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Supply and Demand in Microeconomics

The document outlines the principles of microeconomics, focusing on the supply and demand model that determines prices and quantities in a market economy. It explains the laws of demand and supply, market equilibrium, and factors that can shift demand and supply curves. Additionally, it introduces price elasticity of demand, indicating how quantity demanded responds to price changes.

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Wynna Winner
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5 views1 page

Supply and Demand in Microeconomics

The document outlines the principles of microeconomics, focusing on the supply and demand model that determines prices and quantities in a market economy. It explains the laws of demand and supply, market equilibrium, and factors that can shift demand and supply curves. Additionally, it introduces price elasticity of demand, indicating how quantity demanded responds to price changes.

Uploaded by

Wynna Winner
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as TXT, PDF, TXT or read online on Scribd

4.

Principles of Economics
University: Yale University
Course Title: ECON 110 – Principles of Microeconomics
Professor: Dr. Richard F. Greene
Date: September 18, 2025

Supply and Demand: The Basic Model


Overview:
Supply and demand is the fundamental model of economics that explains how prices
and quantities of goods and services are determined in a market economy.

Law of Demand:
Definition: As the price of a good or service decreases, the quantity demanded
increases, ceteris paribus (all else being equal).

Demand Curve: A downward-sloping curve, indicating that as prices fall, demand


rises.

Law of Supply:
Definition: As the price of a good or service increases, the quantity supplied
increases, ceteris paribus.

Supply Curve: An upward-sloping curve, indicating that higher prices incentivize


producers to supply more.

Market Equilibrium:
The point where the quantity demanded equals the quantity supplied. At this point,
the market price stabilizes.

Shifts in the Curves:


Demand Shift: Can be caused by changes in consumer preferences, income, or the
prices of related goods.

Supply Shift: Can be caused by changes in production technology, input prices, or


government policies.

Elasticity:
Price Elasticity of Demand (PED): Measures how responsive the quantity demanded is
to a change in price.

If PED > 1, demand is elastic.

If PED < 1, demand is inelastic.

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