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Social Studies
Grade 11-12
AP Microeconomics Course Reference Cheat Sheet
A printable reference covering supply and demand, elasticity, market structures, costs, consumer choice, externalities, and factor markets for grades 11-12.
Related Worksheets
Core ideas include marginal analysis, market equilibrium, elasticity, production costs, and firm behavior under different market structures. Students should know how to read supply and demand graphs, calculate economic measures, and predict how changes shift curves. The most important rule is that rational decision-makers compare marginal benefit with marginal cost.
Key Facts
- Market equilibrium occurs where quantity demanded equals quantity supplied, so Qd = Qs.
- Price elasticity of demand is Ed = percent change in quantity demanded / percent change in price.
- Total revenue is TR = P x Q, and profit is profit = total revenue - total cost.
- A firm maximizes profit by producing the quantity where marginal revenue equals marginal cost, or MR = MC, if price covers average variable cost in the short run.
- Marginal cost is MC = change in total cost / change in quantity.
- Average total cost is ATC = total cost / quantity, and average variable cost is AVC = variable cost / quantity.
- Consumer surplus is the area below the demand curve and above the market price, while producer surplus is the area above the supply curve and below the market price.
- In a perfectly competitive market, an individual firm is a price taker and faces a horizontal demand curve at the market price.
Vocabulary
- Scarcity
- Scarcity is the condition that resources are limited while human wants are unlimited.
- Opportunity Cost
- Opportunity cost is the value of the next best alternative given up when a choice is made.
- Elasticity
- Elasticity measures how strongly quantity demanded or quantity supplied responds to a change in price, income, or another factor.
- Marginal Analysis
- Marginal analysis compares the additional benefit and additional cost of one more unit of an activity.
- Deadweight Loss
- Deadweight loss is the lost total surplus caused by market inefficiency, such as a tax, price control, monopoly, or externality.
- Market Structure
- Market structure describes the competitive environment of a market, including the number of firms, barriers to entry, and product type.
Common Mistakes to Avoid
- Confusing a movement along a curve with a shift of the curve is wrong because price changes cause movement, while non-price determinants cause shifts.
- Using total values instead of marginal values is wrong because most AP Microeconomics decisions are based on MR, MC, MB, and marginal utility.
- Forgetting the absolute value in elasticity interpretation is wrong because demand elasticity is usually reported by magnitude, so Ed = -2 is elastic because its absolute value is greater than 1.
- Assuming all firms set price equal to marginal cost is wrong because only perfectly competitive firms take price as given, while monopolies and imperfect competitors choose output where MR = MC and then charge from the demand curve.
- Labeling graph areas without checking the correct boundaries is wrong because consumer surplus, producer surplus, tax revenue, and deadweight loss each depend on the relevant price, quantity, demand curve, and supply curve.
Practice Questions
- 1 A product's price rises from 12, and quantity demanded falls from 100 units to 80 units. Using the midpoint method, calculate the price elasticity of demand.
- 2 A firm has total revenue of 760 when it produces 30 units. What is its economic profit?
- 3 If marginal revenue is 14 at the current output level, should a profit-maximizing firm increase output, decrease output, or keep output the same?
- 4 Explain why a binding price ceiling can create a shortage and deadweight loss even though it makes the legal price lower for consumers.