ECO101H1 Principles of Microeconomics
The Complete Exam Bible · Fall 2026ECO101H1 Overview
- University of Toronto
- Fall 2026
- Principles of Microeconomics
Thinking in alternatives
ECO101H1 Principles of Microeconomics at the University of Toronto examines household and firm decisions and their interaction in markets. The Fall 2026 course begins with scarcity, opportunity cost and marginal analysis. These ideas become the vocabulary for every later calculation.
- Model the choice Compare the additional benefit with the additional opportunity cost.
- Keep prices distinct Taxes separate what a buyer pays from what a seller receives.
- Track incentives Private best responses and socially efficient outcomes can differ.
How ECO101H1 is assessed
| Component | Weight | Format |
|---|---|---|
| Quizzes | 5% | Weekly online and tutorial quizzes; best ten quiz marks |
| Assignments | 5% | Ten short writing assignments, normally based on an article or podcast |
| Midterm Tests | 50% | Two in-person term tests, each worth 25% |
| Final Exam | 40% | Cumulative in-person final examination, three hours |
The Fall 2026 syllabus table totals 100%, and the course administration slides repeat the same weights. The syllabus also says the first tutorial skill test earns 1%, without explaining how that fits the table. Ask on Quercus whether it is included in an existing component or is additional credit. The midterm duration is described as 90 minutes, but the administration slides show two-hour windows; the syllabus repeats the start time as the end time for the second test. Use the dates below for planning and confirm exact sitting times on Quercus. The syllabus progression threshold of 63% concerns eligibility for higher-level Economics Major courses; it is not presented here as an exam hurdle. Confirm applicable passing and progression requirements with the University.
Current ECO101H1 dates
| Date | Item | Control |
|---|---|---|
| 16 October 2026 | Term Test 1 | Confirm the sitting time on Quercus. |
| 20 November 2026 | Term Test 2 | Published timing differs between the syllabus and administration slides; confirm on Quercus. |
| 1 December 2026 | General makeup | For eligible missed midterms; check Quercus instructions. |
Dates are as published in the Fall 2026 syllabus and course administration dates. Confirm exact deadlines and submission settings in the live LMS.
What ECO101H1 covers
Follow household choices through markets, firms, strategy and social efficiency.
Scarcity, Choice and Trade
Opportunity cost, marginal decisions, production possibilities and comparative advantageScarcity Creates an Allocation Problem
Microeconomic reasoning begins with limited resources and competing uses. Money, time, land and productive capacity can all be scarce.
- Scarcity and Feasible Alternatives
- Opportunity Cost
- Marginal Benefit and Cost
- Sunk and Recoverable Expenditure
- Production Possibility Frontiers
- Absolute and Comparative Advantage
Markets and Elasticity
Demand shifts, supply shifts, equilibrium and responsiveness to priceDemand and Supply Are Conditional Schedules
A demand schedule relates purchases to the good's own price while holding other influences fixed. A supply schedule describes sellers' planned quantities under the corresponding condition.
- Demand and Supply Schedules
- Market Equilibrium
- Shortages and Surpluses
- Shifts and Movements
- Midpoint Elasticity
- Income and Cross-Price Elasticity
Surplus and Intervention
Gains from exchange, binding controls, tax incidence and deadweight lossValue, Payment and Cost
Surplus measures the gains that buyers and sellers obtain from exchange. A buyer can value an item more highly than the amount paid, while a seller can receive more than the opportunity cost of supplying it.
- Consumer and Producer Surplus
- Efficient Exchange
- Price Ceilings and Floors
- Rationing and Allocation
- Tax Incidence
- Deadweight Loss
Firms, Competition and Labor
Production costs, entry, shutdown, labor demand and hiringCost Includes the Next Best Use
Economic cost includes the value of resources in their next best available use. Paying oneself a low salary does not make one's time cheap if other work is available at a higher return.
- Opportunity Costs of Production
- Fixed and Variable Costs
- Marginal Product and Cost
- Competitive Output
- Profit and Producer Surplus
- Shutdown and Entry
Monopoly, Games and Oligopoly
Marginal revenue, price discrimination, best responses and strategic interdependenceA Seller With a Downward-Sloping Demand Curve
Market power changes the revenue consequence of producing another unit. A seller serving the entire market cannot simply assume that every additional unit sells at an unchanged price.
- Monopoly Output
- Marginal Revenue
- Price Discrimination
- Best Responses
- Nash Equilibrium
- Cartel Incentives
Externalities and Efficiency
Private and social margins, corrective incentives and efficient abatementStart With the Person Outside the Transaction
A private market records the benefits and costs that guide buyers and sellers.
- External Costs
- External Benefits
- Social Marginal Curves
- Corrective Taxes
- Tradable Permits
- Abatement Costs
A price is not automatically the entire economic cost of an action: time and the best forgone alternative can matter too. Equally, money already spent and impossible to recover should not determine a forward-looking choice.
Begin revision by identifying what actually changes between the alternatives in the question.
Trade connects personal choices to production
Production possibilities describe feasible output combinations with available resources and technology. Their slope measures a sacrifice, expressed in units of one product per unit of another.
