Microeconomics · Unit 2: Supply and Demand · 14 min read · Updated 2026-05-11
Other Elasticities — AP Microeconomics
AP Microeconomics · Unit 2: Supply and Demand · 14 min read
1. Overview of Other Elasticities★★☆☆☆⏱ 3 min
After covering price elasticity of demand (PED), AP Microeconomics CED Unit 2 Topic 2.7 introduces three additional elasticity measures that extend the core idea of responsiveness to other economic variables. This topic accounts for 1-4% of total AP exam score, appearing regularly in both multiple-choice and early free-response questions.
Elasticity generally measures the percentage change in one variable in response to a 1% change in another variable. The three elasticities covered here are YED, XED, and PES. Mastery of these concepts lets you categorize goods and predict market responses to shocks like income changes, input price changes, or related good price changes.
2. Income Elasticity of Demand (YED)★★★☆☆⏱ 4 min
YED = \frac{\% \Delta Q_d}{\% \Delta Y}
The sign of YED is the key to categorizing goods:
- Positive YED = demand rises with income → good is *normal*
- Negative YED = demand falls with income → good is *inferior*
For normal goods, magnitude adds further context: YED > 1 means the good is a luxury (demand responds more than proportionally to income), while 0 < YED < 1 means the good is a necessity (demand responds less than proportionally). The midpoint method is used for discrete percentage changes, same as for PED.
Exam tip: AP FRQ graders require you to explicitly link the sign of YED to your categorization to earn full points. Always write a 1-sentence justification connecting the sign to the good type, even if your calculation is correct.
3. Cross-Price Elasticity of Demand (XED)★★★☆☆⏱ 4 min
XED = \frac{\% \Delta Q_{d,A}}{\% \Delta P_B}
Like YED, the sign of XED determines the relationship between two goods:
- Positive XED: an increase in the price of B leads to an increase in quantity demanded of A → goods are substitutes
- Negative XED: an increase in the price of B leads to a decrease in quantity demanded of A → goods are complements
Larger absolute XED means a stronger relationship between the two goods.
Exam tip: On MCQ, you can eliminate incorrect options just by checking the expected sign of XED before doing any calculation. This saves time for more complex questions later in the section.
4. Price Elasticity of Supply (PES)★★★☆☆⏱ 3 min
PES = \frac{\% \Delta Q_s}{\% \Delta P}
Per the law of supply, price and quantity supplied move in the same direction, so PES is always non-negative (never negative). PES is categorized by magnitude:
- PES > 1 = elastic supply: quantity supplied responds more than proportionally to price
- 0 < PES < 1 = inelastic supply
- PES = 1 = unit elastic
- PES = 0 = perfectly inelastic: vertical supply curve (e.g. original fine art)
- PES = ∞ = perfectly elastic: horizontal supply curve (e.g. mass-produced goods with constant per-unit cost)
Key determinants that make supply more elastic: longer time horizons, easier input access, and better storage capacity.
Exam tip: When asked to explain what determines PES for a good, always link your answer to firms’ ability to adjust output to price changes. AP graders do not award full points for just listing factors without this connection.
5. Worked AP-Style Practice Problems★★★★☆⏱ 5 min
Common Pitfalls
Why: Students confuse the direction of change: inferior goods have higher demand when income is lower, so rising income reduces demand, leading to negative YED.
Why: Students mix up which variable responds to which, since cross-price involves two separate goods.
Why: Students mix up XED sign rules with YED sign rules, or misremember the direction of change for complements.
Why: Students get lazy and use the simpler calculation after repeated practice.
Why: Students confuse PES with PED and mix up the law of supply with the law of demand.