Supply & Demand

Name: AP Microeconomics Unit 2: Supply & Demand
Availability: InStock

20–25% of the exam3 lessons · 42 min

What this unit covers

The topics below follow the published Micro course framework for Unit 2. This unit is worth 20–25% of the exam, so budget your time against that rather than against how long the unit takes to teach.

Market equilibriumElasticitySurplusPrice controls

Lessons in this unit

Demand, Supply & Market Equilibrium14 min · 3 objectivesDistinguish a change in quantity demanded/supplied from a shift of the curve · Identify the determinants that shift demand and supply · Predict changes in equilibrium price and quantity from shifts
Elasticity14 min · 3 objectivesCalculate and interpret the price elasticity of demand · Relate elasticity to total revenue · Distinguish price elasticity of supply, income elasticity, and cross-price elasticity
Surplus, Price Controls & Efficiency14 min · 3 objectivesDefine consumer surplus, producer surplus, and total surplus · Explain how price ceilings and price floors create shortages and surpluses · Analyze the deadweight loss caused by price controls

Formulas in Unit 2

Single-shift outcomes

Demand ↑ ⇒ P ↑, Q ↑ · Demand ↓ ⇒ P ↓, Q ↓ · Supply ↑ ⇒ P ↓, Q ↑ · Supply ↓ ⇒ P ↑, Q ↓

With one shift, both price and quantity are determined. With two shifts, one of the two becomes ambiguous.

Price elasticity of demand

Ed = (% change in quantity demanded) / (% change in price)

Elastic if |Ed| > 1, inelastic if |Ed| < 1, unit elastic if |Ed| = 1. Total-revenue test: cut price to raise revenue when elastic; raise price to raise revenue when inelastic.

Surplus and efficiency

Total surplus = Consumer surplus + Producer surplus (maximized at competitive equilibrium)

Any binding price control reduces the traded quantity below equilibrium, creating deadweight loss = the surplus on the forgone mutually beneficial trades.

What examiners penalize here

For a **double shift**, one variable is always determinate and the other ambiguous. Identify the shared direction (both shifts pushing price *or* quantity the same way) — that variable is certain; the other depends on relative shift sizes.
For cross-price and income elasticities, read the **sign** first: cross-price positive = substitutes, negative = complements; income positive = normal, negative = inferior. Magnitude tells you *how strong*, but the sign tells you *what kind*.
On price-control graphs, show the **reduced quantity traded**, then mark the **deadweight-loss triangle** between the supply and demand curves at that quantity. Distinguish the **transfer** of surplus between groups from the **deadweight loss** that no one captures — the exam tests both.

Practice Micro

Our practice bank is drawn from across the whole course rather than filtered to one unit, which is closer to how the exam asks anyway — it will not tell you which unit a question is testing.

26 practice questionsEvery one with a written explanation FRQ trainerWritten answers scored against the rubric Micro study guideAll units, weights and score data in one place All 6 Micro unitsThe full course

Questions about this unit

How much of the AP Microeconomics exam is Unit 2?

Unit 2, Supply & Demand, is worth 20–25% of the Micro multiple-choice section according to the published course framework. Across all 6 units that makes it one of the heaviest units on the exam, and worth front-loading.

What topics are covered in Micro Unit 2?

Supply & Demand covers Market equilibrium, Elasticity, Surplus and Price controls.

How should I study Micro Unit 2?

Read the 3 lessons below first — about 40 minutes — then work practice questions on these topics. Finish with practice questions and read the explanation for every one you get right by elimination as well as the ones you miss.

All 6 units of AP Microeconomics

Unit names, topics and exam weights follow the published College Board course framework for AP Microeconomics. AP® is a trademark registered by the College Board, which does not endorse this site.