5 Steps to a 5 AP Microeconomics, 2014-2015 Edition

Demand, Supply, Market

Equilibrium, and Welfare Analysis

IN THIS CHAPTER

Summary:A thorough understanding of the way in which the market system

determines price and quantity pays dividends both in microeconomics and

macroeconomics. In the absence of government intervention and/or externali-

ties, the competitive market also provides the most efficient outcome for

society.

Key Ideas

JDemand

JSupply

JEquilibrium

JConsumer and Producer Surplus

6.1 Demand

Main Topics: Law of Demand, Income and Substitution Effects, The Demand Curve, Determinants

of Demand

For many years now, you have understood the concept of demand. On the surface, the con-

cept is rather simple: people tend to purchase fewer items when the price is high than they

do when the price is low. This is such an intuitively appealing concept that your typical con-

sumer cares little about the rationale and still manages to live a happy life. As someone

knee-deep in reviewing to take the AP Microeconomics Exam, you need to go “behind the

KEY IDEA

CHAPTER

6

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