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Unit 2: Supply and Demand

9 dot points across 9 inquiry questions. Click any dot point for a focused answer with worked past exam questions where available.

Why does the quantity buyers want fall as price rises, and what makes the whole demand curve shift?

Topic 2.1 Demand: state the law of demand, distinguish a change in quantity demanded from a change in demand, and identify the determinants that shift the demand curve.
A focused answer to AP Microeconomics Topic 2.1, covering the law of demand, the difference between a movement along and a shift of the demand curve, the determinants of demand, and the income and substitution effects, with worked exam-style questions.
10 min answer →

How do price controls, taxes, subsidies, and quotas change market outcomes and reduce total surplus?

Topic 2.8 The Effects of Government Intervention in Markets: analyze binding price ceilings and floors, per-unit taxes and subsidies, and quantity controls, showing the resulting shortages, surpluses, tax incidence, and deadweight loss.
A focused answer to AP Microeconomics Topic 2.8, covering binding price ceilings and floors, per-unit excise taxes and subsidies, tax incidence and elasticity, quantity controls (quotas), and the deadweight loss intervention creates, with worked exam-style questions.
12 min answer →

How does opening a market to world trade change prices and surplus, and what do tariffs and quotas do?

Topic 2.9 International Trade and Public Policy: analyze the effect of free trade at the world price on consumer and producer surplus, and the effect of tariffs and import quotas on prices, quantities, surplus, and deadweight loss.
A focused answer to AP Microeconomics Topic 2.9, covering the world price and free trade, gains and losses in consumer and producer surplus for importers and exporters, and how tariffs and import quotas raise the domestic price, reduce trade, and create deadweight loss, with worked exam-style questions.
11 min answer →

How do shortages and surpluses push price toward equilibrium, and what happens when one or both curves shift?

Topic 2.7 Market Disequilibrium and Changes in Equilibrium: explain how shortages and surpluses arise and self-correct, predict the new equilibrium after a single shift, and handle the indeterminate cases of a double shift.
A focused answer to AP Microeconomics Topic 2.7, covering shortages and surpluses, how price adjusts to clear a market, the four single-shift outcomes, and the indeterminate results of a double shift, with worked exam-style questions.
10 min answer →

How do supply and demand together set the market price, and how do we measure the benefit each side gets?

Topic 2.6 Market Equilibrium and Consumer and Producer Surplus: find equilibrium price and quantity, identify consumer and producer surplus on a graph, and explain why the competitive equilibrium maximizes total surplus (allocative efficiency).
A focused answer to AP Microeconomics Topic 2.6, covering how supply and demand determine equilibrium price and quantity, the measurement of consumer and producer surplus, total surplus, and why the competitive equilibrium is allocatively efficient, with worked exam-style questions.
11 min answer →

How do economists measure the responsiveness of demand to income and to the prices of other goods?

Topic 2.5 Other Elasticities: calculate and interpret the income elasticity of demand (normal versus inferior goods) and the cross-price elasticity of demand (substitutes versus complements).
A focused answer to AP Microeconomics Topic 2.5, covering income elasticity of demand and the normal-versus-inferior distinction, cross-price elasticity of demand and the substitute-versus-complement distinction, and how the sign and size of each elasticity are interpreted, with worked exam-style questions.
9 min answer →

How responsive is the quantity buyers want to a change in price, and how does that responsiveness affect total revenue?

Topic 2.3 Price Elasticity of Demand: calculate price elasticity of demand using the midpoint formula, classify demand as elastic, inelastic, or unit elastic, apply the total revenue test, and identify the determinants of elasticity.
A focused answer to AP Microeconomics Topic 2.3, covering the price elasticity of demand, the midpoint formula, elastic versus inelastic versus unit elastic demand, the total revenue test, perfectly elastic and inelastic cases, and the determinants of elasticity, with worked exam-style questions.
11 min answer →

How responsive is the quantity producers offer to a change in price, and what makes supply more or less elastic?

Topic 2.4 Price Elasticity of Supply: calculate price elasticity of supply using the midpoint formula, classify supply as elastic, inelastic, or unit elastic, and explain why time is the key determinant.
A focused answer to AP Microeconomics Topic 2.4, covering the price elasticity of supply, the midpoint formula, elastic versus inelastic versus unit elastic supply, the perfectly elastic and inelastic extremes, and why time is the chief determinant, with worked exam-style questions.
10 min answer →

Why does the quantity producers offer rise as price rises, and what makes the whole supply curve shift?

Topic 2.2 Supply: state the law of supply, distinguish a change in quantity supplied from a change in supply, and identify the determinants that shift the supply curve.
A focused answer to AP Microeconomics Topic 2.2, covering the law of supply, the difference between a movement along and a shift of the supply curve, the determinants of supply, and why the curve slopes upward, with worked exam-style questions.
10 min answer →