Comparative advantage concerns that opportunity cost, whereas absolute advantage concerns productivity. A useful trade answer therefore records the units in both ratios before assigning specialization. It then checks whether the proposed terms of exchange lie between the parties' opportunity costs.
A claim that trade helps both parties needs a feasible production plan and a consumption comparison, not just a statement that one producer is faster.
Markets adjust through prices and quantities
Supply and demand translate individual choices into a market outcome. Distinguish a change in the price on the vertical axis from a change in income, input cost or another condition held fixed by a curve.
The first produces movement along a curve; the second can shift it. Solving an equilibrium means satisfying the plans of buyers and sellers at the same price. After a disturbance, identify the curve that moves before predicting the direction of price and quantity.
If both curves move, some results can be ambiguous until the sizes of the changes are specified.
Responsiveness changes the size of an effect
Elasticity compares percentage changes rather than changes in dollars or physical units. This makes it different from the slope of a demand curve. A straight demand curve has constant slope but can have different elasticity at different points.
Keep the signed price elasticity separate from its absolute magnitude when classifying demand. Total revenue is price multiplied by quantity, so a higher selling price need not raise revenue. The quantity response can offset or outweigh the price increase.
For finite changes, a midpoint calculation avoids choosing one endpoint as an arbitrary percentage base.
Welfare accounting follows the units that trade
Consumer surplus and producer surplus measure gains above the relevant reservation values. With the usual competitive assumptions and no external effects, units whose willingness to pay exceeds marginal cost generate gains from exchange.
Controls and taxes alter which units trade and how the remaining gains are divided. A binding price ceiling can create a shortage; it does not make quantity demanded equal to quantity actually exchanged. A tax introduces a gap between what buyers pay and sellers receive.
Tax revenue is a transfer in the usual surplus calculation, whereas deadweight loss reflects forgone mutually beneficial trades.
Firm decisions depend on the margin and the horizon
The production and cost chapters move from physical output to financial decisions. Fixed cost, variable cost, average cost and marginal cost answer different questions.
A competitive firm's output choice uses the market price and marginal cost, subject to the operating condition; it does not automatically choose the output with the lowest average total cost. A short-run decision to operate while making a loss can be rational when revenue covers variable cost and contributes toward unavoidable fixed cost. Long-run entry and exit require a separate comparison.
The labor market extends the same marginal reasoning to hiring and the additional revenue generated by another worker.
Market power introduces strategic constraints
A monopolist faces a downward-sloping demand curve, so selling an extra unit can lower the price received on earlier units. Marginal revenue must therefore be distinguished from price.
Once the profit-maximizing quantity is found, the demand curve supplies the selling price. Price discrimination changes how willingness to pay is translated into revenue, subject to the relevant information and resale constraints. Oligopoly adds another firm's decisions to the problem.
Read a payoff matrix by holding the other player's action fixed while comparing your own alternatives; a joint maximum need not be a stable outcome.
Private incentives can miss social consequences
Externalities arise when a decision affects others through costs or benefits that the decision-maker does not fully take into account. A private equilibrium can consequently differ from the socially efficient quantity.
The appropriate correction depends on the missing margin: a negative production externality adds external cost to private cost, while a positive external effect requires the benefit side to be examined. Policy analysis should compare the changes in real resource use and external harm, rather than treating every payment as a loss to society.
When abatement is possible, compare its marginal cost with the marginal benefit of avoiding damage.
Prepare for the actual assessment mix
The syllabus combines weekly quizzes and short assignments with two midterm tests and a cumulative final examination. The administration slides describe a mixture of multiple-choice and short-answer work. Practise both choosing an answer and constructing an explanation.
For a numerical question, write the relevant condition, substitute values, solve and interpret. For a writing task, isolate a microeconomic mechanism in the article or podcast, identify what is held fixed and explain the predicted consequence.
The syllabus says assignment material can be tested and that the final includes a problem similar to the weekly writing exercises.
Use the worked material actively
The examples in this guide are independently authored study exercises. Cover their solutions and attempt them with a blank diagram or equation first. After checking an answer, change one input and predict the result before calculating again.
Keep an error record that distinguishes arithmetic slips from errors in the economic model: confusing total with marginal cost requires a different repair from subtracting incorrectly. Return to the current Quercus instructions for operational dates, authorized aids and submission details.
The published assessment disagreements are disclosed below so that a planning assumption does not become an invented course rule.
See the University of Toronto course guide collection for study support at the same university.
Worked example · free
A market adjusts to a per-unit tax
- 2Equate initial demand and supply: 90 - 3P = 2P, so P = 18 and Q = 36.
- 3Substitute the wedge: 90 - 3(Ps + 5) = 2Ps. Hence Ps = 15, Pb = 20 and Q = 30.
- 1Compute tax revenue as 5 × 30 = 150, keeping it separate from the reduction in trade.
Key terms
- Opportunity Cost
- The value of the best alternative forgone when choosing an action. Count the displaced alternative once, including relevant time or resources, rather than adding every option that was not chosen.
