Micro Unit 2:

Unit 2 Organizing Principles

Overview: This is the most important unit because you will use these concepts in every other unit. You start with learning about demand and the shifters of demand. Make sure to learn the difference between a change in quantity demanded and a change in demand. Remember, PRICE DOESN'T SHIFT THE CURVE!

Next you will learn about supply and the shifters of supply. Feel comfortable putting demand and supply together and showing what happens to price and quantity when there are changes in the market. You will learn what happens when the government gets involved. Make sure that you can show what happens to consumer and producer surplus when there are price ceilings, floors, quotas, taxes, and subsidies. You will also learn about elasticity and how sensitive quantity is to a change in price. Make sure you know the "total revenue test" to determine if demand is elastic or inelastic. The last thing you will learn is the law of diminishing marginal utility and how to apply the utility maximizing rule. This unit is VERY IMPORTANT! Pay attention and practice these skills.