Microeconomics Unit 2 Study Guide
Supply and Demand
Topic 2.1- Demand Topic 2.2- Supply
1. What is the law of demand? 1. What is the law of supply?
P↑ Qd ____ P↑ Qs ____
P↓ Qd ____ P↓ Qs ____
2. Why is the market demand curve downward sloping? 2. Why is the market supply curve upward-sloping?
3. What are the five shifters of demand? 3. What are the five shifters of supply?
4. Goods A and B are substitutes. An increase in the Topic 2.4- Price Elasticity of Supply (PES)
price of A will cause the demand for B to __________. 1. Identify the price elasticity of supply coefficient equation
5. Goods X and Y are complements. A decrease in the
price of X will cause the demand for Y to __________.
2. List 3 characteristics of goods with relatively inelastic
6. Good N is a normal good. A decrease in income will
supply.
cause the demand for N to __________.
7. Good R is an inferior good. A decrease in income will
cause the demand for R to __________.
Topic 2.3- Price Elasticity of Demand (PED) Topic 2.5- Other Elasticities
Inelastic Demand Elastic Demand 1. What is cross-price elasticity of demand (XED)?
2. Identify the XED equation.
3. Identify the price elasticity of demand equation.
3. What is income elasticity of demand (YED)?
4. Identify the YED equation.
Coefficient for perfectly inelastic demand =
Coefficient for inelastic demand =
Coefficient for unit elastic demand =
Coefficient for elastic demand =
Coefficient for perfectly elastic demand =
4. Use the total revenue test to fill in the blanks. 5. List 3 characteristics of goods with relatively inelastic
Inelastic Demand Elastic Demand demand.
Price ↑, TR ____ Price ↑, TR ____
Price ↓, TR ____ Price ↓, TR ____
©Copyright Jacob Clifford 2022. Ultimate Review Packet
Do not use unless you have purchased an annual license
Microeconomics Unit 2 Study Guide
Supply and Demand
Topic 2.6- Equilibrium and Consumer and Producer Surplus
1. Define consumer surplus (CS).
2. Define producer surplus (PS).
3. Define deadweight loss (DWL).
4. Calculate the CS at the equilibrium price. Show your work.
5. Calculate the CS if the price was $12. Show your work.
6. Calculate the deadweight loss if the market produced only 20 units.
Topic 2.7- Market Disequilibrium and Changes in Equilibrium
Graph #1 Graph #2 1. Draw a shortage on Graph #1. Label price
(P1), quantity supplied (Qs), and quantity
demanded (Qd). Shade in CS, PS, and DWL.
2. Draw a surplus on Graph #2. Label price
(P2), quantity supplied (Qs), and quantity
demanded (Qd). Shade in CS, PS, and DWL.
3. What is the difference between a change
in demand and a change in quantity
demanded?
4. Draw a demand decrease 5. Draw a demand increase 8. What is the double shift rule?
9. Draw an increase in demand AND an
increase in supply. What happens to the
equilibrium price and quantity?
6. Draw a supply decrease 7. Draw a supply increase
©Copyright Jacob Clifford 2022. Ultimate Review Packet
Do not use unless you have purchased an annual license
Microeconomics Unit 2 Study Guide
Supply and Demand
Topic 2.8- Government Intervention
1. What is a price ceiling? 4. What is a subsidy?
2. What is a price floor?
3. A binding price ceiling must go ___________ equilibrium and results in a
____________. A binding price floor must go ___________ equilibrium.
Complete the following assuming the equilibrium price is $10
5. Identify the consumer surplus (CS)
6. Identify the producer surplus (PS)
7. Identify the CS if a price ceiling is placed at $12
8. Identify the CS if a price floor is placed at $12
Identify the following after the tax is imposed
9. The tax per unit
10. CS after tax
11. PS after tax
12. Deadweight loss
13. Total tax revenue
14. Total spending by buyers
15. Total revenue to sellers
16. Total amount of tax buyers pay
17. Total amount of tax sellers pay
Identify if buyers or sellers pay more of a tax in the
18. Is the demand curve between $12 and $10 elastic, inelastic, following situations.
or unit elastic? Explain.
20. Demand is more inelastic than supply.
19. Calculate the elasticity of supply coefficient as price 21. Demand and supply have the same elasticity.
increases from $10 to $12. Show your work.
22. Supply is more inelastic than demand.
Topics 2.9- International Trade and Public Policy
Calculate the following at the equilibrium price. The graph below shows the domestic market for rice.
1. Consumer surplus
2. Producer surplus
3. Total surplus
Calculate the following if this country buys rice from other
countries at the world price of $5. Show your work.
4. Quantity produced domestically
5. Quantity imported
6. Consumer surplus
7. Producer surplus
Identify the following if the government places a tariff of $1
on foreign rice. Show your work.
8. Consumer surplus
9. Tariff revenue
10. Deadweight loss
©Copyright Jacob Clifford 2022. Ultimate Review Packet
Do not use unless you have purchased an annual license
