ACT SSC Economics · Unit 1
ACT SSC Economics Unit 1: Microeconomic Foundations — Flashcards & Quiz
ACT SSC Economics Unit 1 covers microeconomic foundations within the BSSS framework. This unit explores supply and demand, market equilibrium, price elasticity, consumer and producer surplus, market structures, market failure and externalities. These flashcards and quiz questions help you revise the key concepts tested in ACT assessments.
Key Terms
- Opportunity Cost
- The value of the next best alternative forgone when a choice is made; the foundational economic concept in BSSS Economics Unit 1 that underpins all decision-making analysis in ACT SSC assessments.
- Price Elasticity of Demand
- A measure of how responsive the quantity demanded of a good is to a change in its price, calculated as the percentage change in quantity demanded divided by the percentage change in price; a core calculation in ACT SSC microeconomics.
- Market Equilibrium
- The point where the quantity supplied equals the quantity demanded at a particular price, represented by the intersection of supply and demand curves; BSSS assessments require diagrammatic and written analysis.
- Market Failure
- A situation where the free market fails to allocate resources efficiently, resulting in deadweight loss; causes include externalities, public goods and information asymmetry as assessed in ACT SSC Economics.
- Consumer Surplus
- The difference between the maximum price consumers are willing to pay and the actual market price; BSSS unit score tasks require identification and calculation of surplus from supply-demand diagrams.
- Externality
- A cost or benefit of an economic transaction that affects a third party not directly involved in the transaction; negative externalities like pollution and positive externalities like education are key BSSS assessment topics.
- Allocative Efficiency
- Achieved when resources are distributed in a way that maximises total benefit to society, occurring where price equals marginal cost; a benchmark for evaluating market outcomes in ACT Senior Secondary Certificate Economics.
Sample Flashcards
Q1: State the law of demand.
The law of demand states that, ceteris paribus (all else equal), as the price of a good rises, the quantity demanded falls, and vice versa. This creates a downward-sloping demand curve.
Q2: State the law of supply.
The law of supply states that, ceteris paribus, as the price of a good rises, the quantity supplied increases, and vice versa. This creates an upward-sloping supply curve.
Q3: List three non-price factors that shift the demand curve.
1) Changes in consumer income. 2) Changes in tastes and preferences. 3) Changes in the price of related goods (substitutes and complements). Other factors include population changes and consumer expectations.
Q4: List three non-price factors that shift the supply curve.
1) Changes in input/production costs. 2) Technological improvements. 3) Government taxes and subsidies. Other factors include number of suppliers, natural conditions and producer expectations.
Q5: What is market equilibrium?
Market equilibrium occurs where the quantity demanded equals the quantity supplied at a particular price. At this point there is no surplus or shortage, and the market clears.
Q6: What happens when a price is set above or below equilibrium?
Above equilibrium: quantity supplied exceeds quantity demanded, creating a surplus. Below equilibrium: quantity demanded exceeds quantity supplied, creating a shortage. Market forces push the price back towards equilibrium.
Q7: Define price elasticity of demand (PED).
PED measures the responsiveness of quantity demanded to a change in price. PED = % change in quantity demanded ÷ % change in price. If |PED| > 1 demand is elastic; if |PED| < 1 demand is inelastic; if |PED| = 1 demand is unit elastic.
Q8: What factors affect the price elasticity of demand?
1) Availability of substitutes (more subs = more elastic). 2) Necessity vs luxury (necessities = inelastic). 3) Proportion of income spent (larger share = more elastic). 4) Time period (long run = more elastic).
Sample Quiz Questions
Q1: The law of demand states that as price rises, quantity demanded also rises.
Answer: FALSE
The law of demand states quantity demanded FALLS as price rises, ceteris paribus.
Q2: An increase in consumer income shifts the demand curve for a normal good to the right.
Answer: TRUE
Higher income increases consumers' ability to buy, shifting demand right for normal goods.
Q3: A rise in the price of a good causes the supply curve to shift to the right.
Answer: FALSE
A price change causes movement ALONG the supply curve, not a shift of it. Non-price factors shift the curve.
Q4: At market equilibrium, quantity demanded equals quantity supplied.
