ECON1101 Microeconomics 1

How ECON1101 is assessed

Weights and task names follow the official ANU Class Summary for Semester 2, 2026, and match the assessment slide in the first lecture. The Class Summary and the Week 6 feedback slide give the Reflection Task an 800-word limit, while the first lecture calls it one page. Exam rooms and times are set by ANU Central Exams; confirm them on Canvas and in your ANU email.

Current ECON1101 dates

Dates are as published in the Semester 2, 2026 ANU Class Summary and lecture slides. Confirm exact deadlines and submission settings in the live LMS.

What ECON1101 covers

Thirteen chapters follow the teaching weeks from economic method and demand through consumer choice, elasticity, production and cost to equilibrium, welfare and taxation.

It begins with the economist’s method: opportunity cost, decisions at the margin, responses to incentives, and the difference between positive and normative claims. Consumer theory follows, from willingness to pay and consumer surplus to budget constraints and the rule that the best bundle equalises marginal utility per dollar.

Elasticities then measure how strongly buyers and sellers respond to prices and incomes.

The supply side starts inside the firm. A short-run production function with fixed capital produces diminishing returns, which make marginal cost rise and give the supply curve its upward slope.

Price-taking firms choose output where price equals marginal cost, shut down when price falls below average variable cost and exit when it stays below average total cost.

Bringing the two sides together, the course solves for market equilibrium, analyses shocks with comparative statics, measures welfare with consumer and producer surplus, and shows why a competitive equilibrium maximises total surplus.

The first half ends with government in the market: price ceilings and floors, per-unit taxes, deadweight loss and the question of who really pays a tax.

The second half of the course turns to market failures and market power, including externalities, public goods, monopoly, price discrimination, game theory, trade and behavioural economics. The midterm materials describe the mix of skills the exams draw on: drawing a specific function or diagram, calculating a quantity such as a surplus, and using a concept to judge whether a statement is true, false or uncertain.

Worked example · free

A rise in demand moves the market to a new equilibrium

Key terms

Scarcity

Scarcity is the condition of having unlimited wants but limited resources such as money and time.

Positive economics

Positive economics describes what economic agents do and why, using statements that can be checked against evidence.

Linear demand function

A linear demand function writes quantity demanded as a minus m times price, with a the market size and m the sensitivity.

Marginal utility

Marginal utility is the change in utility from consuming one more unit of a good.

Opportunity cost of a good

On a budget line, the opportunity cost of a good is how much of the other good must be sacrificed for one more unit, which equals the price ratio.

Unit elastic demand

Unit elastic demand has a price elasticity of exactly minus one, so revenue does not change for a small price change.

Necessity

A necessity is a normal good with an income elasticity between zero and one.

Marginal cost

Marginal cost is the extra cost incurred when output rises by one unit.

Average total cost

Average total cost is total cost divided by output, the sum of average fixed and average variable cost.

Exit price

The exit price is the minimum of average total cost, below which a firm leaves the market in the long run.

Social surplus

Social surplus adds consumer surplus, producer surplus, government revenue and any external effects.

First welfare theorem

The first welfare theorem states that a competitive market meeting its assumptions reaches a Pareto-efficient outcome.

Per-unit tax

A per-unit tax adds a fixed dollar amount to each unit sold, so the buyer price equals the seller price plus the tax.

ECON1101 FAQ

Questions students ask in each ECON1101 chapter

What counts in an opportunity cost?

Count what the choice actually rules out: money paid out plus the value of the single best alternative use of the time or resources. Options that could never have been taken together do not add up; only the most valuable one enters the calculation. Chapter 01 · Thinking Like an Economist

What is the difference between demand and quantity demanded?

Demand is the whole relationship between price and quantity, the curve itself. Quantity demanded is one point on it, the amount buyers want at a particular price. A price change alters quantity demanded; other factors alter demand. Chapter 02 · Demand Curves and Demand Shifters

Why is willingness to pay the same as marginal benefit?

