Formula Sheet that you can use for quizzes and exams.
Individual ordinary demand and Inverse demand
Demand
Q
=
f
(
P,
{
I, p, A, n
}
)
Ordinary Demand
Q
=
D

MP
D
=
α
0
+
α
1
I
+
α
2
p
+
α
3
A
+
α
4
n
All factors but P affect D, the reason P is outside
When only D changes demand changes, P does not change demand
When A and n goes up D goes up, demand goes up
For normal good
α
1
positive, I goes up demand goes up
Normal good
α
1
is positive, I goes up D goes up, demand goes up
Inferior good
α
1
negative, I goes up D goes down, demand goes down
Substitute good,
α
2
positive, p goes up, D goes up, demand goes up
Complement good,
α
2
negative, p goes up, D goes down, demand goes down
Inverse Demand
P
=
D
M

1
M
Q
=
a

m
d
Q
Where
a
=
D
M
and
m
d
=
1
M
–absolute slope of inverse demand
for given M, D increase implies
a
increase, demand increases
.
Supply
Supply
Q
=
f
(
P,
{
T, p, w, t
a
, s
u
, n
}
)
Supply
Q
=
S
+
NP
S
=
β
0
+
β
1
T
+
β
2
p
+
β
3
w
+
β
4
t
a
+
β
5
s
u
+
β
6
n
all factors but P affect S, the reason P is outside
S increases, supply increases, P does not affect S, P does not change supply
T, n, and
s
u
all increase S, supply increases
β
3
and
β
4
are negative, their increase, decreases S, supply goes down
β
2
is negative for substitute, p goes up supply goes down
β
2
is positive for complement, p goes up supply goes up
Inverse Supply
P
=

S
N
+
1
N
Q
=
b
+
m
s
Q
Where
b
=

S
N
and
m
s
=
1
N
–the slope of inverse supply
When S increases,
b
decreases,
b
goes down supply goes up
1