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    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
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    • % change in price= change in price / initial price x 100
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    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
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    • Income Elasticity of Demand= % change in quantity demanded/ % change in income
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    • 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

     

    Helpful Websites
     
    Khan Academy Consumer Surplus on Youtube http://www.youtube.com/watch?v=_6kwhF6hoqQ 
     
     
     
    A New York Times Blog on the impact an increase on the price of soda has on the demand for soda  http://economix.blogs.nytimes.com/tag/price-elasticity/
     
     
     
     
     
     
Last Modified on October 29, 2020