AP Microeconomics Unit 2 Notes: Price Elasticity, Marginal Analysis, and Government Intervention

These notes are for Unit 2 of AP Microeconomics, but they can be used by anyone aiming to learn about supply and demand through a microeconomic lens. The main topics covered: marginal analysis, price elasticity of demand and supply, and the effects of government intervention in markets. These notes give details on market economies, command economies, mixed economies, explicit costs, implicit costs, cost-benefit analysis, and marginal analysis. There are charts to demonstrate and explain marginal analysis and how to find the optimal consumption bundle. Furthermore, price elasticity of demand, price elasticity of supply, income elasticity of demand (YED), and cross-price elasticity of demand (CPED) are covered in detail. I explain how to calculate price elasticity and determine if demand/supply is elastic, inelastic, unit-elastic, perfectly elastic, or perfectly inelastic based on this calculation. I also cover price effect, quantity effect, elastic demand, inelastic demand, elasticity along the demand curve, and determinants of price elasticity. As for the other elasticities, I cover how to calculate YED and CPED and what you can tell about goods based on it. Additionally, government intervention in markets is covered by deeply explaining and providing graphs for price floor, price ceiling, quotas, and excise taxes, tax incidence, autarky, and tariffs.