Microeconomics

• 5 possible determinants of demand:

  Substitute

  Preference

  Income

  Complementary

  Expectations
• Law of demand: as quantity demanded increases, the price decreases, ceteris paribus
• Law of supply: as quantity supplied increases, the price increases, ceteris paribus
• 6 possible determinants of supply:

  Resource cost

  Other goods

  Technology

  Taxes and subsidies

  Expectations

  Number of firms
• When there is more of quantity supplied than demanded, it is called excess supply
• When there is more quantity demanded than supplied, it is called excess demand
• Consumer surplus: The difference between the price consumers are willing to pay and the price they actually pay.
• Producer surplus: The difference between the price producers are willing to sell and the price they actually sell for.
• Allocative efficiency: a combination of both consumer and producer surplus, when the price and quantity of a good or service is optimally allocated from society's point of view