the quantity of excess demand or excess supply in the above diagrams.