interned micro

Gross substitute

Increase in price causes an increase in demand for other good

Gross compliment

increase in Price of one good leads to a decrease of second good

Market Supply Schedule

Listing for each possible price of a good that might prevail in the market of a seller/frims are prepared to offer for sale per unit

Demand function

D(p)=S(p)

consumer share

P^-P*

Seller share

P*-Ps^

How to find demand Qaunitity

Set P=0

How to find demand P

Set Q=0

Utility Function

U(X,Y)

Axioms

1- completeness, 2- Transitivity, 3- More is better

Indifference Curve

Shows all combos of a good or service that provide same level of utility

Marginal rate of Substitution

Absolute value of the slope of an indifference curve and the rate at which a person is willing to reduce consumption of one good when they get one more unit of another good

Diminishing MRS

people prefer balanced consumption bundles

Excess demand formula

Qd-Qs

Shortage

E>0

Surplus

E<0

When are price ceiling effective

Below equilibrium price

When is a price floor effective

Above equilibrium price

Steps to solve for price floor or ceiling

1. find equilibrium 2. find excess demand form 3. is the new P above or below equilibrium 4. plug new P into original equations for D and S

How to graph the excess funds equation

Set P=0 to find Q and vise versa

When Supply and demand both increase or decreases

P is unknown and Q Increases/ decreases

When supply and demand go opposite directions

Price goes up or down and Q is unknown

Excise Tax

Taxes each unit sold

How to solve for Tax

1- Find equalbrum and points, 2- use Ps= x(p-T) 3- Plug in new supply set equal to demand, 4- solve for new Q and P, 5- Plug in consumer price to PC=ps-T,

Seller price

Pc -T

Consumers pay

Pc-P*

Sellers

P-Ps