Unit 2, Chapter 20
Mr. Maurer
AP Economics
Name: _______________________________
Date: _____________________
Chapter 20, Problem Set #2
Price Elasticity of Supply, Cross Elasticity, and Income Elasticity of Demand
1. In your own words, explain the concept of price elasticity of supply.
2. What factors determine price elasticity of supply?
3. Explain why price elasticity of supply is different over the market period, the short run, and the
long run.
4. Explain, in your own words, the idea of cross elasticity of demand. What concept, that we have
studied before, is this closely related to?
5. Suppose a 20% increase in the price of apples leads to a 20% increase the quantity of bananas
demanded by consumers. Calculate the cross elasticity of demand for apples and bananas? Are
apples and bananas substitute goods, complementary goods, or independent goods?
6. Suppose a 20% increase in the price of TVs leads to a 10% decrease the quantity of DVDs
demanded by consumers. Calculate the cross elasticity of demand for TVs and DVDs? Are TVs and
DVDs substitute goods, complementary goods, or independent goods?
7. Explain the idea of income elasticity of demand. If the income elasticity of demand coefficient is
positive (that means as income went up, quantity demanded went up), what type of good are we
talking about?