ECON10004 Introductory Microeconomics
The Complete Exam Bible · S1 2026ECON10004 Overview
- University of Melbourne
- S1 2026
- 8 chapters
- Economics
Introductory Microeconomics teaches how people, firms and governments choose under scarcity — supply & demand, elasticity, surplus, taxes & deadweight loss, monopoly, externalities and game theory.
- Assessed by Final exam 50% · Continuous assessment ~50% — Final exam is a hurdle
- Key terms Opportunity cost, Elasticity, Consumer surplus, Deadweight loss
- How to prepare Treat the tax / price-control / deadweight-loss chain and competition vs monopoly as the signature exam chains &mdash…
- Most asked What is on the ECON10004 final exam?
How ECON10004 is assessed
| Component | Weight | Format |
|---|---|---|
| Final exam · hurdle | 50% | End of semester · must pass to pass the subject |
| Continuous assessment | ~50% | Tutorials, assignments & online quizzes across the semester — confirm the exact split in your subject guide |
What ECON10004 covers
Twelve lecture topics → one exam-ready map. Each links to its free chapter guide.
Economic Way of Thinking
Scarcity · trade-offs · PPF · comparative advantageThe economic way of thinking is the reasoning toolkit ECON10004 builds everything else on: how people, firms and societies make choices under scarcity.
- 1.1 Scarcity & the economic problem
- 1.2 Opportunity cost (and why sunk costs don't count)
- 1.3 The production possibility frontier
- 1.4 Comparative advantage & gains from trade
- 1.5 Thinking at the margin (MB = MC)
- 1.6 Positive vs normative statements
Supply and Demand
The core model · linear D & S algebra · equilibriumA market is buyers and sellers of a good interacting, and the demand and supply model is the engine the rest of ECON10004 runs on: nearly every exam calculation starts by finding where the two curves cross and then layers a policy on top.
The demand curve slopes downward (the law of demand) and the supply curve slopes upward (the law of supply).
- 2.1 The demand curve & its shifters
- 2.2 The supply curve & its shifters
- Movement along vs shift of a curve
- 2.3 Market equilibrium (surplus & shortage)
- 2.4 Comparative statics — the four cases
- Solving linear demand & supply algebraically
Elasticity
Point formula · total-revenue rule · supply & cross-priceElasticity turns the slope of a demand or supply curve into a unit-free number measuring how much quantity responds to a change in price, income, or another good's price.
- 3.1 Price elasticity of demand (PED) and the point formula
- The three regions: elastic, inelastic, unit-elastic
- 3.2 Determinants of PED
- 3.3 The total-revenue rule
- 3.4 Price elasticity of supply
- 3.5 Income elasticity
Consumer and Producer Surplus
CS · PS · the three triangles · market efficiencyConsumer and producer surplus are the two halves of the value a market creates.
- Consumer surplus — the area under demand, above price
- Producer surplus — the area above supply, below price
- The choke price and the supply intercept (the triangle corners)
- Total surplus = CS + PS, and reading areas off a linear graph
- Why the competitive equilibrium maximises total surplus
- The invisible hand — value vs cost on each unit
Market Efficiency and Failures
Taxes · price controls · deadweight loss · externalitiesThis chapter is ECON10004's market-failure toolkit: it covers every way the competitive equilibrium — which maximises total surplus — can be pushed off the efficient point, and the policies that respond.
- Two kinds of intervention: price controls vs taxes & subsidies
- Price ceilings and floors (binding vs non-binding; short side of the market)
- Per-unit taxes: the wedge, revenue and deadweight loss
- Tax incidence: statutory vs economic, split by relative elasticity
- The signature chain: equilibrium → elasticity → surplus → tax → DWL
- Minimum wage as a labour-market price floor; subsidies as reverse taxes
Production and Costs
Cost family · perfect competition · P = MC · shut-downProduction and costs is where supply curves come from.
