Microeconomics

Unit 2 Practice Sheet

Part 1 - Supply and Demand Practice-​ ​Use the
graph for ice cream to answer the questions below.
1. What is the equilibrium price and quantity?

2. Identify a price and quantity that could be the

result of an increase in the price of milk, a key
resource in the production of ice cream.

3. Identify a price and quantity that could be the

result of a decrease in the price of popsicles, a
substitute to ice cream.

4. Identify the area of consumer surplus at the

equilibrium price.

5. Identify the area of consumer surplus if the supply increased resulting in the equilibrium price of P​3
and Q​4​.

6. Assume instead that the demand decreased resulting in the equilibrium price of P​3​ and Q​2​. Identify
the area of producer surplus.

7. Identify the area of consumer surplus if a price ceiling is placed at P​2​.

8. Identify the area of consumer surplus if a price ceiling is placed at P​5​.

9. Identify the area of deadweight loss if a price floor is placed at P​6​.

10. Assume that a per-unit tax was placed on ice cream resulting in an equilibrium price of P​6​ and Q​1​.
Identify the area of consumer surplus.

11. Assume that a per-unit tax was placed on ice cream resulting in an equilibrium price of P​6​ and Q​1​.
Identify the area of deadweight loss.

12. Assume that a per-unit tax was placed on ice cream resulting in an equilibrium price of P​6​ and Q​1​.
Identify the area of tax revenue.

13. Assume instead that consumers can get ice cream at the world price of P​2​. Identify the area of
consumer surplus after international trade.

14. Identify the quantity that will be imported if the world price is P​2​.

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 Microeconomics
Unit 2 Practice Sheet
Part 2 - Calculation Practice-​ ​Use the graph for a
competitive market to answer the questions below.
Show your work.
15. What is the quantity demanded and quantity
supplied at the price of $13?

16. Could an increase in supply result in an

equilibrium price and quantity of $12 and 30 units?
Explain.

17. Calculate the consumer surplus at the equilibrium

price.

18. Calculate the consumer surplus if a decrease in

supply results in an equilibrium price of $12.

19. Calculate the producer surplus if an increase in demand results in an equilibrium price of $12.

20. Calculate the deadweight loss if a decrease in demand results in an equilibrium price of $8.

21. Calculate the consumer surplus if a price ceiling is placed at $8.

22. What would be the equilibrium price and quantity if a $2 per-unit tax is placed on the good?

23. How much tax revenue would be generated if a $2 per-unit tax is placed on the good?

24. Would the incidence of tax from a $2 tax mostly fall on consumers or producers? Explain.

25. Calculate the consumer surplus if consumers can get this product at the world price of $7.

26. Calculate the elasticity of demand coefficient between the price of $10 and $9.

27. Calculate the elasticity of supply coefficient between the price of $10 and $12.

28. Assume the price fell from $10 to $8 causing the quantity demanded of a different product to increase
from 100 to 120 units. Calculate the cross-price elasticity of demand coefficient.

29. Assume instead that the demand changes in such a way that a decrease in supply results in an
equilibrium price and quantity of $12 and 50 units. Calculate the elasticity of demand coefficient.

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 Microeconomics
Unit 2 Practice Sheet
Part 3 - FRQ Practice-​ ​Complete the following question from the 2015 AP exam (Question 3).

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 Micro Topics 2.3, 2.4 and 2.5
Elasticity Practice Sheet
Answer the questions. Be sure to explain and/or show your work.
1. The price of burgers increased from $4.00 to $4.40 and the quantity demanded decreased from 50
to 30 units per hour. Calculate the coefficient for price elasticity of demand. Show your work.

2. Given your answer to question #1, is the demand for burgers perfectly elastic, relatively elastic, unit
elastic, relatively inelastic, or perfectly inelastic? Explain how you determined your answer.

3. Assume, instead, that the quantity of burgers demanded remained at 50 (after the price change in
question #1). Would the demand for burgers be perfectly elastic, relatively elastic, unit elastic,
relatively inelastic, or perfectly inelastic? Explain how you determined your answer.

4. The price of burgers increased from $4 to $4.40 and the quantity supplied increased from 50 to 60
units. Calculate the price elasticity of the supply coefficient. Show your work.

5. Given the information in question #4, is the supply of burgers perfectly elastic, relatively elastic, unit
elastic, relatively inelastic, or perfectly inelastic? Explain how you determined your answer.

6. Suppose that the price of burgers decreased from $4.00 to $3.00 and the quantity demanded of
pizza decreased by 50%. Calculate the cross-price elasticity of demand coefficient between burgers
and pizza. Show your work.

7. Given your answer to question #6, are burgers and pizza complements, substitutes, normal goods,
or inferior goods? Explain how you determined your answer.

8. If the demand for pizza is relatively inelastic, will an increase in the price of pizza cause the total
revenue for pizza restaurants to increase, decrease, or stay the same. Explain.

9. Assume that incomes increased by 40% and the quantity demanded of hot dogs decreased by 40%.
Calculate the income elasticity of hot dogs. Show your work.

10. Given your answer to question #9, are hot dogs a complement, substitute, normal good, or inferior
good? Explain how you determined your answer.

11. Given the information in question #9, is the demand for hot dogs be perfectly elastic, relatively
elastic, unit elastic, relatively inelastic, or perfectly inelastic? Explain how you determined your
answer.

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 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 ____
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 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

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 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
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Do not use unless you have purchased an annual license