can-celebi.github.io/micro-business/L04
microeconomics · lecture 4 · open on your laptop
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microeconomics
040184 · ws 2026/27 · lecture 4
equilibrium
before we start
problem set 1: how did it go?
your answers from the survey · and your grades ·
problem set 1: how did it go?
% of you · 1 very badly … 5 very well
your grades
share of students in each score band (% of the points)
everyone: average 85% · median 86%
came to at least 1 class: average 87% · median 93%
came to at least 2 classes: average 87% · median 93%
“came to class” = signed in on the slides in lectures 1–3. About a third of you never signed in: you count as 0 classes even if you came.
today's concepts
your answers from the survey ·
today
can you do it? · average, 1 not at all … 5 yes, easily
the stream
average, 1 very bad … 5 very good
a video of each lecture?
% of you
sign in
Tap 👤 at the top of the slides: name, surname, nickname, and whether you are in class or online.
today
1 supply and demand shifts
2 calculating equilibrium
3 taxes and subsidies
4 price caps and floors
problem set 2
Problem set 2 has questions in words about perfect competition and calculations with supply and demand.
1 · in words
Which condition of perfect competition fails in a given market? (lecture 2)
2 · shifts
Something happens in a market: which curve shifts, in which direction, and what happens to the price and the quantity? Sometimes both curves shift.
3 · other goods
A price changes in another market (a substitute or a complement): how does this market react?
4 · inverse curves
Turn Q = … into P = …, and draw both curves.
5 · equilibrium
Set demand equal to supply and solve for P* and Q*.
6 · per-unit tax
Which curve moves, what buyers pay, what sellers keep, and who bears how much of the tax.
shifts in the demand curve
| change | demand shifts |
|---|---|
| income rises (normal good) | right |
| income rises (inferior good) | left |
| tastes, information, trust, fashion | right or left |
| a substitute gets more expensive | right |
| a complement gets more expensive | left |
| more buyers | right |
| a per-unit tax paid by buyers | left |
| a per-unit subsidy to buyers | right |
shifts in the supply curve
| change | supply shifts |
|---|---|
| input costs rise (wages, energy, chips, rent) | left |
| better technology, cheaper production | right |
| more sellers | right |
| shocks: a bad harvest, a war, a closed shipping route, a factory fire | left |
| something else the sellers could make pays more | left |
| a per-unit tax paid by sellers | left |
| a per-unit subsidy to sellers | right |
| a rule that adds a cost to every unit | left |
demand shifts right
supply · P = 10 + Q
demand · P = 40 − Q
new demand · P = 46 − Q
supply shifts right
supply · P = 10 + Q
demand · P = 40 − Q
new supply · P = 4 + Q
both curves shift right
When both curves shift, one of price and quantity moves for sure. The other depends on which shift is bigger.
1 · Demand shifts right.
2 · Supply shifts right. The quantity rises; here the price stays where it was.
both curves shift right: supply shifts more
The same start. This time supply shifts much more than demand.
1 · Demand shifts right a little.
2 · Supply shifts right a lot. The quantity rises; the price ends lower than before.
both curves shift right: demand shifts more
The same start. This time demand shifts much more than supply.
1 · Demand shifts right a lot.
2 · Supply shifts right a little. The quantity rises; the price ends higher than before.
so · The quantity rises for sure. The price can go either way: it depends on which shift is bigger.
which curve moved? A2
market
Nova, an AI assistant
buyers (demand side)
students
sellers (supply side)
Nova
story
A new chip halves Nova's cost of answering each question.
question
Which curve moved, and which way?
how well do you understand it? 1 · no idea … 5 · fully understood
which curve moved? A3
market
Nova, an AI assistant
buyers (demand side)
students
sellers (supply side)
Nova
story
Every course at the university now expects students to use their own AI assistant.
question
Which curve moved, and which way?
how well do you understand it? 1 · no idea … 5 · fully understood
which curve moved? A4
market
Nova, an AI assistant
buyers (demand side)
students
sellers (supply side)
Nova
story
More and more students want Nova.
question
Which curve moved, and which way?
how well do you understand it? 1 · no idea … 5 · fully understood
which curve moved? A5
market
Nova, an AI assistant
buyers (demand side)
students
sellers (supply side)
Nova
story
Electricity for Nova's data centre gets 40% cheaper.
question
Which curve moved, and which way?
how well do you understand it? 1 · no idea … 5 · fully understood
which curve moved? A6
market
sponsored posts
buyers (demand side)
brands
sellers (supply side)
influencers
story
Brands spend more on social media this year.
question
Which curve moved, and which way?
how well do you understand it? 1 · no idea … 5 · fully understood
price and quantity changes with the shift B1
market
sponsored posts
buyers (demand side)
brands
sellers (supply side)
influencers
story
Brands find that a sponsored post now brings them twice as many sales.
question
What happens to the price and the number of sponsored posts?
