Demand, Supply and Markets

📋 Course Outline

1. Valuations Costs and Gains from Trade
2. Demand Supply and Marginal Values
3. Market Equilibrium and Efficiency
4. Consumer and Producer Surplus
5. Sales Taxes and Deadweight Loss
6. Price Controls and Market Shocks

📖 1. Valuations Costs and Gains from Trade

🔑 Key Concepts & Definitions

• Buyer valuation: The cutoff below which she wants to trade.
• Seller cost: The cutoff above which he wants to trade.

📝 Essential Points

• A buyer’s gain from trade is V − P, a seller’s gain is P − C, and their total gain is V − C.

💡 Memory Hook

Buyer valuation V supports buying below V; seller cost C supports selling above C.

📖 2. Demand Supply and Marginal Values

🔑 Key Concepts & Definitions

• Total valuation: The area under the valuation graph up to Q for the first Q buyers.
• Total cost: The area under the cost graph up to Q for the first Q sellers.

★ Must-know

• The demand curve slopes downward and the supply curve slopes upward.

Further detail

📐 Formula - The marginal valuation of the Qth unit is $mv(Q)=v(Q)-v(Q-1)=\frac{dv(Q)}{dQ}$.

📐 Formula - The marginal cost of the Qth unit is $mc(Q)=c(Q)-c(Q-1)=\frac{dc(Q)}{dQ}$.

💡 Memory Hook