- Comparative Advantage
- The ability to produce a good at a lower opportunity cost than another producer. This is a comparison of sacrifices, so the most productive producer need not have comparative advantage in every activity.
- Market Equilibrium
- A price and quantity at which quantity demanded equals quantity supplied. The condition concerns compatible plans under the specified demand and supply curves, not a guarantee of fairness or social optimality in every setting.
- Price Elasticity
- The percentage response of quantity demanded or supplied to a percentage change in price. State whether demand elasticity is signed or expressed as a positive magnitude before interpreting the number.
- Consumer Surplus
- The difference between buyers’ willingness to pay and their actual payment for the units they purchase. In a continuous demand diagram it is an area, measured in monetary value rather than physical output.
- Marginal Cost
- The additional total cost associated with producing another unit of output. It differs from average cost, which divides a total by quantity, and from fixed cost, which does not change with current output.
- Nash Equilibrium
- A combination of strategies at which each player is choosing a best response to the others. A unilateral deviation cannot improve that player’s payoff, although a coordinated change might improve several players’ outcomes.
- Externality
- A cost or benefit of an action that affects others and is not fully reflected in the decision-maker’s private incentives. Its presence can separate privately chosen quantities from socially efficient quantities.
ECO101H1 FAQ
How much does the final exam contribute?
The Fall 2026 syllabus assigns the Final Exam 40% of the course grade and describes a cumulative, in-person examination lasting three hours. The remaining table weights are 50% for Midterm Tests, 5% for Quizzes and 5% for Assignments. Check Quercus for the scheduled final sitting and authorized materials.
Does the initial skill test change the grading total?
The published assessment table already adds to 100%, while a separate syllabus paragraph offers 1% for taking the initial tutorial skill test. Its treatment within that total is unclear. Retain the table for planning and ask on Quercus whether the skill-test credit is included or additional.
Which dates should I put in my revision calendar?
The syllabus lists October 16 and November 20 for the term tests and December 1 for the general makeup, all in Fall 2026. Because the documents disagree on timing details, confirm the exact sitting times and any eligibility conditions through Quercus before relying on a calendar entry.
Why can a business rationally operate at a loss?
A short-run loss includes costs that may remain payable even if production stops. When revenue covers variable cost, operating can reduce the loss by contributing toward fixed cost. Compare operating profit with shutdown profit, and revisit the decision when those fixed commitments become avoidable.
When does a higher price reduce total revenue?
When demand is sufficiently elastic over the relevant change, the percentage fall in quantity outweighs the percentage increase in price. Check the product of price and quantity at both outcomes; a demand curve’s slope alone does not settle the revenue effect.
How should I use old exam questions?
Use historical papers to practise the microeconomic methods that match the current syllabus, such as opportunity cost, market equilibrium and strategic choice. Keep their dates, permitted aids and assessment rules separate from Fall 2026 instructions. Older ECO100 materials may also include topics outside this microeconomics course.
Questions students ask in each ECO101H1 chapter
- Can an activity be free and still have an opportunity cost?
- Yes. A zero purchase price removes one possible expense, but attending may still use time that could earn income or consume a resource that could be sold. Identify the actual alternative and value what is sacrificed before deciding whether the activity is worthwhile. Chapter 01 · Scarcity, Choice and Trade
- Why does a higher observed price sometimes accompany more sales?
- A demand expansion can raise both equilibrium price and quantity when supply remains fixed. The observations then lie on different demand schedules. They do not describe movement upward along a single unchanged demand curve, so they do not contradict the usual law of demand. Chapter 02 · Markets and Elasticity
- Why is tax revenue added back when comparing welfare?
- A welfare account includes the public recipient as well as private buyers and sellers. Money paid as tax becomes a government receipt. The lost surplus is the residual reduction after that transfer is recognised, assuming collection itself uses no resources. Chapter 03 · Surplus and Intervention
- How can a business keep running when economic profit is negative?
- Continuing may cover variable expenses and part of a fixed commitment that must be paid either way. The right immediate comparison is the operating result against the shutdown result, not against an imagined option with no remaining cost. Chapter 04 · Firms, Competition and Labor
- Can I read the monopoly price from marginal revenue?
- No. Marginal revenue determines the chosen quantity when compared with marginal cost. Demand then determines the price buyers will pay for that quantity; confusing these readings understates the selling price. Chapter 05 · Monopoly, Games and Oligopoly
- Does efficiency require eliminating all pollution?
- No. The efficiency comparison concerns the marginal benefits and marginal social costs of emissions. Zero pollution follows only when that comparison supports the boundary; it is not implied by the word pollution. Chapter 06 · Externalities and Efficiency
How to study for the exam
Use short retrieval sessions for definitions and longer sessions for complete problems. Redraw curves with their axes labeled, calculate the outcome, and finish with a sentence linking the result to incentives. For every wrong answer, record whether the fault was the economic condition, the units, the algebra or the interpretation. Reattempt a changed problem before revisiting the same solution.
Keep writing practice alongside numerical practice because the syllabus connects the weekly writing assignments to examination work.
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