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AP® Microeconomics · Unit 2 · Topic 2.8

The Effects of Government Intervention in Markets: Topic Checklist (Microeconomics 2.8)

Specific “I can…” statements for price controls, quotas, taxes and subsidies, each linked to the guide section and practice question that shows whether you can really do it.

Work through the list without notes. If you cannot do a statement, follow its link, then come back. Guide = study guide; Practice = practice questions.

Understanding

  • I can define a price ceiling, a price floor, a quantity control, a per-unit tax and a per-unit subsidy. (Guide: “Summary of the policies”)
  • I can say when a price ceiling or floor is binding and whether it causes a shortage or a surplus. (Guide: “Price ceilings”, “Price floors”; Practice Q1)
  • I can explain why any of these policies lowers total surplus in an efficient competitive market, and what deadweight loss measures. (Guide: “The benchmark: an efficient market”)
  • I can describe how goods are rationed under a binding ceiling and why the shortage can grow over time. (Guide: “Price ceilings”; Practice Q6)

Calculation and graphing

  • I can find the price buyers pay, the price sellers keep and the new quantity after a per-unit tax. (Guide: Worked example 2; Practice Q4)
  • I can do the same for a per-unit subsidy, and calculate its cost to the government. (Guide: “Per-unit subsidies”; Practice Q7)
  • I can calculate consumer surplus, producer surplus, tax revenue and deadweight loss after an intervention, and check they add up to the original total. (Guide: Worked examples 1 and 2; Practice Q4, Q5)
  • I can find the quantity traded and the deadweight loss under a binding price control or quota. (Guide: Worked example 1, “Quantity controls”; Practice Q5)
  • I can draw a labelled graph of a ceiling, a floor or a tax, showing both prices, the quantity traded, any revenue rectangle and the deadweight loss triangle. (Guide: Figures 1 and 2; Practice Q5)

Reasoning

  • I can use the elasticities of demand and supply to say who bears more of a tax or gains more from a subsidy. (Guide: “Who bears a tax? Elasticity decides”; Practice Q2, Q4(b), Q7(d))
  • I can explain why a subsidy creates deadweight loss even though buyers and sellers both gain. (Practice Q7(c))
  • I can explain why a quota raises the price buyers pay and who receives the gap. (Guide: “Quantity controls”; Practice Q3)

All ticked? Move on to Topic 2.9, International Trade and Public Policy, or return to the course roadmap.

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