Microeconomics is the study of how individuals and firms make decisions under scarcity, and how those decisions produce market outcomes. This sandbox renders interactive supply-and-demand diagrams and cost curves in SVG — with sliders for demand shifters, supply shifters, price floors/ceilings, and market structure. Grounded in standard ECON 323 microeconomic theory content.
| Shock | Curve Shift | Effect on P* | Effect on Q* |
|---|---|---|---|
| Consumer income ↑ (normal good) | Demand right | ↑ | ↑ |
| Consumer income ↑ (inferior good) | Demand left | ↓ | ↓ |
| Substitute price ↑ | Demand right | ↑ | ↑ |
| Complement price ↑ | Demand left | ↓ | ↓ |
| Input costs ↑ | Supply left | ↑ | ↓ |
| Technology improves | Supply right | ↓ | ↑ |
| Number of sellers ↑ | Supply right | ↓ | ↑ |
| Government subsidy | Supply right | ↓ | ↑ |
| Government tax/excise | Supply left | ↑ | ↓ |
| Number of buyers ↑ | Demand right | ↑ | ↑ |
| PED Range | Classification | Examples | Interpretation |
|---|---|---|---|
| |PED| = 0 | Perfectly inelastic | Insulin, emergency surgery | Quantity doesn't respond to price |
| 0 < |PED| < 1 | Inelastic | Gasoline, basic food, utilities | % Δ Q < % Δ P |
| |PED| = 1 | Unit elastic | — | % Δ Q = % Δ P (TR unchanged) |
| |PED| > 1 | Elastic | Luxury goods, vacations, brand names | % Δ Q > % Δ P |
| |PED| = ∞ | Perfectly elastic | Perfectly competitive firm's demand | Any price increase → Q = 0 |
Consumer Surplus (CS): The area above the equilibrium price and below the demand curve. Represents what consumers would have been willing to pay above what they actually paid. In a linear demand model: CS = ½ × Q* × (P_max – P*).
Producer Surplus (PS): The area below the equilibrium price and above the supply curve. Represents revenue above the minimum the firm would have accepted. In a linear supply model: PS = ½ × Q* × (P* – P_min).
Total Surplus = CS + PS. Competitive equilibrium maximizes total surplus. Price controls and taxes create deadweight loss — the triangle of lost surplus not captured by anyone.
Deadweight Loss (DWL): The reduction in total surplus caused by market inefficiency (price controls, monopoly, taxes). = ½ × ΔQ × ΔP.