Review Sheet

AP Microeconomics
Section 9 (Modules 46-51)& 10 (Modules 52-54)
Test on Tuesday 3/10/15
Test Checklist
Please bring a #2 pencil and a non- graphing calculator
Section 9 (Modules 46- 51)
1.) Be able to calculate and interpret the following elasticity coefficients,
and interpret what they mean:
a. Price Elasticity of Demand
b. Price Elasticity of Supply
c. Cross Elasticity of Demand
d. Income Elasticity of Demand
Perfectly elastic = horizontal supply or demand curve
Perfectly Inelastic = vertical supply or demand curve
2.) Know the determinants of elasticity (both supply and demand).
3.) Know the Total Revenue (TR) Test – what happens to TR when price
changes depends on whether demand is elastic or inelastic.
4.) Who bears the burden of an excise tax? – The party whose supply or
demand is more inelastic. Be able to graph this (there will be a
problem on this) and use formula to calculate what proportion of tax the
buyer and seller bears:
Pd/Ps = Es/Ed
5.) Know what the Law of Diminishing Marginal Utility means.
Understand the relationship between Total Utility and Marginal
6.) Know how to apply the Optimal Purchase Rule (allows you to
determine the number of units of a particular product a consumer will
buy to maximize consumer surplus).
7.) Know how to calculate a consumer’s optimal consumption bundle
(Module 51 -states that a consumer will maximize her satisfaction if
she allocates her income so that the last dollar spent on each good
gives her the same amount of extra benefit).
MUa = MUb
8.) Know how to calculate consumer/producer surplus and deadweight
Section 10 (Modules 52-54)
Review Module 53 and 54 Reading Questions
1. Be able to define diminishing returns to input (applies only in the shortrun when only 1 resource is variable and the plant capacity is fixed).
2. Definitions of implicit costs, explicit costs, accounting profits and
economic profits.
3. Understand the relationship between total product, average product and
marginal product curves.
4. The marginal product curves and marginal cost curves are mirror images
of each other (see widget simulation graph)