#AP Microeconomics: Supply - Your Ultimate Review

Hey there! Let's get you prepped for the AP Microeconomics exam with a laser focus on Supply. Think of this as your late-night, rapid-fire review session with a friend who knows their stuff. Let's dive in!

# What is Supply? 📦

Supply is all about how much of a good or service producers are willing and able to sell at different prices. It's the seller's side of the market. Remember, we're talking about a specific time period here, not just a general idea. Think of it like a store deciding how many items to put on the shelves each week.

Key Concept

Supply is not just about having the resources, but also the willingness to sell at a given price.

# The Law of Supply 📈

The Law of Supply is super straightforward: as price increases, quantity supplied increases, and vice-versa. Why? Because higher prices = higher profits, so sellers are more motivated to sell more. It's like when your favorite coffee shop raises prices, they're probably going to brew more coffee.

Memory Aid

Law of Supply: Think "Price Up, Supply Up" (PUSU). It's a positive relationship!

# The Supply Curve 📊

The supply curve visually represents the law of supply. It's a graph with quantity on the x-axis and price on the y-axis. Because of the law of supply, the supply curve is upward sloping.

Upward-sloping supply curve

Quick Fact

Remember, the supply curve can be a straight line or a curve, but it always increases from left to right.

# Determinants of Supply ⚙️

These are the factors that shift the entire supply curve. Remember, a change in price only changes the quantity supplied, not the supply curve itself. Think of it like moving along the curve vs. shifting the whole curve.

Resource Costs: If the cost of inputs (like raw materials or labor) goes up, supply decreases (shifts left). It's more expensive to produce, so less is offered at each price. If costs go down, supply increases (shifts right).

Memory Aid

Think of it like baking cookies: if the cost of flour goes up, you'll bake fewer cookies.

Taxes and Subsidies: Taxes increase production costs, decreasing supply (shifts left). Subsidies lower costs, increasing supply (shifts right). It's like the government either making it harder or easier to produce.
Technology/Productivity: Better technology or increased productivity means more can be produced with the same resources, increasing supply (shifts right). It's like a factory getting a new, faster machine.
Expectations: If producers expect prices to rise in the future, they might decrease supply now to sell more later (shifts left). If they expect prices to fall, they might increase supply now (shifts right). It's all about playing the market.
Number of Sellers/Producers: More sellers in the market mean more supply (shifts right). Fewer sellers mean less supply (shifts left). It's like more pizza places opening up in your town.

Common Mistake

Don't confuse a change in quantity supplied (movement along the curve due to a price change) with a change in supply (a shift of the entire curve due to a determinant).

Understanding supply determinants is crucial for analyzing market changes and predicting outcomes.

# Final Exam Focus 🎯

Okay, here's the real deal for the exam:

Law of Supply: Understand its core principle and how it relates to the supply curve.
Supply Curve: Know that it's upward sloping and why.
Determinants of Supply: Be able to identify them and explain how they shift the supply curve.
Market Equilibrium: Remember that supply interacts with demand to determine market prices and quantities.

Exam Tip

When answering questions, always clearly state whether you're talking about a change in quantity supplied or a change in supply. Use the correct terminology!

#Last-Minute Tips 🚀

Time Management: Don't spend too long on any one question. If you're stuck, move on and come back later.
Common Pitfalls: Watch out for questions that try to trick you by confusing supply and demand. Read carefully!
FRQs: For free-response questions, practice drawing and labeling graphs correctly. Explain your reasoning clearly and concisely.

# Practice Questions 📝

Okay, let's put this knowledge to the test! Here are some practice questions to get you exam-ready.

Practice Question

Multiple Choice Questions

Which of the following would cause an increase in the supply of gasoline? (A) An increase in the price of crude oil (B) A decrease in the number of gasoline producers (C) The introduction of a new, more efficient refining technology (D) An increase in taxes on gasoline production (E) An expectation of higher gasoline prices in the future
If the price of a good increases, what happens to the quantity supplied, according to the law of supply? (A) It decreases. (B) It increases. (C) It remains the same. (D) It could increase or decrease, depending on the good. (E) There is no relationship between price and quantity supplied.
A government subsidy to corn farmers would result in which of the following changes in the corn market? (A) A decrease in the supply of corn (B) An increase in the supply of corn (C) A decrease in the demand for corn (D) An increase in the demand for corn (E) No change in either the supply or demand for corn

Free Response Question

Consider the market for smartphones. Assume the market is initially in equilibrium.

(a) Draw a correctly labeled graph of the smartphone market, showing the equilibrium price and quantity. (2 points)

(b) Suppose there is a technological advancement in the production of smartphones. On your graph from part (a), show the effect of this change on the supply curve. (2 points)

(d) Now, suppose at the same time as the technological advancement, the price of a key input used in smartphone production increases. Show the effect of this on your graph from part (b). (2 points)

(e) What is the likely effect of these two changes (technological advancement and increase in input costs) on the equilibrium quantity of smartphones? Explain. (2 points)

Answer Key

Multiple Choice:

Free Response Question:

(a) * 1 point for correctly labeled axes (Price and Quantity) * 1 point for correctly drawn supply and demand curves, showing equilibrium

(b) * 1 point for showing a rightward shift of the supply curve * 1 point for correctly labeling the new supply curve

(c) * 1 point for stating that the equilibrium price will decrease * 1 point for stating that the equilibrium quantity will increase

(d) * 1 point for showing a leftward shift of the supply curve from the new supply curve in part (b) * 1 point for correctly labeling the new supply curve

(e) * 1 point for stating that the effect on equilibrium quantity is indeterminate (or uncertain) * 1 point for explaining that the increase in supply increases the quantity and the decrease in supply decreases the quantity. The net effect depends on which effect is greater.

You've got this! Review these key points, practice, and you'll be ready to ace the AP Microeconomics exam. Good luck!