- Economic cost vs accounting cost (opportunity cost, normal and economic profit)
- Sunk vs fixed vs variable cost — which costs affect decisions
- The production function and diminishing marginal product
- The short-run cost family: TC, ATC, AVC, AFC, MC
- The geometry the exam tests (MC cuts ATC/AVC at their minimums)
- Worked derivation from TC = 32 + q²/16
Monopoly and Game Theory
MR = MC · markup · welfare cost · Nash · prisoner's dilemmaA monopoly is a single seller of a product with no close substitute, so unlike the price-taking competitive firm it chooses a point on the downward-sloping market demand curve rather than taking the price as given.
- Where market power comes from: barriers to entry (resource, government/patent, natural monopoly)
- The single seller faces market demand = AR
- Why marginal revenue is below price: the output vs price effect, and the linear MR = a − 2bQ rule
- Profit maximisation: MR = MC for Q*, then read P* off demand; the markup and Lerner index
- Price discrimination (1st/2nd/3rd degree) and natural monopoly
- The welfare cost: P = MC benchmark, transfer vs deadweight loss, and that monopoly has no supply curve
Macroeconomic Foundations
Circular flow · GDP · inflation · unemployment · AD-ASECON10004 is a microeconomics subject — it studies individual markets, firms and households. This closing chapter steps back to ask a different question: how does the whole economy behave when you add every market together?
- From micro to macro: the change in scale
- The circular flow of income
- GDP — measuring total output
- Real vs nominal GDP and the deflator
- Inflation and the Consumer Price Index (CPI)
- Unemployment and the labour market
The final exam is 50% of your grade and a hurdle (you must pass it to pass the subject), so this guide teaches each model to exam standard: the diagram examiners look for, the formula they expect, and where the marks hide.
Worked example · free
Taxes & deadweight loss — the signature diagram, mark by mark
- +1Draw S, D and the post-tax supply S+tax, shifted up by the full tax.
- +2Mark Qt, buyer price Pb (on D) and seller price Ps (on S). The wedge Pb − Ps = T.
- +2Shade tax revenue (the Pb–Ps rectangle out to Qt) and the deadweight-loss triangle, Qt→Q*.
- +1State it: Q falls, buyers pay more, sellers keep less; DWL = welfare lost to trades that no longer happen.
Key terms
- Opportunity cost
- The value of the next-best alternative you give up when you make a choice — not the price you pay, and not everything else you didn't do.
- Elasticity
- How responsive quantity is to a change in price, written as a ratio of percentage changes: %ΔQ over %ΔP.
- Consumer surplus
- What buyers were willing to pay minus what they actually paid — the area under the demand curve and above the price.
- Deadweight loss
- Welfare lost to mutually beneficial trades that no longer happen — caused by a tax, a price control, or market power.
- Marginal cost
- The extra cost of producing one more unit of output. A competitive firm produces where price equals marginal cost (P = MC).
ECON10004 FAQ
Is ECON10004 hard?
Conceptually approachable but mark-dense: most questions reward applying a model to a diagram or a calculation, so the difficulty is precision under exam time. The final exam is 50% and a hurdle, so the stakes are concentrated on one paper.
How is ECON10004 assessed?
The final exam is 50% and a hurdle — you must pass it to pass the subject. The remaining ~50% is continuous assessment across tutorials, assignments and online quizzes; confirm this year's exact split in your subject guide.
What is on the ECON10004 final exam?
Supply & demand, elasticity, consumer and producer surplus, the tax / price-control / deadweight-loss chain, perfect competition vs monopoly, externalities, and basic game theory. The tax-and-deadweight-loss diagram is a signature question worth several marks.
Do I need calculus for ECON10004?
No. Introductory Microeconomics is graphical and algebraic. Calculus appears in intermediate microeconomics, not here.
Is using AskSia for ECON10004 cheating?
No. AskSia is a study reference written in our own words — we host none of your lecturer's files, and Sia teaches you the method to earn the marks; it does not complete or sit your assessments.
Questions students ask in each ECON10004 chapter
- Is opportunity cost the money I spent on something?
