Supply, Demand, and Equilibrium

… a core topic in Economic Analysis and Atlas102

Click for MRU videoTopic description

This topic explores the basic microeconomic principles of supply, demand, and market equilibrium.

The treatment of this topic on the Atlas follows almost precisely that in Chapter 2, Supply, Demand, and Equilibrium of the open access Principles of Microeconomics course offered by Tyler Cowen and Alex Tabarrok at the Marginal Revolution University online education platform (, accessed 20 April 2016).

Topic learning outcome

Appropriately utilize and interpret results of applying to the analysis of public policy and management problems the basic principles of supply, demand and market equilibrium, including following core concepts.

Core concepts associated with this topic
Budget Constraint

Change in Demand vs. Change in Quantity Demanded

Change in Supply vs. Change in Quantity Supplied

Consumer Surplus

Diminishing Returns

Demand Curve

Demand Curve Shifts

Gains from Trade

Marginal Rate of Substitution

Market Equilibrium

Normal Good vs. Inferior Good

Producer Surplus

Supply Curve

Supply Curve Shifts

Other (non-core) concepts

These concepts were not used directly in the MRU lessons but have been identified from courses and have short descriptions on the Old Atlas. Some may be added to the core and be elaborated in a page in this Atlas.

Diminishing Marginal Rate of Substitution

Diminishing Technical Rate of Substitution

Engel Curve

Extensive Margin

Giffen Good

Income Elasticity of Demand

Income Offer Curve

Indifference Curve

Inferior Good

Inverse Demand Function

Law of Demand

Luxury Good

Necessary GoodNet Demand

Ordinary Good

Perfect Complements

Perfect Substitutes

Short Run Industry Supply


We believe that this topic and its core concepts can be mastered to the MPP/MPA level by watching and re-watching the 71 minutes of MRU course videos listed below (all accessed 20 April 2016) and doing the 28 sample questions associated with these video segments and reproduced at the bottom of this page and repeated on the appropriate concept pages.

Atlas core concept pages above.

The Demand Curve, at (4 minutes).

The Supply Curve, at (3 minutes).

The Equilibrium Price, at (5 minutes).

A Deeper Look at the Demand Curve, at (8 minutes).

The Demand Curve Shifts, at (14 minutes).

A Deeper Look at the Supply Curve, at (7 minutes).

The Supply Curve Shifts, at (12 minutes).

Exploring Equilibrium, at (6 minutes).

Does the Equilibrium Model Work, at (8 minutes).

Supply and Demand Terminology, at (at 4 minutes).

Textbook readings in MPP and MPA courses 

University of Toronto: PPG-1002

Varian, Hal R., and Jack Repcheck. Intermediate microeconomics: a modern approach. Vol. 6. New York, NY: WW Norton & Company, 2010. Chapter 6

Carleton Unversity: PADM-5111

Frank, Robert, Ian Parker, and Igela Alger. Microeconomics and Behaviour, 5th Canadian Edition. New York: McGraw-Hill, 2013. Chapters 1 and 2

Harvard Kennedy School: API-101

Pindyck, Robert S. and Daniel L. Rubinfeld. Microeconomics, 8th Edition. Prentice-Hall, 2012. Chapter 1 and 2

NYU Wagner: GP-1018

Krugman, Paul and R. Wells, Microeconomics, 3rd edition. London: Worth Publishers, 2012. . Chapter 3

Johnson-Shoyama: JS-805

Krugman, Paul, Robin Wells, and Anthony Myatt. Microeconomics: 1st Canadian Edition. London: Worth Publishers, 2006. Chapters 3 and 5

Ford School of Public Policy: Public Policy 555

Pindyck, Robert S., and D. Rubinfeld. Microeconomics, 7th edition. Upper Saddle River: Patience-Hall, 2007. Chapter 2

George Washington: PPPA-6003

Mankiw, N. Gregory. Principles of Microeconomics, 6th edition. Mason: South-Western College Publishers, 2011. Chapter 2 Appendix and Chapter 4

Wheelan, Charles. Naked Economics: Undressing the Dismal Science. New York: W. W. Norton & Company, 2010. Chapter 1

American: PAUD-630

Krugman, Paul and R. Wells, Microeconomics, 3rd edition. London: Worth Publishers, 2012. Chapter 3


Goolsbee, Austan, Steven Levitt, and Chad Syverson. Microeconomics. New York:  Worth Publishers, 2013. Chapter 2

Rutgers: Economics in Public Policy

Pindyck, Robert S., and D. Rubinfeld. Microeconomics, 7th edition.  Upper Saddle River: Patience-Hall, 2007. Chapter 1

Concept comprehension questions (from MRU Practice Questions for Chapter 2)

AQ102.02.01. When the price of a good increases the quantity demanded ____.

AQ102.02.03. Your roommate just bought an iPod for $200. She would have been willing to pay $500 for a machine that could store and replay that much music. How much consumer surplus does your roommate enjoy from the iPod?

AQ102.02.03. Along a supply curve, if the price of oil falls, what will happen to the quantity of oil supplied?

AQ102.02.07. Michael is an economist. He loves being an economist so much that he would do it for a living even if he only earned $30,000 per year. Instead, he earns $80,000 per year. (Note: This is the average salary of new economists with a Ph.D. degree.) How much producer surplus does Michael enjoy?

AQ102.02.08. When supply falls, what happens to quantity demanded in equilibrium?

a. Q

AQ102.02.10. If the price in a market is above the equilibrium price, this creates ___________.

AQ102.02.14. Jules wants to purchase a Royale with cheese from Vincent. Vincent is willing to offer this tasty burger for $3. The most Jules is willing to pay for the tasty burger is $8 (after all, his girlfriend is a vegetarian, so he doesn’t get many opportunities for tasty burgers). How large are the potential gains from trade if Jules and Vincent agree to make this trade? In other words, what is the sum of producer and consumer surplus if the trade happens?

AQ102.02.17. What happened in Vernon Smith’s lab?

Page created by: Ian Clark, last modified on 16 May 2016.

Image: Minute 0.37 of MRU Video, at, accessed 19 April 2016.