Supply, Demand and Market Equilibrium

📋 Course Outline

1. Inverse Demand Curve
2. Supply and Willingness to Accept
3. Supply Shifts and Determinants
4. Market Equilibrium
5. Market Shocks and Surplus
6. Price Regulation

📖 1. Inverse Demand Curve

📝 Essential Points

📐 Formula — The inverse demand function is $P=a+bQ$, with $a>0$ and $b<0$.

📌 A demand-curve shift is represented by a change in the intercept a, because when Q=0, P=a; a higher a places the curve farther to the right and a lower a places it farther to the left.

💡 Memory Hook

Intercept a shifts the curve; slope b changes sensitivity.

📖 2. Supply and Willingness to Accept

🔑 Key Concepts & Definitions

• Willingness to accept: the minimum price at which a firm is willing to produce a good or service

★ Must-know

📌 Ceteris paribus, when the price of a product increases, the quantity supplied increases, so the supply curve is upward-sloping.

📌 An individual firm’s supply is the profit-maximizing quantity produced by one firm, whereas market supply is the sum of the individual supplies of all firms.

Further detail

• In the short run, firms cannot adjust all their production capacities, so the supply curve is generally upward-sloping.

💡 Memory Hook

Higher price → higher profit → greater supply.