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Microeconomics Fundamentals Cheat Sheet
A printable reference covering supply, demand, equilibrium, elasticity, marginal analysis, costs, market structures, and market failure for grades 9-12.
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Microeconomics studies how individual consumers, producers, and markets make choices when resources are limited. This cheat sheet helps students organize the most important ideas behind prices, production, competition, and efficiency. It is useful for reviewing graphs, formulas, and decision rules that appear often in economics problems and real-world examples. The core ideas include supply and demand, market equilibrium, price elasticity, marginal benefit and marginal cost, and the difference between fixed, variable, total, average, and marginal costs. Students should understand how shifts in curves change price and quantity, how firms decide output, and why markets sometimes fail. These tools help explain consumer behavior, business decisions, taxes, shortages, surpluses, and government policies.
Key Facts
- Demand usually follows the law of demand: as price rises, quantity demanded falls, all else equal.
- Supply usually follows the law of supply: as price rises, quantity supplied rises, all else equal.
- Market equilibrium occurs where quantity demanded equals quantity supplied, so Qd = Qs.
- A shortage occurs when quantity demanded is greater than quantity supplied at the current price.
- A surplus occurs when quantity supplied is greater than quantity demanded at the current price.
- Price elasticity of demand is Ed = percent change in quantity demanded / percent change in price.
- Total revenue is TR = P x Q, where P is price and Q is quantity sold.
- A rational firm produces where marginal revenue equals marginal cost, so MR = MC.
Vocabulary
- Scarcity
- Scarcity is the condition of having limited resources to satisfy unlimited wants.
- Opportunity Cost
- Opportunity cost is the value of the next best alternative given up when a choice is made.
- Demand
- Demand is the amount of a good or service consumers are willing and able to buy at different prices.
- Supply
- Supply is the amount of a good or service producers are willing and able to sell at different prices.
- Equilibrium Price
- Equilibrium price is the price at which quantity demanded equals quantity supplied.
- Marginal Cost
- Marginal cost is the additional cost of producing one more unit of a good or service.
Common Mistakes to Avoid
- Confusing a change in demand with a change in quantity demanded is wrong because only price causes movement along the demand curve, while non-price factors shift the entire curve.
- Mixing up shortage and surplus is wrong because a shortage means Qd is greater than Qs, while a surplus means Qs is greater than Qd.
- Forgetting to use percent changes in elasticity is wrong because elasticity compares relative changes, not just raw changes in price and quantity.
- Assuming higher total revenue always means higher profit is wrong because profit also depends on costs, so profit = total revenue minus total cost.
- Thinking firms should always produce as much as possible is wrong because the profit-maximizing output is where MR = MC, not necessarily the highest output level.
Practice Questions
- 1 A market has Qd = 100 - 5P and Qs = 20 + 3P. Find the equilibrium price and quantity.
- 2 A store raises price from 12, and quantity demanded falls from 80 units to 60 units. Calculate the price elasticity of demand using percent change from the original values.
- 3 A firm sells 50 units at 300. Calculate total revenue and profit.
- 4 Explain why a price ceiling below equilibrium usually creates a shortage, using supply and demand reasoning.