When benefit is measured in dollars, the most a buyer would pay for one more unit is exactly the extra benefit that unit brings. That is why the demand curve can be read as a marginal benefit curve. Chapter 03 · Marginal Benefit and Consumer Surplus

What does the slope of the budget line mean?

It is the price ratio with a minus sign, and it tells you how many units of the vertical-axis good must be given up to buy one more unit of the horizontal-axis good: the opportunity cost set by market prices. Chapter 04 · Budget Constraints and the Best Bundle

Why is price elasticity of demand negative?

Under the law of demand price and quantity move in opposite directions, so one percentage change is positive and the other negative. The ratio is therefore negative, and demand is classified using its absolute value. Chapter 05 · Price Elasticity of Demand

How do I know whether two goods are substitutes or complements?

Look at the sign of the cross-price elasticity. If a higher price of one good raises demand for the other, the sign is positive and they are substitutes; if it lowers demand, the sign is negative and they are complements. Chapter 06 · Income, Cross-Price and Supply Elasticities

Why does marginal cost rise in the short run?

With capital fixed, each extra worker adds less output than the one before once diminishing returns set in. The wage is the same, so the cost of each extra unit, the wage divided by marginal product, goes up. Chapter 07 · Production and Cost Curves

Why does a firm keep producing when it is making a loss?

In the short run fixed costs must be paid whether or not the firm produces. If revenue covers variable cost, producing shrinks the loss below the fixed cost it would lose by closing, so staying open is the better choice. Chapter 08 · Profit, Shutdown and Exit

Why does the long-run average cost curve lie below the short-run curves?

In the long run the firm can choose the plant size that makes any given output cheapest. Each short-run curve is tied to one plant, so the best choice across all plants is never more expensive than any single one. Chapter 09 · Long-Run Costs and Producer Surplus

How does a market move toward equilibrium?

At a price below equilibrium buyers want more than sellers offer, so competition among buyers pushes the price up. Above equilibrium sellers cannot sell everything and cut prices. Either way the price moves until the two quantities match. Chapter 10 · Market Equilibrium and Comparative Statics

Why does total surplus not depend on the price?

A higher price moves surplus from buyers to sellers dollar for dollar, so the total is unchanged. Only the quantity traded, and whether each unit is worth more than it costs, changes the size of the total. Chapter 11 · Market Efficiency and Price Controls

Why does long-run economic profit fall to zero?

Positive economic profit attracts identical firms into the industry. Their entry shifts market supply to the right and lowers the price until it reaches minimum average total cost, where no further profit remains to attract anyone. Chapter 12 · Long-Run Competitive Market Equilibrium

Does it matter whether a tax is collected from buyers or sellers?

Not for the outcome. Whichever side hands the money over, the market settles at the quantity where the gap between buyer and seller prices equals the tax, so prices, quantity and the split of the burden are the same. Chapter 13 · Taxes, Deadweight Loss and Tax Incidence

How to study for the exam

Treat the course as one connected toolkit rather than a list of weeks. Start with the diagrams: for every chapter, draw the key figure from its equations on blank paper, label the axes and the curves, and mark the numbers that matter.

Next, drill the calculations that the exams reward, solving equilibria, computing standard and point elasticities, finding the best bundle with marginal utility per dollar, completing cost tables, and measuring consumer surplus, producer surplus, tax revenue and deadweight loss as areas.

Then practise the true, false or uncertain format until the structure is automatic: a verdict, the mechanism in a few sentences and a labelled graph.

Because the final exam focuses on the second half of the course, plan time for externalities, public goods, monopoly, price discrimination and game theory after the first-half toolkit is secure; externalities, public goods and monopoly are each measured against the efficient competitive benchmark built here.

In the final week, sit a timed mixed set under closed-book conditions and spend the review time on the slips, not on the questions you already answered well.

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