graphs mentioned in your “Micro Economics and Macro Economics”


1. Production Possibility Frontier (PPF)

  • Meaning: Shows trade-offs in resource allocation between two goods.

  • Highlights: Scarcity, opportunity cost, efficiency, and economic growth.

2. Demand Curve

  • Meaning: Graphical representation of the relationship between price and quantity demanded.

  • Shape: Downward sloping.

  • Why: Due to the Law of Diminishing Marginal Utility, Substitution Effect, and Income Effect.

3. Supply Curve

  • Meaning: Shows the relationship between price and quantity supplied.

  • Shape: Upward sloping.

  • Why: Due to the Law of Supply—higher prices incentivize more supply.

4. Market Demand Curve

  • Meaning: Horizontal summation of individual demand curves.

  • Characteristic: Flatter than individual curves due to market-wide responsiveness.

5. Market Supply Curve

  • Meaning: Horizontal summation of individual supply curves from all producers.

6. Movement Along the Demand/Supply Curve

  • Meaning: Change in quantity demanded/supplied due to a change in price.

  • Types: Expansion (downward movement on demand curve), Contraction (upward movement), and vice versa for supply.

7. Shift in Demand/Supply Curve

  • Meaning: Change in demand/supply due to factors other than price.

  • Direction:

    • Rightward Shift: Increase in demand/supply.

    • Leftward Shift: Decrease in demand/supply.

8. Market Equilibrium Graph

  • Meaning: Intersection of demand and supply curves.

  • Shows: Equilibrium price and quantity.

  • Includes: Surplus (excess supply) and shortage (excess demand).

9. Price Ceiling and Floor Graphs

  • Price Ceiling: Maximum legal price (set below equilibrium) → shortage.

  • Price Floor: Minimum legal price (set above equilibrium) → surplus.

10. Elasticity Graphs

A. Price Elasticity of Demand

  • Types:

    • Perfectly Elastic (horizontal line)

    • Perfectly Inelastic (vertical line)

    • Elastic (>1): Flatter curve

    • Inelastic (<1): Steeper curve

    • Unitary Elastic (=1): Rectangular hyperbola

B. Price Elasticity of Supply

  • Types:

    • Perfectly Elastic (horizontal)

    • Perfectly Inelastic (vertical)

    • Elastic (>1): Flatter

    • Inelastic (<1): Steeper

    • Unitary Elastic (=1): Line through the origin

11. Indifference Curve and Budget Line

  • Indifference Curve: Shows combinations of goods giving equal satisfaction.

  • Budget Line: Represents all affordable combinations of two goods.

  • Consumer Equilibrium: Point where budget line is tangent to highest indifference curve.

12. Isoquant Curve

  • Meaning: Shows combinations of two inputs (e.g., labor and capital) that produce the same output.

  • Shape: Convex to the origin (similar to indifference curves).

13. Cost Curves

  • Types:

    • Total Cost (TC)

    • Average Cost (AC)

    • Marginal Cost (MC)

  • Behavior:

    • TC increases with output.

    • AC and MC have U-shapes due to economies and diseconomies of scale.


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