AP Microeconomics / Supply and Demand
Lesson
Equilibrium and elasticity
Find the market-clearing price, then ask how much quantity reacts when price changes.
Learning goals
- Explain surplus and shortage as disequilibrium.
- Interpret price elasticity of demand as a responsiveness measure.
Explanation
Demand slopes down: at a higher price, buyers want fewer units. Supply slopes up: a higher price draws out more output. Equilibrium is the price where those plans match. Above it, leftover goods push price down. Below it, frustrated buyers push price up.
Elasticity asks how much quantity changes when price changes. Elastic demand means a small price rise cuts quantity a lot. Inelastic demand means quantity hangs on. The same idea applies to supply. Slope on a graph is not the same number as elasticity.
Key terms
- Equilibrium. The price and quantity where quantity demanded equals quantity supplied.
- Price elasticity of demand. The percent change in quantity demanded divided by the percent change in price.
Common mistakes
- Calling a change in price a shift of demand.
- Saying a steep curve is automatically inelastic without checking percentages.
Practice
Original Marlow Works items. Check the answer explanation after you try.
A binding price ceiling is set below equilibrium in the market for rental apartments. What is the most likely result?
Original Marlow Works item — not a College Board question.
Take your time—this is practice, not a test.
Answer explanation
Coffee beans get cheaper for roasters. What happens to the retail coffee market if demand is unchanged?
Answer. Supply shifts right, equilibrium price falls, and equilibrium quantity rises.
Lower input costs make sellers willing to offer more at each price.
Related resources
External links with reuse status. Marlow Works is independent and does not copy restricted exam or textbook material.
Official / link only
AP Microeconomics course page
Official six-unit framework for markets, costs, and market failure.
College Board · All rights reserved · accessed 2026-10-01
Open sourceCC BY — attribution required
Principles of Microeconomics: Scarcity and Social Provisioning
Open microeconomics background for scarcity, markets, and elasticity.
Open Textbook Library listing · CC BY · accessed 2026-10-01
Open source