AP Microeconomics Unit 2.1-7 Quiz Review

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Law of Demand

Inverse relationship between price and quantity demanded

What are the 5 shifters of demand?

Consumer tastes/preferences, related goods (complementary/substitute), income effect, number of buyers, consumer expectations

What is the acronym for the shifters of the demand curve?

TRIBE

Taste and preferences

Related goods

Income effect

Buyers (# of buyers)

Expectations

A change in price on the supply OR demand curve causes a shift…

ALONG the curve

Law of Supply

Direct relationship between price and quantity supplied

What are the 6 shifters of the supply curve?

Resource/input costs, prices of other goods, technology, taxes/subsidies, consumer expectations, number of sellersWhat

What is the acronym for the shifters of the supply curve?

ROTTEN

Resource costs

Other goods’ prices

Technology

Taxes + subsidies

Expectations

Number of sellers

What are the 4 types of market elasticities?

Price Elasticity of Demand (PED), Price Elasticity of Supply (PES), Cross-Price Elasticity (XED), Income Elasticity (YED)

What is the percent change formula?

((Final value - Initial value) / Initial value) * 100

What is the formula for PED?

% Change in Qd / % Change in Price

If PED > 1, the demand is…

Elastic

If PED < 1, the demand is…

Inelastic

If PED = 1, the demand is…

Unit-elastic

The elasticity of the demand curve can also be determined with the…

Total Revenue Test

What is the formula for TR?

P * Q

In the TR test, if demand is ELASTIC, price and TR share a(n) ___________ relationship

inverse

In the TR test, if demand is INELASTIC, price and TR share a(n) ___________ relationship

direct

What is the formula for PES?

% Change in Qs / % Change in Price

If PES > 1, the supply is…

Elastic

If PES < 1, the supply is…

Inelastic

if PES = 1, the supply is..

Unit-elastic

What is the formula for XED?

% Change in Qd of Good A / % Change in Price of Good B

If XED is negative, Goods A and B are…

Complementary goods

If XED is positive, Goods A and B are…

Substitute goods

What is the formula for YED?

% Change in Qd / % Change in Income

If YED is negative, the good is classified as…

inferior

If YED is positive, the good is classified as…

normal

What signifies a surplus on the supply/demand schedule?

Price above P_E, Qs > Qd

What signifies a shortage on the supply/demand schedule?

Price bellow P_E, Qd > Qs

What is the formula for Consumer Surplus?

Price customers are willing to pay - Price paid

What is the formula for Producer Surplus?

Price received - Minimum price producers are willing to sell at

What is the formula for Total Surplus?

CS + PS

Deadweight Loss

CS and PS (TS) lost when not at P_E and Q_E

Deadweight loss occurs when…

taxes are applied to a market or a shortage occurs