π MICROECONOMICS KEY POINTS (Modules 1β4) ---------------------------------- MODULE 1 β Supply & Demand ---------------------------------- β’ Law of Demand: price β β quantity demanded β β’ Law of Supply: price β β quantity supplied β β’ Market equilibrium at intersection of supply & demand. β’ Shifts in demand caused by income, tastes, substitutes, complements. β’ Shifts in supply caused by production costs, technology, expectations. β’ Surplus β price too high; Shortage β price too low. ---------------------------------- MODULE 2 β Elasticity ---------------------------------- β’ Elasticity measures sensitivity of quantity to price/income changes. β’ PED > 1 β elastic (price-sensitive) β’ PED < 1 β inelastic (not price-sensitive) β’ Elastic β price β β TR β β’ Inelastic β price β β TR β β’ YED > 0 β normal good; YED < 0 β inferior good β’ PES β with time, flexibility, storage. β’ Formula aΜ connaiΜtre: Midpoint method for PED. ---------------------------------- MODULE 3 β Consumer Choices ---------------------------------- β’ Consumers maximize utility under a budget constraint. β’ Budget line: PxX + PyY = I β’ Indifference curve = combinations with equal satisfaction. β’ MRS = MUx / MUy β slope of indifference curve. β’ Optimum: MRS = Px / Py (tangency point). β’ Perfect substitutes β straight IC; Perfect complements β L-shaped IC. ---------------------------------- MODULE 4 β Welfare & Government ---------------------------------- β’ Consumer Surplus = gain from paying less than WTP. β’ Producer Surplus = gain from selling above cost. β’ Total Surplus = CS + PS β maximized at equilibrium. β’ Deadweight Loss = welfare lost due to tax, subsidy, or control. β’ Price ceiling (max price) β shortage. β’ Price floor (min price) β surplus. β’ Tax wedge = difference between price buyer pays and seller receives. β’ Less elastic side bears more tax. β’ Subsidy β increases quantity, lowers price for buyers, costs government. β’ Efficiency = maximum welfare; Equity = fairness of distribution. # Type your text here