Supply and Demand — AP Microeconomics
1. Unit at a Glance
This unit builds step-by-step from basic definitions to applied policy analysis. We start by separating buyer (demand) and seller (supply) behavior to understand what drives each curve, then combine them to explain how market prices and quantities are determined. Next, we explore elasticity, which measures how responsive buyers and sellers are to changes in prices, a critical tool for predicting market outcomes after shocks or policy changes. We then extend the model to measure social welfare, analyze the impacts of common government interventions, and end with applications to international trade policy.
Common Pitfalls
Why: Only changes to the non-price determinants of demand/supply cause curves to shift; price changes only cause movements along existing curves.
Why: Elasticity is percentage change, which varies along a linear demand curve, even with a constant slope.
Why: Many policies create unintended consequences like shortages, surpluses, and deadweight loss that harm some groups.