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AP Microeconomics › Unit 2
AP Microeconomics Unit 2: Supply and Demand
20 to 25% of the exam · 180 practice questions · 12 free-response questions
Unit 2 is the heart of the course. You will shift supply and demand, compute price elasticities, and measure consumer and producer surplus. Government shows up too, with price ceilings, price floors, taxes, subsidies, and tariffs. Exam questions ask you to shade areas on a graph, calculate deadweight loss from data, or use the total revenue test. A frequent mix-up is calling a price ceiling binding when it sits above equilibrium; it binds only below. Students also confuse slope with elasticity, which changes along a straight-line demand curve.
Practice this unit
White belt covers core terms and foundational ideas, Regular is set at exam level, and Black belt has harder multi-step questions.
Topics in this unit
- 2.1 Demand (19 questions)
- 2.2 Supply (15 questions)
- 2.3 Price Elasticity of Demand (22 questions)
- 2.4 Price Elasticity of Supply (14 questions)
- 2.5 Other Elasticities (18 questions)
- 2.6 Market Equilibrium and Consumer and Producer Surplus (19 questions)
- 2.7 Market Disequilibrium and Changes in Equilibrium (27 questions)
- 2.8 The Effects of Government Intervention in Markets (32 questions)
- 2.9 International Trade and Public Policy (14 questions)
Free-response questions
- Helmets: A Price Floor (Long question, 10 points)
- A Per-Unit Tax on Sellers (Long question, 10 points)
- A Per-Unit Subsidy (Short question, 5 points)
- Rent Control (Short question, 5 points)
- Ticket Prices and Revenue (Short question, 5 points)
- Cross-Price and Income Elasticity (Short question, 5 points)
- Coffee, Tea and Cream (Long question, 10 points)
- A Tariff on Imports (Long question, 10 points)
- Tickets: Who Gains from Trade? (Short question, 5 points)
- A Bumper Wheat Crop (Short question, 5 points)
- Avocado Supply in the Short Run and the Long Run (Short question, 5 points)
- Adding Up the Market for Bread (Short question, 5 points)
Sample questions
These are taken from the Regular set, with the answer and explanation shown.
Topic 2.2 Supply
1. Producers of a storable good expect its price to fall next month. What happens to the current supply of the good?
- AOnly the quantity supplied changes
- BIt decreases, as sellers hold goods for next month
- CIt does not change, since today's price is unchanged
- DIt decreases, because buyers will wait until next month to buy
- EIt increases, as sellers sell before the price falls
Answer: E. If sellers expect lower prices later, they sell more now while the price is higher, so current supply increases.
Common trap: Reversing the direction. Expecting a higher future price would reduce current supply.
Topic 2.4 Price Elasticity of Supply
2. Why is the supply of most goods more elastic in the long run than in the short run?
- ADemand becomes perfectly elastic in the long run for every good
- BConsumers have time to find substitutes
- CPrices are fixed by contracts in the long run
- DTechnology never changes in the short run
- EFirms can build plants, and new firms can enter
Answer: E. Over time, firms can expand capacity and new firms can enter, so quantity supplied can respond more to price changes.
Common trap: Choosing the consumer reason. That explains more elastic demand, not supply.
Topic 2.7 Market Disequilibrium and Changes in Equilibrium
3. In a market, demand increases and supply increases at the same time. Which of the following must be true?
- AEquilibrium quantity falls
- BEquilibrium price rises
- CEquilibrium price falls
- DEquilibrium quantity rises
- EBoth price and quantity rise
Answer: D. Both shifts raise quantity, so quantity must rise. Demand pushes price up and supply pushes it down, so the price change is indeterminate.
Common trap: Saying the price must rise or must fall. The demand increase pushes the price up and the supply increase pushes it down, so the price change depends on sizes.