Chapter 1: Market Forces of Supply and Demand

In this section

• Introduction to Supply and Demand
  Discover the core principles of supply and demand, how they shape market outcomes, and why they matter in finance—even for beginners.
• Equilibrium, Surplus, and Shortage
  Discover how market equilibrium arises from the interplay of supply and demand, including how surpluses and shortages are resolved through price adjustments.
• Consumer and Producer Surplus
  Discover how consumer and producer surplus measure net benefits in market transactions, informing cost-benefit analyses, policy decisions, and overall economic welfare.
• Market Efficiency and Deadweight Loss
  Explore how efficient markets maximize total surplus, understand deadweight loss, and examine how taxes, subsidies, or price controls distort equilibrium leading to welfare losses. Includes diagrams, practical examples, and exam-relevant insights.
• Elasticities (Price, Income, Cross)
  Explore how price, income, and cross-price elasticities reveal the sensitivity of demand and supply to changes in prices and income.
• Government Intervention (Price Floors, Price Ceilings, Taxes, Subsidies)
  A deep dive into price floors, price ceilings, taxes, and subsidies, illustrating how government interventions impact equilibrium and welfare, with examples to help CFA candidates.
• Demand and Supply Shifters
  Explore the critical distinction between movements along and shifts of demand and supply curves, examining real-world examples and portfolio implications for CFA Level I candidates.
• Common Resources and Public Goods
  Explore the nuances of rival vs. non-rival goods, learn about policy strategies to address the tragedy of the commons and free-rider issues, and gain insights for the CFA exam.
• Market Failures and Asymmetric Information
  Explore how imperfect information and externalities can lead to inefficient market outcomes, and learn how policy measures can sometimes mitigate these failures.