AP Microeconomics Unit 2: Supply and Demand Notes

Introduction

Demand and supply schedules meet at equilibrium; elasticities measure responsiveness, while policy and trade create wedges that change quantities and the distribution of surplus.

Start every graph by naming the vertical price per unit, horizontal quantity per period, and variables held constant. An own-price change causes movement along a curve. A non-axis determinant shifts a schedule, and the new intersection determines the modeled price and quantity.

Surplus measures gains from exchange under stated assumptions. Price controls, taxes, subsidies, tariffs, and quotas redistribute some surplus and may prevent mutually beneficial trades, but efficiency accounting alone does not answer equity, rights, enforcement, or strategic-policy questions.

Demand and supply

schedules, determinants, and equilibrium

Elasticity

percentage responsiveness and incidence

Surplus

buyer value, seller cost, and gains from trade

Intervention and trade

wedges, transfers, revenue, and deadweight loss

Current exam guidance: Aligned to the current 2026–27 AP Microeconomics framework. Every model identifies axes, assumptions, movement or shift, market structure, and the quantitative or welfare consequence.

2.1

Demand

When does buyer behavior move along a demand curve, and when does it shift the curve?

Short answer

A change in the good’s own price changes quantity demanded on the existing curve; a change in income, tastes, expectations, related-good prices, or buyer count shifts demand.

Know firstConsumer choice · Coordinate schedules · Ceteris paribus

The axis variable moves the point

Demand is the schedule of quantities buyers are willing and able to purchase at alternative own prices. In the authored schedule, a fall in price from 12 to 9 currency units raises quantity demanded from 3 to 6 units per week. Both observations belong to the same curve because only the vertical-axis variable changed. This inverse relation follows from marginal choice under the model, not from a claim that every individual behaves identically.

A determinant outside the axes changes the whole schedule. Adding a buyer who demands three units at every shown price moves each quantity coordinate right by three. A higher price for a substitute can also shift demand right; a higher own price cannot. “Normal” and “inferior” describe the sign of the income response, while “substitute” and “complement” describe the cross-price response. Those are empirical relationships, not judgments about quality or need.

Economic model

A demand schedule and a buyer-count shift

Place own price on the axis and buyer count outside the curve.

Held constant: All nonprice determinants are constant on each curve; the added buyer contributes three units at every displayed price.
Time horizon: One weekly market period with other demand determinants fixed.
Read the change: An own-price change moves along one demand curve. Adding a buyer shifts every coordinate right from D0 to D1.

Movement: price: 12 → 9
Movement: quantity: 3 → 6
Added demand: +3 at each price

D0: original demandD1: one additional buyer

Horizontal axis: Quantity demanded (units per week)
Vertical axis: Price (currency per unit)

1P=12 on D02P=9 on D0

Price 12 to 9 is movement along D0.
Buyer count shifts the entire schedule.

Q_d=f(P\mid I,T,E,P_r,N_b)

Original demand pairs prices 12, 9, 6, and 3 with quantities 3, 6, 9, and 12. An additional buyer adds three units at every price, shifting the entire schedule right.

Read the model as a table

A demand schedule and a buyer-count shift values
Price	Quantity on D0	Quantity on D1 after buyer added
12	3	6
9	6	9
6	9	12
3	12	15

Buyers and an auctioneer gathered around livestock at a calf auction in Chamberlain, South Dakota. — Demand combines many buyers at each possible price
An auction makes willingness to pay visible as buyers respond to successive prices. A market demand curve goes further: it totals how many units all buyers would purchase at every price, holding demand determinants fixed.
Use this visual to see
Use a price-discovery setting to distinguish one observed transaction from an entire demand schedule.
What it cannot show
The photograph does not show every bid, reservation value, quantity demanded at unobserved prices, or whether other demand determinants changed.

Classify the event before drawing

Identify the market and time unit.
Check whether the changed variable appears on an axis.
Move along the curve for an own-price change.
Shift the schedule for a nonprice determinant.
Name the determinant and explain the buyer-side mechanism.

Keep these three ideas

Demand is a complete price–quantity schedule.
Own price changes quantity demanded along a curve.
Income, tastes, expectations, related-good prices, and buyer count can shift demand.

Supply and Demand