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
  • Price and quantity controls
  • Elasticity
    • Price, income and cross-price elasticities of demand
    • Price elasticity of supply
    • Elasticity
      • Assignments
  • Consumer surplus, producer surplus and market efficiency
  • 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
  • Monopoly
  • Oligopoly
  •  Monopolistic competition
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