Read this the night before the exam
Everything important on one page. Print it with the 🖨 button or save it as a PDF.
Sticky notes
Demand = quantities buyers will purchase at various possible prices.
Market demand curve = horizontal summation of individual demand curves.
Substitute = used instead of another. Complement = used together with another.
Demand schedule = table. Demand curve = graph of that table.
Supply = amount sellers offer at a given price in a given period.
A smooth supply curve applies to the product market; in factor markets the supply curve can have different shapes (e.g. land supply is vertical — MCQ 23).
Giffen paradox (Sir Robert Giffen): when price of bread fell, demand for it fell — people's real income rose and they bought better-quality bread.
Direct demand = demand for consumer goods. Derived demand = demand for factors of production (land, labour, machines) — derived from demand for the final good.
Equilibrium: no one wants to change, all plans compatible, QD = QS.
Price ceiling = legal maximum. Price floor = legal minimum. Government usually picks one for a product.
Reserve price = minimum price a firm will accept.
Graphs: price on vertical axis, quantity on horizontal axis (common practice in economics). A demand curve need not be smooth — it just needs to slope downward.
One-page cheat sheet
| If this happens… | Curve | Price | Quantity |
|---|---|---|---|
| Income ↑ (normal good) | D right | ↑ | ↑ |
| Price of substitute ↑ | D right | ↑ | ↑ |
| Price of complement ↑ | D left | ↓ | ↓ |
| Good advertising / fashion | D right | ↑ | ↑ |
| Population ↑ | D right | ↑ | ↑ |
| Bad weather for the product | D left | ↓ | ↓ |
| Input cost / wages ↑ | S left | ↑ | ↓ |
| Better technology / productivity | S right | ↓ | ↑ |
| Indirect tax ↑ | S left | ↑ | ↓ |
| Subsidy ↑ | S right | ↓ | ↑ |
| Product's own price changes | No shift – movement along | — | — |
| Price above equilibrium | — | Surplus → falls | — |
| Price below equilibrium | — | Shortage → rises | — |
Final exam tips
Final exam tips
Q2, Q29 and Q38 are a bit tricky in the book — the answers on this website are the ones that best match standard economics and this chapter. If your teacher's key differs, follow your teacher.
For any “shift” question, always ask first: did the product's OWN price change? If yes → movement. If no → shift.
Good luck!