CDS Economics · Free notes
Microeconomics: CDS Economics
Microeconomics has 32 past-year questions in CDS General Knowledge, from 2018 (I) to 2025 (II), and five of them are HARD. Only one needs any arithmetic; the rest test whether you know a definition exactly and which way a curve moves. The hard ones take a rule to its edge: a perfectly elastic supply curve, a good with a spill-over benefit, the firm whose marginal cost must be rising. Learn the four market forms side by side, because CDS asks them as a match or as the odd one out.
The handout has every subtopic, worked example, formula and trap with answers shown. The formula sheet is the chapter’s formulas and traps alone, on one page.
Subtopic notes
Choice, Utility and Demand
13 PYQsOpportunity cost and why people trade, how total and marginal utility move together, and what makes a buyer move along a demand curve or shift the whole curve.
Supply, Elasticity and Market Price
8 PYQsThe inputs a producer needs, what moves supply, how elasticity measures the response to price, how demand and supply settle the price, and where markets go wrong.
Market Structures and Economic Systems
11 PYQsThe four market forms and how to tell them apart, the rule a profit-making firm follows, and the kinds of firms and economic systems CDS names.
Formula & revision sheet
3 formulas · 7 reference tables · 19 gotchas across all subtopics — the exam-eve cheat-sheet
Formula & revision sheet
3 formulas · 7 reference tables · 19 gotchas across all subtopics — the exam-eve cheat-sheet
Reference tables (2)
Scarcity, opportunity cost and exchange4 rows
| Idea | What it means |
|---|---|
| Opportunity cost | The value of the next best alternative given upQ Asked twice: CDS 2020 (I) as a sum with daily wages, and CDS 2021 (II) as a definition. |
| Voluntary exchange | Both parties gain, or they would not tradeQ CDS 2021 (II): a pure voluntary exchange is a win-win situation. |
| Economic model | A simplified picture of a theory, in words, diagrams or equationsQ CDS 2019 (II): the statement that is NOT correct is that models can be expressed only through equations. |
| Scarcity | Limited resources against unlimited wants, which forces choice |
The law of demand: movement and shift5 rows
| Change | Effect on the demand curve for the good |
|---|---|
| The good's own price falls | Movement along the curve (more is bought)Q Asked twice: CDS 2020 (II) asked what does NOT shift the curve, CDS 2021 (II) what moves along it. Both answers are the good's own price. |
| Consumers' income rises | The curve shifts (right for a normal good) |
| Population grows | The curve shifts right |
| Price of a substitute or complement changes | The curve shifts |
| Prices of inputs used to make the good change | No effect on demand; supply changes insteadQ CDS 2022 (I): input prices are the one factor that does not influence quantity demanded. |
Watch out for (7)
- Opportunity cost is what you give up, not what you take→ Scarcity, opportunity cost and exchange
- Trade is not a zero-sum game→ Scarcity, opportunity cost and exchange
- At maximum total utility, only marginal utility is zero→ Total utility, marginal utility and indifference curves
- Indifference curves never intersect→ Total utility, marginal utility and indifference curves
- Own price moves along, everything else shifts→ The law of demand: movement and shift
- Input prices belong to supply→ The law of demand: movement and shift
- The effect on the other good is often indeterminate→ The law of demand: movement and shift
Formulas (1)
Reference tables (3)
Factors of production and capital5 rows
| Input | Examples |
|---|---|
| Fixed capital | Tools, machines, buildings |
| Working capital | Raw materials, money in hand |
| Physical capital | Fixed capital and working capital together |
| Human capital | Knowledge, skill and enterprise of people |
| Land | The input non-farm activities need leastQ CDS 2022 (I): land is required in less quantity in non-farming activities. |
Market equilibrium and price controls5 rows
| Case | Result |
|---|---|
| Price floor | Legal minimum, for example MSP for cropsQ CDS 2019 (II): MSP for jowar is a price floor; MRP is a ceiling. |
