•

# Elasticity of Demand, Supply, Cross Price, and More

2012 Final Elasticity Project

Focus Question:   How quickly will quantity demanded and quantity supplied respond to a change in prices?

Class Notes
Krugman Surplus Power Point Notes

Former AP Free Response Questions

2019 Set #1 Question #2
2019 Set #2 Question #2
2016 Question #1
2014 Question #3
2012 Question #2
2010 (Form B) Question #3
2009 Question #2
2006 (Form B) Question #2
2005 Question #2
2004 (Form B) Questions # 2 & 3
2003 Question #2

Key Content
• perfectly elastic
• elastic
• unit elastic
• inelastic
• perfectly inelastic
• signs of elasticity- how expensive is the g/s, is it a need or want?,how many substitutes what happend to TR when price changes?
• substitution and income effects
• Factors of Price Elasticity of Demand: Close substitutes, need or want, % of income
• Factors of Price Elasticity of Supply: Availability of Inputs, Time
• cross- price elasticity of demand=% change in quantity of good A demanded/ % change in price of good B
Formulas (remember to ignore the negative sign when calculating elasticity)
• % change in quantity demanded= change in q demanded/original q demanded x 100
•
• % change in price= change in price / initial price x 100
•

Price Elasticity of demand = % change in quantity demanded/ % change in price

•  Midpoint Method of price elasticity of demand equals (Q2- Q1)/(Q1 +Q2)/2 DIVIDED BY (P2- P1)/(P1 +P2)/2

• see cross price of elasticity above; know why businesses measure this
•
• Income Elasticity of Demand= % change in quantity demanded/ % change in income
•
• Price Elasticity of supply= % change in quantity supplied/ % change in price
If the elasticity coefficient is less than 1 then the demand is relatively inelastic
If the elasticity coefficient is greater than 1 then the demand is relatively elastic
• If the elasticity coefficient is equal to one then the demand is unit elastic