AP Macroeconomics: Section 2 Study
Guide
2 characteristics of a competitive market - Answer-1. many buyers and sellers
2. identical good or service
the supply and demand model - Answer-a model of how a competitive market works
5 key elements of the supply and demand model - Answer-1. demand cu...
shift of the demand curve - Answer✔✔-a change in the quantity demanded at any given price
represented by the change of the original demand curve to a new position, denoted by a new demand
curve
number of demand shifters - Answer✔✔-6
(shift of the demand curve) changes in the prices of related goods: substitutes - Answer✔✔-a substitute
good is a good that can be used in place of another; substitutes are products that a consumer perceives
as similar or comparable
(shift of the demand curve) changes in the prices of related goods: complements - Answer✔✔-2 goods
are complements if a fall in the price of one good makes people more willing to buy the second good
(shift of the demand curve) changes in income: normal goods - Answer✔✔-a normal good is any good
for which demand increases when income increases
(shift of the demand curve) changes in income: inferior goods - Answer✔✔-an inferior good is a good
whose demand decreases when consumer income rises
(shift of the demand curve) human: changes in tastes - Answer✔✔-economists lump together changes in
demand due to fads, beliefs, and cultural shifts under the heading of changes in tastes or preferences
(shift of the demand curve) human: changes in expectations - Answer✔✔-expectations of a future drop
in price lead to a decrease in demand today; expectations of a future rise in price are likely to cause an
increase in demand today
law of demand - Answer✔✔-demand curves slope downwards (inverse); as prices fall, consumer
demand rises
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