Economics
Unit 2: Microeconomics Teaching Guide
SSEMI1 The student will describe how households, businesses, and governments are interdependent and interact through flows
of goods, services, and money.
a. Illustrate by means of a circular flow diagram, the Product market; the Resource (factor) market;
the real flow of goods and services between and among businesses, households, and government; and the flow of money.
b. Explain the role of money as a medium of exchange.
Key Terms and Concepts
circular flow
businesses
productive resources
consumers
taxes
unit of account
Text Pages:
resource/factor market
income
goods and services
producers
transfer payments
store of value
product market
revenue
expenditures
government’s role
money
6 characteristics of money
households
profit/net profit
goods and services
public goods and services
medium of exchange
Circular Flow – Chapter 2, Section 2; pp. 29-30
Role of Money – Chapter 10, Section 1; pp. 243-245
SSEMI2 The student will explain how the Law of Demand, the Law of Supply, prices, and profits work to determine production and
distribution in a market economy.
a. Define the Law of Supply and the Law of Demand.
b. Describe the role of buyers and sellers in determining market clearing price.
c. Illustrate on a graph how supply and demand determine equilibrium price and quantity.
d. Explain how prices serve as incentives in a market economy.
Key Terms and Concepts
demand
inverse relationship
movement along curve
direct relationship
market clearing price
Text Pages:
quantity demanded (x-axis)
demand curve
supply
supply curve
Law of Demand
demand schedule
quantity supplied (x-axis)
supply schedule
price (y-axis)
Law of Supply
equilibrium
Law of Supply – Chapter 5, Section 1; pp.101-104
Law of Demand – Chapter 4, Section 1; pp. 79-82
Market Equilibrium – Chapter 6, Section 1 – pp. 125-128; Section 2; pp. 133-135
Price Incentives – Chapter 6, Section 3; pp. 139-142
SSEMI3 The student will explain how markets, prices, and competition influence economic behavior.
a. Identify and illustrate on a graph factors that cause changes in market supply and demand.
b. Explain and illustrate on a graph how price floors create surpluses and price ceilings create shortages.
c. Define price elasticity of demand and supply.
Key Terms and Concepts
demand curve shift
complementary goods
determinants of demand
price ceilings
rent control
variable costs
elastic supply
determinants of demand
normal goods
supply curve shift
black market
minimum wage
elasticity
inelastic supply
income effect
inferior goods
determinants of supply
shortage vs. scarce
production costs
elastic demand
perfectly elastic
substitute goods
demand curve shift
price floors
surplus
fixed costs
inelastic demand
relatively elastic
perfectly inelastic
Text Pages:
relatively inelastic
Changes in Supply/Demand – Chapter 4, Section 2; pp. 85-88; Chapter 5, Section 1; pp. 104-106; Section 3: 117-119
Production Costs – Chapter 5, Section 2; pp. 111-112
Price Floors/Ceiling – Chapter 6, Section1; pp. 128-131
Elasticity – Chapter 4, Section 3; pp. 90-95
SSEMI4 The student will explain the organization and role of business and analyze the four types of market structures
in the U.S. economy.
a. Compare and contrast three forms of business organization—sole proprietorship, partnership, and corporation.
b. Explain the role of profit as an incentive for entrepreneurs.
c. Identify the basic characteristics of monopoly, oligopoly, monopolistic competition, and pure competition
Key Terms and Concepts
business organization
sole proprietorship
partnership
advantages/disadvantages of sole proprietorship , partnership, corporation
limited liability
shared risk
entrepreneurs
profit motive
market structures
monopoly
monopolistic competition
pure competition
Text Pages:
corporation
entrepreneurship
oligopoly
Forms of Business Organization – Chapter 8, Section 1; pp.185-188; Section 2; pp. 190-193; Section 3;
pp. 195-198
Entrepreneurs and Profit – Chapter 8, Section 1; pp. 185-186
Market Structures – Chapter 7, Section 1; pp. 151-154; Section 2; pp. 157-164; Section 3; 166-171