| Price ceiling | Legal maximum, for example ration shop prices |
| Free-market price mechanism | Price set by the forces of demand and supplyQ CDS 2019 (II): the working of the price mechanism is the interplay of demand and supply. |
| Demand falls, supply perfectly elastic | Quantity falls, price unchangedQ CDS 2024 (I), a HARD question. |
| Demand rises, supply perfectly inelastic | Price rises, quantity unchanged |
Externalities and market failure4 rows
| Case | What the free market does |
|---|---|
| Negative externality, such as factory smoke | Over-produces |
| Positive externality, such as vaccination | Under-producesQ CDS 2024 (I): the statement that is NOT correct says the market over-produces a good with a positive externality. |
| Shared pasture with free access | Overuses it: the tragedy of the commons |
| Public good, such as a street light | Supplies too little or none |
Watch out for (6)
- Physical capital is the whole, not one part→ Factors of production and capital
- Vertical is inelastic, horizontal is elastic→ Supply and price elasticity
- A cheaper other good raises this good's supply→ Supply and price elasticity
- Floor is a minimum, ceiling is a maximum→ Market equilibrium and price controls
- Flat supply absorbs the shift in quantity→ Market equilibrium and price controls
- Positive externality means too little, not too much→ Externalities and market failure
Reference tables (2)
The four market structures4 rows
| Market form | Sellers and product | Example |
|---|---|---|
| Perfect competition | Many sellers, identical product | A vegetable or grain market (close to it) |
| Monopolistic competition | Many sellers, differentiated product | Branded soapsQ Asked directly three times: CDS 2019 (I) defined it, 2021 (II) asked for an example (soaps), 2022 (I) for its features. |
| Oligopoly | Few sellers, similar products | Car makers, telecom companiesQ CDS 2020 (I) matched all four market forms with their features. |
| Monopoly | One seller, no close substitute | Indian Railways |
Firms and economic systems5 rows
| Term | Key feature |
|---|---|
| Capitalism | Private ownership and allocation by marketsQ CDS 2022 (II): planning is the feature NOT associated with a capitalist economy. |
| Socialism | State ownership and central planning |
| Social market economy | Free markets with welfare, from West Germany in the 1950sQ CDS 2022 (II): the idea emerged in Germany. |
| Joint-stock company | Legal entity, limited liability, elected management, collective ownershipQ CDS 2019 (I): all four of these features were correct. |
| Unicorn | Privately held start-up valued over US$ 1 billionQ CDS 2022 (I). |
Watch out for (6)
- Differentiated means monopolistic competition→ The four market structures
- Few sellers is oligopoly, not imperfect competition→ The four market structures
- MR = MC is not enough: MC must be rising→ How a firm chooses its output
- Monopoly is not efficient→ How a firm chooses its output
- Planning belongs to socialism→ Firms and economic systems
- A unicorn is private, not listed or public sector→ Firms and economic systems
PYQ weightage by concept
10 concepts · 32 PYQs — where the marks actually sit, so you know what to drill first
PYQ weightage by concept
10 concepts · 32 PYQs — where the marks actually sit, so you know what to drill first
| Concept | PYQs | Share |
|---|---|---|
| The law of demand: movement and shift | 6 | 19% |
| Scarcity, opportunity cost and exchange | 4 | 13% |
| Total utility, marginal utility and indifference curves | 3 | 9% |
| Concept | PYQs | Share |
|---|---|---|
| Market equilibrium and price controls | 3 | 9% |
| Factors of production and capital | 2 | 6% |
| Supply and price elasticity | 2 | 6% |
| Externalities and market failure | 1 | 3% |
| Concept | PYQs | Share |
|---|---|---|
| The four market structures | 5 | 16% |
| Firms and economic systems | 4 | 13% |
| How a firm chooses its output | 2 | 6% |
Test yourself on Microeconomics — Demand, Supply and Market Structure
15 past CDS questions from this chapter, timed at 15 minutes and marked the way the exam marks it. You see your score and every answer the moment you finish. Free to start.