AP Microeconomics Units

Key Takeaways

• AP Microeconomics has 6 main units, starting with basic ideas and moving up to more complex topics.

• The course focuses on how people, businesses, and markets make choices every day.

• Learning to read and draw graphs and diagrams is important for doing well on the exam.

• Real-world examples help you see how these ideas work in real life.

Introduction: What Is AP Microeconomics?

AP Microeconomics helps you understand how people, companies, and markets make choices about money, products, and resources.

This course focuses on small-scale economics, like how individual decisions affect prices, production, and trade. Unlike macroeconomics (which looks at whole countries and big economies), microeconomics zooms in on how specific markets and people behave.

The College Board divides AP Microeconomics (opens in a new tab) into 6 official units, each one building on the last so you can see how markets really work.

Overview of the 6 AP Microeconomics Units

Unit 1: Basic Economic Concepts

This unit is the starting point for everything you’ll learn. It lays the foundation for microeconomic thinking. The first concept is scarcity, and how people want more than they can have, because resources are limited.

• Scarcity affects choices because we can’t have it all. You end up giving up something to choose something else that is available. That is where opportunity cost comes in.

• This first unit of AP Microeconomics covers the Production Possibilities Curve (PPC). You’ll learn about a graph that shows trade-offs between two goods.

• Comparative advantage explains why people or countries specialize in what they do best. Even if you’re not the best at something overall, you can still be better at it compared to others.

• Marginal analysis means thinking about “one more,” like deciding if one more hour of studying is worth it compared to the cost (like lost sleep).

About 12–15% of the exam will come from Unit 1.

Unit 2: Supply and Demand

This is one of the most important units. It will also be a big part of the AP Microeconomics exam.

• The law of demand says people buy less when prices go up. The law of supply says producers want to sell more when prices rise.

• When supply and demand meet, we get market equilibrium. This is where the amount supplied equals the amount people want to buy.

• Price controls can mess up this balance.

  • Price ceilings (like rent control) can cause shortages.

  • Price floors (like minimum wage) can cause surpluses.

• Elasticity shows how sensitive buyers and sellers are to price changes. For example, if the price of ice cream jumps and everyone stops buying it, that’s elastic demand.

• Consumer and producer surplus measure how happy buyers and sellers are with prices.

This unit is a big part of the exam. It can make up 20–25% of the exam. You will see it in both multiple-choice and free-response questions.

Unit 3: Production, Cost, and the Perfect Competition Model

In Unit 3, you’ll learn how businesses make products and decide how much to produce.

• In the short run, some things (like factory space) can’t change. In the long run, everything can change.

• The law of diminishing returns says that adding more workers to a fixed space eventually makes production less efficient.

• You’ll study several cost curves:

  • ATC (Average Total Cost): cost per unit made

  • MC (Marginal Cost): cost of one more unit

  • AVC (Average Variable Cost) and AFC (Average Fixed Cost): break down total costs

• Perfect competition is a market with lots of small businesses selling identical products. No one controls prices — everyone’s a “price taker.”

This unit makes up 22–25% of the exam and requires you to understand and label graphs.

Unit 4: Imperfect Competition

In the real world, most markets aren’t perfectly competitive. This unit shows what happens when companies have power over prices.

• Monopolies: One company controls everything (like a utility company). This causes deadweight loss, which means lost efficiency.

• Monopolistic competition: Many companies sell similar but not identical items (like restaurants or clothing brands).

• Oligopolies: A few big companies dominate (like airlines or phone carriers).

• Price discrimination: Charging different customers different prices for the same thing (like student discounts or airline tickets).

• You’ll also study game theory, which looks at how companies make decisions while reacting to their competitors.

This unit makes up 15–22% of the exam and includes lots of graph-based and strategy questions.

Unit 5: Factor Markets

Unit 5 covers products and how they relate to resources, like workers, land, and machines. You’ll discover how resources affect decision-making.

• Derived demand means the demand for workers depends on the demand for what they make. If more people buy cars, car companies hire more workers.

  • Marginal Revenue Product (MRP): how much extra money a worker adds to a company.

  • Marginal Factor Cost (MFC): how much it costs to hire one more worker.

• Wages depend on supply and demand for labor. Jobs that need rare skills or high productivity usually pay more.

Different labor markets work differently:

• Competitive markets pay fair wages.

• Monopsony (only one employer) can keep wages low.

• Labor unions can raise wages but might reduce jobs.

This unit is 10–13% of the test and often appears in free-response questions.

Unit 6: Market Failure and the Role of Government

This unit explores:

• Externalities are side effects of economic activity:

  • Negative externality: pollution (hurts others)

  • Positive externality: education (helps others)

• Public goods (like parks or national defense) are things everyone can use, and one person’s use doesn’t stop another’s.

• Because people might not want to pay for public goods (free rider problem), the government often provides them.

• The government can also:

  • Tax harmful activities.

  • Subsidize helpful ones.

  • Regulate bad behaviors.

  • Provide public services directly.

This unit makes up 6–9% of the exam. But it’s also important because it connects strongly to real-world issues.

How These Units Appear on the AP Exam

Section I: Multiple Choice (MCQs)

You’ll have 60 multiple-choice questions and 70 minutes to complete them. That is about a minute per question.

Expect questions about:

• Graphs and diagrams

• Real-world examples

• Definitions of economic principles and models

• Calculations

Units 2–4 tend to appear the most in this section of the AP Microeconomics exam. Think through each scenario logically and use the process of elimination to choose answers. The multiple-choice section will be 66% of your exam score.

Section II: Free Response (FRQs)

You’ll answer 1 long question and 2 short questions.

The long question usually mixes ideas from multiple units and always includes graphs. The short ones focus on specific topics. You’ll be allowed 60 minutes to complete the three free-response questions. 

To get ready for the FRQs, you should be able to:

• Drawing clear, labelled graphs

• Explain economic concepts, models, outcomes, and effects

• Perform numerical calculations and analysis

Practice with past FRQs from Save My Exams to see how the scoring works. This section will be 33% of your exam score.

Frequently Asked Questions

How many units are in AP Microeconomics?

There are (opens in a new tab)6 units (opens in a new tab). They start with basic ideas and end with how the government deals with market problems.

What’s the hardest unit?

 Most students find Unit 4 (Imperfect Competition) tricky because it has lots of graphs and concepts like game theory. Unit 3 (Production and Cost) can also be tough. Using study resources and being organized will help you master these and other concepts in no time!

Do I need to memorize graphs?

 Yes! You should be able to draw and explain graphs of key concepts quickly. Focus on what each part means, not just how it looks.

What’s the difference between AP Micro and AP Macro?

• Micro: small scale (individuals and businesses)

• Macro: big picture (whole countries and economies)

Can AP Micro help me in business or finance?

 Definitely, you’ll learn about pricing, decision-making, and competition. These are all useful for business and money management. Plus, some colleges give credit for it!

Final Thoughts

AP Microeconomics takes you step by step through how people and companies make choices about money, production, and markets.

To do well:

1. Practice drawing graphs: they’re your best tool.

2. Learn the terms: clear vocabulary shows a strong understanding.

3. Keep practicing: solving problems helps you think like an economist.

Microeconomics isn’t just about math and theory. It’s about understanding how everyday decisions shape the world around you, from shopping and jobs to prices and policies.

If you are looking for resources and study aids, Save My Exams provides a variety of AP study resources to help you succeed in your AP classes. Our study guides and past questions are exam-aligned and written by teachers to help you boost your score. 

References

College Board AP Microeconomics Overview (opens in a new tab)

College Board PDF - Course at a Glance (opens in a new tab)