Answer: TRUE
Equilibrium is the point where the demand and supply curves intersect, and the market clears.
Q5: A price floor set below the equilibrium price will cause a shortage.
Answer: FALSE
A price floor below equilibrium has no effect. A price floor ABOVE equilibrium causes a surplus (Qs > Qd).
Why It Matters
Microeconomic foundations in ACT SSC Economics Unit 1 builds the analytical toolkit for understanding how individuals and firms make economic decisions. BSSS assessments emphasise your ability to use supply and demand models, calculate elasticity, analyse market structures, and identify market failures. This unit establishes the foundational economic reasoning that underpins all subsequent units, making mastery here essential for course success. Students who develop fluency with diagrams, economic terminology, and marginal analysis find that the debates, macroeconomic analysis and policy evaluation in later units become natural extensions of the same analytical framework. Supply and demand analysis reappears in every subsequent unit, from evaluating policy interventions in Unit 2 to analysing exchange rate movements in Unit 3. BSSS exam questions on microeconomics commonly require you to draw and annotate supply and demand diagrams showing shifts, surplus, and deadweight loss, so practise constructing these diagrams neatly and explaining each element in written responses.
Key Concepts
Supply and Demand Analysis
The interaction of supply and demand determines equilibrium price and quantity in competitive markets. Being able to illustrate shifts, identify new equilibria, and explain the factors behind supply and demand changes is the most frequently assessed skill in BSSS Economics.
Elasticity
Price elasticity measures how responsive quantity demanded or supplied is to price changes. Calculating elasticity, understanding its determinants, and predicting the revenue impact of price changes are essential quantitative skills that BSSS assessments regularly test.
Market Structures
Perfect competition, monopolistic competition, oligopoly, and monopoly produce different outcomes for consumers and producers. Comparing these structures on price, output, efficiency, and innovation develops the evaluative thinking that BSSS extended responses require.
Market Failure and Government Intervention
Externalities, public goods, and market power create situations where markets produce inefficient outcomes. Understanding why markets fail and evaluating the effectiveness of government interventions like taxes, subsidies, and regulation is a key analytical skill.
Common Mistakes to Avoid
- Confusing a movement along the demand curve with a shift of the demand curve in BSSS diagram questions — a price change causes movement along the curve, while changes in non-price factors shift the entire curve.
- Calculating elasticity without using percentage changes — ACT SSC examiners require the percentage change formula, not absolute changes, to ensure comparability across different goods and markets.
- Forgetting to identify the type of market failure before recommending a government intervention — BSSS evaluation criteria expect you to diagnose the specific failure (externality, public good, market power) first.
- Drawing supply and demand diagrams without labelling axes, curves and equilibrium — ACT Board of Senior Secondary Studies marking guides allocate specific marks for complete, correctly labelled diagrams.
Study Tips
- Draw supply and demand diagrams daily for different market scenarios until you can produce accurate shifts and label equilibria in under a minute.
- Build flashcards for microeconomic definitions and formulae, using spaced repetition to eliminate terminology confusion in assessments.
- Work through elasticity calculations with real product examples to connect mathematical concepts to tangible market situations.
- Create a comparison matrix for market structures covering price-setting power, barriers to entry, number of firms, and examples.
- Practise writing evaluations of government interventions that consider both intended outcomes and potential unintended consequences.
- Before your exam, work through the practice questions in this set at least twice using spaced repetition. Testing yourself repeatedly is the most effective revision strategy for long-term retention.
Related Topics
Frequently Asked Questions
What does ACT SSC Economics Unit 1 cover?
Unit 1 covers microeconomic foundations including supply and demand, market equilibrium, price elasticity, market structures (perfect competition, monopoly, oligopoly), consumer/producer surplus, market failure and externalities.
How many flashcards are in this set?
This free set contains 20 flashcards and 20 true/false quiz questions covering all key concepts in Unit 1, aligned to the BSSS Economics framework.
Are these flashcards aligned to the ACT curriculum?
Yes — every flashcard and quiz question is mapped to the BSSS framework for ACT SSC Economics Unit 1.
Last updated: March 2026 · 20 flashcards · 20 quiz questions · Content aligned to the BSSS Framework