The US Department of Education published a new edition of its “AP Economics” explanations of macroeconomics and microeconomics. The AP Economics explanation of macroeconomics explains why the market prices of goods and services tend to converge to some level in the long run. The AP Economics explanation of microeconomics explains why individuals have such a tendency to shop around for the best bargains.
In both macroeconomics and microeconomics the term “demand curve” is used. A demand curve refers to the relationship between the supply and demand of certain goods and services. It is usually depicted by a straight line which is most often found on graph sheets, or by a curve with a range of slope or angle. Demand curves are not linear lines or curves, but can be “cubic,” “curve-shaped”curve-free.” There are some other forms of demand that are sometimes included in a demand curve.
The AP Economics explanation of macroeconomics shows how changes in the demand for certain goods and services affect the overall cost of producing the same goods and services. For instance, changes in the demand for labor or production leads to changes in the price of labor. Similarly, changes in the demand for raw materials and energy leads to changes in the price of raw materials and energy.
In contrast, changes in the cost curves do not lead to changes in the supply of these things. Supply curve diagrams show what happens if there is a change in a variable, whether it is the amount of food or the number of cars on the road. What will happen if no one purchases more food than what is necessary? No one is going to go out and buy food for free! The cost curve tells you what will happen if there is a change in the supply of a specific good.
There are many ways of presenting a supply curve to help explain the economic theories of the United States Department of Education. An example is a diagram of a supply curve, shown on an Excel workbook called “AP Economics in One Lesson: Microeconomics in Practice,” where a series of points are plotted along the cost curve.
AP Macroeconomics explanations of microeconomics show that the size of the population can affect the supply of some goods and services, while a relatively small increase in the size of a country's population can cause the demand for those goods and services to rise. Some examples of microeconomics that might be illustrated by a supply curve include how sales tax rates affect the amount people pay on gasoline; how sales tax revenues affect the price of goods; and services at government-funded schools affect the cost; the extent to which a person may receive unemployment benefits affects their ability to pay mortgage payments; the amount; and how changes in unemployment benefits affects the price of some medical insurance.