how well do you understand it? 1 · no idea … 5 · fully understood
price and quantity changes with the shift B2
market
sponsored posts
buyers (demand side)
brands
sellers (supply side)
influencers
story
A new AI video editor cuts the time to make a sponsored post from 5 hours to 1 hour.
question
What happens to the price and the quantity?
how well do you understand it? 1 · no idea … 5 · fully understood
price and quantity changes with the shift B3
two things at once
market
sponsored posts
buyers (demand side)
brands
sellers (supply side)
influencers
story
Brands move their ad budgets from TV to social media. At the same time, a new AI video editor cuts the time to make a post from 5 hours to 1 hour.
question
Which do we know for sure: what happens to the price, or to the number of posts?
how well do you understand it? 1 · no idea … 5 · fully understood
the influencer market C
market
sponsored posts (P = price per post in €, Q = posts per week)
buyers (demand side)
brands
sellers (supply side)
influencers
demand
Q = 300 − 2P
supply
Q = P − 30
the influencer market C1
market
sponsored posts (P = price per post in €, Q = posts per week)
buyers (demand side)
brands
sellers (supply side)
influencers
demand
Q = 300 − 2P
supply
Q = P − 30
question
What are the inverse demand and the inverse supply?
can you solve it? 1 · no idea … 5 · in my sleep
how well do you understand the solution? 1 · no idea … 5 · fully understood
the influencer market C2
market
sponsored posts (P = price per post in €, Q = posts per week)
buyers (demand side)
brands
sellers (supply side)
influencers
demand
Q = 300 − 2P
supply
Q = P − 30
question
Find the equilibrium price and quantity.
can you solve it? 1 · no idea … 5 · in my sleep
how well do you understand the solution? 1 · no idea … 5 · fully understood
the influencer market C3
market
sponsored posts (P = price per post in €, Q = posts per week)
buyers (demand side)
brands
sellers (supply side)
influencers
demand
Q = 300 − 2P
supply
Q = P − 30
question
The platform caps the price of a sponsored post at €90. How many posts do brands want, how many do influencers offer? Is there a shortage or a surplus, and how big?
can you solve it? 1 · no idea … 5 · in my sleep
how well do you understand the solution? 1 · no idea … 5 · fully understood
the influencer market C5
market
sponsored posts (P = price per post in €, Q = posts per week)
buyers (demand side)
brands
sellers (supply side)
influencers
demand
Q = 300 − 2P
supply
Q = P − 30
question
Back to the original market. The government charges influencers a tax of €12 per sponsored post. How many posts are made? What do brands pay, what do influencers keep?
can you solve it? 1 · no idea … 5 · in my sleep
how well do you understand the solution? 1 · no idea … 5 · fully understood
a price floor E1.3
market
sponsored posts (P = price per post in €, Q = posts per week)
buyers (demand side)
brands
sellers (supply side)
influencers
demand
Q = 300 − 2P
supply
Q = P − 30
new rule
To “protect creators”, the platform sets a minimum price of €130 per sponsored post.
question
Shortage or surplus? How big? How many posts are actually made?
can you solve it? 1 · no idea … 5 · in my sleep
how well do you understand the solution? 1 · no idea … 5 · fully understood
a price floor E1.4
market
sponsored posts (P = price per post in €, Q = posts per week)
buyers (demand side)
brands
sellers (supply side)
influencers
demand
Q = 300 − 2P
supply
Q = P − 30
new rule
To “protect creators”, the platform sets a minimum price of €130 per sponsored post.
question
Did a curve shift?
can you solve it? 1 · no idea … 5 · in my sleep
how well do you understand the solution? 1 · no idea … 5 · fully understood
a tax and a subsidy: AI assistant subscriptions F
market
monthly subscriptions to AI assistants (P = € per month, Q = thousand subscriptions)
buyers (demand side)
students
sellers (supply side)
AI companies
demand
P = 28 − 0.5Q
supply
P = 4 + Q
AI assistant subscriptions F2
market
monthly subscriptions to AI assistants (P = € per month, Q = thousand subscriptions)
buyers (demand side)
students
sellers (supply side)
AI companies
demand
P = 28 − 0.5Q
supply
P = 4 + Q
question
The government charges the AI companies a tax of €6 per subscription. Which curve shifts, and how? New quantity, what students pay, what companies keep? Who bears how much?
can you solve it? 1 · no idea … 5 · in my sleep
how well do you understand the solution? 1 · no idea … 5 · fully understood
AI assistant subscriptions F3
market
monthly subscriptions to AI assistants (P = € per month, Q = thousand subscriptions)
buyers (demand side)
students
sellers (supply side)
AI companies
demand
P = 28 − 0.5Q
supply
P = 4 + Q
question
Instead (no tax), the government pays students a subsidy of €6 per subscription. Which curve shifts, and how? New quantity, what companies get, what students pay out of their own pocket? Who gets how much of the €6?
can you solve it? 1 · no idea … 5 · in my sleep
how well do you understand the solution? 1 · no idea … 5 · fully understood