AP Econ Unit 2 Nature and Function of Product Markets

Unit 2:  The Nature and Functions of Product Markets (55–70%)

1. Supply and demand (15–20%)

• Market equilibrium
•  Determinants of supply and demand
  • supply-and-demand
• Price and quantity controls
  • Price Controls
• Elasticity
  • Price, income and cross-price elasticities of demand
  • Price elasticity of supply
  • Elasticity
    • Assignments
• Consumer surplus, producer surplus and market efficiency
  • cs-and-ps
• Tax incidence and deadweight loss

2. Theory of consumer choice (5–10%)

• Total utility and marginal utility
• Utility maximization: equalizing marginal utility per dollar
• Utility
• Individual and market demand curves
• Income and substitution effects

3. Production and costs (10–15%)

• Production functions: short and long run
• Marginal product and diminishing returns
• Short-run costs
• Long-run costs and economies of scale
• Cost minimizing input combination
• production-costs
• production

 

4. Firm behavior and market structure (25–35%)

• Profit:
  • Accounting versus economic profits
  • Normal profit
  • Profit maximization: MR=MC rule
  • Profits
• Perfect competition
  • Profit maximization
  • Short-run supply and shutdown decision
  • Behavior of firms and markets in the short run and in the long run
  • Efficiency and perfect competition
  • Market Structures – Perfect Competition
• Monopoly
  • Sources of market power
  • Profit maximization
  • Inefficiency of monopoly
  • Price discrimination
  • Natural monopoly
  • Market Structures – MONOPOLY
• Oligopoly
  • Interdependence, collusion, and cartels
  • Game theory and strategic behavior
  • Market Structures – Oligopoly
•  Monopolistic competition
  • Product differentiation and role of advertising
  • Profit maximization
  • Short-run and long-run equilibrium
  • Excess capacity and inefficiency
  • Market Structures – MONOPOLISTIC COMPETITOIN

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