AP Microeconomics — Unit 2: Supply and Demand

What AP Microeconomics Unit 2 covers

The College Board Course and Exam Description breaks Unit 2 into 9 topics:

1. 2.1 Demand
2. 2.2 Supply
3. 2.3 Price Elasticity of Demand
4. 2.4 Price Elasticity of Supply
5. 2.5 Other Elasticities
6. 2.6 Market Equilibrium and Consumer and Producer Surplus
7. 2.7 Market Disequilibrium and Changes in Equilibrium
8. 2.8 The Effects of Government Intervention in Markets
9. 2.9 International Trade and Public Policy

AP Microeconomics Unit 2 practice questions

• You raise coffee prices at your shop. Will you sell more or fewer cups — and why is that almost always true?

  As a good's price rises, quantity demanded falls — all else equal. Price and quantity demanded move in opposite directions — a downward-sloping curve.

• Starbucks raises prices and sells fewer cups. Across town, matcha blows up on TikTok and Starbucks sells fewer cups too. Same result — but only ONE of these shifts the demand curve. Which, and which just slides along it?

  The price hike slides along the curve; the matcha craze shifts it. Price = move along (quantity demanded); a taste change shifts the whole curve.

• The price of Pepsi increases. What happens to the demand for Coca-Cola?

  Demand for Coke rises (shifts right) since they're substitutes. When one substitute gets pricier, people switch to the other.

• Incomes rise across the economy. What happens to the demand for ramen noodles (an inferior good)?

  Demand decreases (shifts left) — ramen is an inferior good. Higher income means people upgrade from ramen; inferior-good demand falls.

• Coffee prices double overnight. Does your local roaster want to produce and sell more or fewer bags?

  As a good's price rises, quantity supplied rises — all else equal. Price and quantity supplied move together — an upward-sloping curve.

• Steel prices double for a carmaker. Your classmate says 'fewer cars sold, so the supply curve slides left along itself.' What's wrong with that — which way does supply actually move, and why?

  Supply shifts left — costlier steel raises the cost of every car. An input-cost change is non-price, so the whole curve moves, not a slide.

• Gas prices jump 10% and people cut back driving by just 3%. A movie theater raises prices 10% and attendance drops 30%. How do economists put a NUMBER on that difference in responsiveness?

  PED = % change in quantity demanded ÷ % change in price. The result is technically negative (price up, Qd down), but we use the absolute value. PED measures how responsive buyers are to price changes.

• Insulin has PED = 0.3; designer sneakers have PED = 2.4. You can raise the price of exactly ONE to boost revenue. Pick the right one and explain why the other backfires.

  Raise insulin — at PED 0.3 it's inelastic, so revenue rises. Inelastic buyers barely cut back; elastic sneakers (PED 2.4) would lose revenue.

+ 27 more AP Microeconomics cards in the app.

Key terms in Unit 2

These 12 terms show up in the Unit 2 cards. Each one links to its definition in the AP Microeconomics key-term reference.

• consumer surplus
• deadweight loss
• elasticity
• equilibrium
• indeterminate
• inferior good
• normal good
• price ceiling
• price floor
• scarcity
• shortage
• substitute