AP Microeconomics Unit 2 Review.Final Test
2026\2027.
normal goods
goods sensitive to purchasing power; direct relationship with income; as income increases,
the demand for these goods increases; as income decreases, the demand for these goods
decreases
inferior goods
goods sensitive to purchasing power; indirect relationship with income; as income
increases, the demand for these goods decreases; as income decreases, the demand for
these goods increases
demand
different quantities of goods that consumers are willing and able to buy at different prices
law of demand
there is an indirect relationship between price and quantity demanded
substitution effect
if the price goes up for a product, consumers will buy less of that product and more of
another substitute product
substitutes
goods that are used in place of one another; direct relationship
complements
two goods that are bought and used together; inverse relationship
income effect
if the price goes down for a product, the purchasing power increases for consumers --
allowing them to purchase more
law of diminishing marginal utility
as you consume anything, the additional satisfaction you receive from each additional unit
will eventually decrease
law of diminishing marginal utility and law of demand
, AP Microeconomics Unit 2 Review.Final Test
2026\2027.
the law of diminishing marginal utility causes the inverse relationship as consumers are
willing to pay more for a unit that offers them the most benefit, while the amount they
demand and are willing to pay for decreases as it does not offer as much utility
market demand
the demand of the entire population (add the market - adding the individual demands)
5 shifters of demand
1. Tastes and Preferences
2. Number of Consumers
3. Price of Related Goods
4. Income
5. Future Expectations (how will what happens in the future, impact demand right now)
law of supply
there is a direct relationship between price and quantity supplied
supply
the different quantities of a good that sellers are willing and able to sell (produce) at
different prices
5 shifters of supply
1. Prices/Availability of Inputs (Resources)
2. Number of Sellers
3. Technology
4. Government Actions (Taxes, Subsidies)
5. Expectations of Future Profit
why doesn't price shift the curve
changes in price only cause movement along the curve because demand and supply
addresses the quantities demanded or supplied at different price points
equilibrium
where supply and demand intersect, producing the optimum price and quantity
shortage
when quantity demanded is greater than quantity supplied, resulting in higher prices
2026\2027.
normal goods
goods sensitive to purchasing power; direct relationship with income; as income increases,
the demand for these goods increases; as income decreases, the demand for these goods
decreases
inferior goods
goods sensitive to purchasing power; indirect relationship with income; as income
increases, the demand for these goods decreases; as income decreases, the demand for
these goods increases
demand
different quantities of goods that consumers are willing and able to buy at different prices
law of demand
there is an indirect relationship between price and quantity demanded
substitution effect
if the price goes up for a product, consumers will buy less of that product and more of
another substitute product
substitutes
goods that are used in place of one another; direct relationship
complements
two goods that are bought and used together; inverse relationship
income effect
if the price goes down for a product, the purchasing power increases for consumers --
allowing them to purchase more
law of diminishing marginal utility
as you consume anything, the additional satisfaction you receive from each additional unit
will eventually decrease
law of diminishing marginal utility and law of demand
, AP Microeconomics Unit 2 Review.Final Test
2026\2027.
the law of diminishing marginal utility causes the inverse relationship as consumers are
willing to pay more for a unit that offers them the most benefit, while the amount they
demand and are willing to pay for decreases as it does not offer as much utility
market demand
the demand of the entire population (add the market - adding the individual demands)
5 shifters of demand
1. Tastes and Preferences
2. Number of Consumers
3. Price of Related Goods
4. Income
5. Future Expectations (how will what happens in the future, impact demand right now)
law of supply
there is a direct relationship between price and quantity supplied
supply
the different quantities of a good that sellers are willing and able to sell (produce) at
different prices
5 shifters of supply
1. Prices/Availability of Inputs (Resources)
2. Number of Sellers
3. Technology
4. Government Actions (Taxes, Subsidies)
5. Expectations of Future Profit
why doesn't price shift the curve
changes in price only cause movement along the curve because demand and supply
addresses the quantities demanded or supplied at different price points
equilibrium
where supply and demand intersect, producing the optimum price and quantity
shortage
when quantity demanded is greater than quantity supplied, resulting in higher prices
