Microeconomics Cheat Sheet: Supply & Demand
If you remember only two things from microeconomics, make them the two laws: demand slopes down, supply slopes up. Almost everything else is a footnote on those.
The core laws
- Law of demand: as price rises, quantity demanded falls (downward slope).
- Law of supply: as price rises, quantity supplied rises (upward slope).
- Equilibrium: the point where the two curves cross — quantity supplied equals quantity demanded.
Shift vs movement (the question everyone misses)
| What changed | What happens |
|---|---|
| Price of the good itself | Movement along the curve |
| Income, tastes, or related-good prices | Demand curve shifts |
| Input costs or technology | Supply curve shifts |
Elasticity in one line
Elastic = quantity responds a lot to price. Inelastic = quantity barely responds. Necessities tend to be inelastic (you'll buy milk regardless of price); luxuries tend to be elastic.
This is the trap on exams: a "change in price" moves you along the curve, while "a change in consumer income" shifts the whole curve. Keep those two straight and you've dodged the most common mistake.
Drawing supply and demand curves?
The chart generator makes line charts for your homework.
Chart Generator →