Principles of Economics course

1. 1.Supply and Demand

   Prices in a competitive market come from the interaction of buyers and sellers. The demand curve slopes down: as price falls, people want more. The supply curve slopes up: as price rises, producers offer more. The equilibrium is the price at which quantity demanded equals quantity supplied, so there is no shortage or surplus.

   • Equilibrium: set $Q_d = Q_s$ and solve for price.
   • Demand shifters: income, preferences, prices of substitutes and complements, expectations, number of buyers.
   • Supply shifters: input costs, technology, taxes and subsidies, number of sellers.
   Quick check: Equilibrium price for $Q_d = 50 - P$ and $Q_s = 2P - 10$.

   $20$

   Includes a worked example, 3 common mistakes and 3 practice questions with answers. Study supply and demand

2. 2.Elasticity

   Price elasticity of demand measures how strongly quantity demanded responds to a price change: the percentage change in quantity divided by the percentage change in price. If the absolute value is greater than 1, demand is elastic; less than 1, inelastic; exactly 1, unit elastic.

   • Midpoint formula: $E = \frac{(Q_2 - Q_1)/\bar{Q}}{(P_2 - P_1)/\bar{P}}$.
   • Elastic ($|E| > 1$): price and revenue move in opposite directions.
   • Inelastic ($|E| < 1$): price and revenue move together.
   Quick check: Price 10 → 12, quantity 100 → 90. Midpoint elasticity, to two decimals.

   $-0.58$

   Includes a worked example, 3 common mistakes and 3 practice questions with answers. Study elasticity

These topics belong to the course outline. Full explainers for them have not been written yet, so they are summarised here rather than given pages of their own.

GDP and Inflation

Nominal versus real GDP and price indexes.

• Economics overview
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