Marginal analysisDecisions based on the effect of one more unit.
Economic modelsSimplified representations of the economy.
Data interpretationDrawing conclusions from economic data.
Linear demand and supplyQd = a − bP and Qs = c + dP; set Qd = Qs to find the equilibrium price, then substitute back for equilibrium quantity.
Consumer and producer surplusWith linear curves, each is usually a triangle (½ × base × height) between the market price and the demand or supply curve; consumer surplus lies above the price, producer surplus below it.
PED along linear demandAlthough the slope is constant, PED varies along a straight-line demand curve: elastic above the midpoint, unit elastic at it, inelastic below.
Tax incidenceHow an indirect tax is split between consumers (higher price paid) and producers (lower price received); the more inelastic side bears more.
Costs, revenues and profitAC = TC/Q, MC = ΔTC/ΔQ, AR = TR/Q and MR = ΔTR/ΔQ; profit = TR − TC and is maximised where MR = MC.
Keynesian multiplierk = 1/(1 − MPC) = 1/(MPS + MPT + MPM); a change in an injection changes real GDP by k times that amount.
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