Unit 1 Review Discussion Topic--AP Microeconomics

How have all the following been affected by COVID-19? Explain.
a. United States’ PPC (Will the curve shift inward and/or will we be operating at a point inside the curve?)
b. The supply and demand of toilet paper
i. What shifted more? What was the result on price and equilibrium quantity?
ii. How does the price elasticity of both demand and supply affect equilibrium price and quantity?
c. Market vs. command mix (Make sure to define each of these and discuss the US government’s reaction to the crisis.)

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  1. a) Since there is an economic recession resulted from the pandemic, this will be a point inside the curve, as the economic recession is causing unemployment. The curve, overall, would not shift inward because all of those workers are not gone, they are just not being used to their full capacity.
    b) The supply of toilet paper has greatly decreased, while the demand of toilet paper has greatly increased.
    i.) The supply curve has shifted outward for toilet paper. The result is a decrease in equilibrium quantity and an increase in price.
    ii.) During the crisis, demand for goods have increased, but supply remained the same, the higher demand would lead to a higher equilibrium price.
    c) In a market/mixed economy, the unemployment rate has greatly increased, causing an economic recession in countries like the United States. However, in a command economy, the government is responsible for the country’s investment, stocking, pricing, and incomes. As all residents in a command economy have equal wages, the economy is not as gravely affected as in a market economy, where individuals run their own businesses.
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