Calculate price elasticity of demand and supply with the midpoint formula, apply the total revenue test, and work through cross-price and income elasticity. 15 problems, answer key at the bottom.
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AP Microeconomics — Price Elasticity Calculations
15 Problems
1. Price rises from $10 to $12, and quantity demanded falls from 100 to 80 units. Calculate price elasticity of demand using the midpoint formula, and classify it.
2. Price falls from $8 to $6, and quantity demanded rises from 50 to 70 units. Calculate Ed and classify it.
3. Price rises from $5.00 to $5.50, and quantity demanded falls from 200 to 195 units. Calculate Ed and classify it.
4. A good has Ed = 0.4. Is demand elastic, inelastic, or unit elastic?
5. A good has Ed = 2.5. Is demand elastic, inelastic, or unit elastic?
6. If price elasticity of demand is exactly 1, what is this called, and what happens to total revenue for a small price change?
7. A firm raises its price and total revenue increases. What does this tell you about the price elasticity of demand for this good?
8. A firm lowers its price and total revenue increases. What does this tell you about elasticity?
9. List three determinants that make demand for a good MORE price-elastic.
10. Insulin for diabetics has very inelastic demand. Explain why, using one determinant of elasticity.
11. Price rises from $4 to $5, and quantity supplied rises from 100 to 140 units. Calculate the price elasticity of supply and classify it.
12. A good has a price elasticity of supply of 0.3. Is supply elastic or inelastic? What does this suggest about how quickly producers can adjust output?
13. Cross-price elasticity of demand for Good X with respect to Good Y is +2.1. Are X and Y substitutes or complements?
14. Cross-price elasticity between coffee and cream is -0.8. Are they substitutes or complements?
15. Income elasticity of demand for a good is -0.5. What type of good is this, and why?
The fastest points on the real exam come from the total revenue test, not the formula — if you’re ever given a price change and a revenue outcome (not raw quantities), you can classify elasticity in one line without calculating anything: elastic when price and revenue move opposite directions, inelastic when they move together.
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