- No — that is the trap the exam plants over and over. Opportunity cost is what you gave up, not what you spent. It is the value of the single next-best alternative you forgo, which is frequently your time rather than a dollar figure. The price on the tag is only part of the story (and sometimes irrelevant if the real cost is the forgone activity). When a question hands you a dollar amount, check whether the better-valued alternative is something non-monetary before answering. Chapter 01 · Economic Way of Thinking
- How do I tell a movement ALONG the curve from a SHIFT of the whole curve?
- A change in the good's own price is a movement along a fixed curve — a change in quantity demanded (or supplied). A change in any shifter (income, prices of related goods, tastes, expectations, number of buyers/sellers, input prices, technology) is a shift of the whole curve — a change in demand (or supply) itself. Almost every true/false item in this chapter lives entirely on this distinction, so name which one it is and why. Chapter 02 · Supply and Demand
- Is elasticity the same as the slope of the demand curve?
- No — this is the most common trap. A straight-line demand curve has a constant slope (dQ/dP is fixed) but a changing elasticity, because ε also depends on P/Q, which changes as you slide along the curve. Elasticity is large (elastic) near the top where P/Q is large and small (inelastic) near the bottom. So 'the steeper curve is more inelastic' is only valid when you compare two curves at the same point; never read elasticity off the slope alone. Chapter 03 · Elasticity
- Is consumer surplus the same as how much consumers spend?
No — this is the most common error markers see. Consumer surplus is not total spending and producer surplus is not total revenue. CS is the gap between what buyers would have paid (the demand curve) and what they actually pay (the price). PS is the gap between the price received and marginal cost (the supply curve). Computing ‘price × quantity’ for a surplus gives the wrong answer; surplus is measured as a triangle area, not a rectangle.
Chapter 04 · Consumer and Producer Surplus- Does a price ceiling always cause a shortage?
- No — only a binding control changes anything. A ceiling bites only when it is set below equilibrium (creating a shortage); a ceiling set above P* is non-binding and the market just settles at P* as before. Symmetrically, a floor only binds when set above equilibrium (creating a surplus). Always check which side of P* the control sits on before drawing a shortage or surplus — examiners love a non-binding trap option where the correct answer is “no effect.” Chapter 05 · Market Efficiency and Failures
- Is a sunk cost the same as a fixed cost?
- No — this is the classic trap. Both are independent of output, so students lump them together, but the difference is recoverability. A fixed cost (insurance, plant maintenance) has a positive opportunity cost and belongs in your decision; a sunk cost (already spent, unrecoverable) has zero opportunity cost and must be ignored. A pharma firm's R&D is fixed AND sunk; its marketing is fixed but NOT sunk. 'We've spent so much, we can't stop now' is the sunk-cost fallacy the exam loves to bait. Chapter 06 · Production and Costs
- Do I read the monopoly price off MR, MC, or demand?
- Off demand — always. MR = MC only gives you the profit-maximising quantity Q*. The firm then charges the highest price the market will bear for Q*, which is found by plugging Q* into the demand curve and reading straight up. A reliable sense-check is that P* must exceed MC; if your price isn't above MC, you read it off the wrong curve. Charging P = MC (the competitive rule) or reading the price off MR are the two traps the exam baits every year. Chapter 07 · Monopoly and Game Theory
- What's the actual difference between microeconomics and macroeconomics?
- It is a question of scale, not subject matter. Micro (all of ECON10004 before this chapter) studies single markets and the decisions of individual households and firms — the price of coffee, one firm's output. Macro adds every market together and studies economy-wide aggregates: total output (GDP), the average price level (inflation), and the overall labour market (unemployment). The same demand-and-supply logic carries over, but the questions become 'what determines total output and the price level for the whole economy?' rather than 'what is the price in one market?'. Chapter 08 · Macroeconomic Foundations
How to study for the exam
Treat the tax / price-control / deadweight-loss chain and competition vs monopoly as the signature exam chains — they recur and they carry diagram marks. For every model, practise drawing the diagram from a blank axis and labelling the exact areas examiners reward (surplus triangles, the tax wedge, the DWL triangle).
Because the final is a 50% hurdle, banked diagram marks are the safest marks in the subject.
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