Microeconomics — Cheatsheets

Demand and supply quick reference

Concept	Definition

|---|---|

Law of demand	Price ↑ → quantity demanded ↓ (inverse relationship)
Law of supply	Price ↑ → quantity supplied ↑ (direct relationship)
Equilibrium	Price/quantity where demand and supply curves intersect
Surplus	Price above equilibrium — quantity supplied > quantity demanded
Shortage	Price below equilibrium — quantity demanded > quantity supplied

Elasticity value	Meaning	Revenue effect of price increase

|---|---|---|

Elastic (>1)	Quantity change % > price change %	Total revenue falls
Unit elastic (=1)	Quantity change % = price change %	Total revenue unchanged
Inelastic (<1)	Quantity change % < price change %	Total revenue rises

Term	Meaning

|---|---|

Marginal utility	Additional satisfaction from one more unit consumed
Diminishing marginal utility	Each additional unit provides less satisfaction than the last
Substitution effect	Quantity change from relative price change alone
Income effect	Quantity change from real purchasing power change
Normal good	Consumed more as income rises
Inferior good	Consumed less as income rises
Fixed cost	Doesn't vary with output (e.g. rent)
Variable cost	Scales with output (e.g. raw materials)

Structure	Number of firms	Product	Pricing power	Long-run profit

|---|---|---|---|---|

Perfect competition	Many	Identical	None (price taker)	Zero economic profit
Monopolistic competition	Many	Differentiated	Some	Low, competed away over time
Oligopoly	Few	Similar or differentiated	Significant, interdependent	Can be sustained
Monopoly	One	Unique	Full	Can be sustained

Type	Problem	Typical remedy

|---|---|---|

Externality	Third-party costs/benefits not in price	Taxes/subsidies
Public good	Non-excludable/non-rivalrous, undersupplied privately	Public provision
Information asymmetry	One party has more information than the other	Regulation, disclosure requirements

(needs verification — recheck against current source: specific Indian regulatory applications of these frameworks evolve with policy.)