Cross-price elasticity of demand is the percentage change in the quantity demanded of one good divided by the percentage change in the price of another good. A positive value means the goods are substitutes; a negative value means they are complements (AP Micro Topic 2.5).
Cross-price elasticity of demand answers one question: when the price of Good B changes, what happens to how much of Good A people buy? You calculate it as the percentage change in quantity demanded of Good A divided by the percentage change in the price of Good B.
The number itself matters less than its sign. If cross-price elasticity is positive, the goods are substitutes (Pepsi gets pricier, people buy more Coke). If it's negative, the goods are complements (hot dogs get pricier, people buy fewer hot dog buns). If it's close to zero, the goods are basically unrelated. Think of it as a relationship detector. Price elasticity of demand tells you about one good by itself; cross-price elasticity tells you how two goods are connected. The size of the number tells you how strong that connection is, so a large positive value means the goods are very close substitutes.
Cross-price elasticity lives in Topic 2.5 (Other Elasticities) in Unit 2: Supply and Demand. It directly supports three learning objectives. AP Micro 2.5.A asks you to define elasticity measures, and the essential knowledge spells it out: economists use cross-price elasticity to determine whether goods are substitutes or complements. AP Micro 2.5.B asks you to explain these measures, and AP Micro 2.5.C asks you to calculate them from a table or graph. This is also where Unit 2 ties together. Substitutes and complements are demand shifters from Topic 2.1, and cross-price elasticity is the tool that puts a number on those relationships. When a question says "the cross-price elasticity between X and Y is −2," it's quietly telling you what happens to the demand curve for X when Y's price moves.
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Substitutes and Complements (Unit 2)
Cross-price elasticity is the math behind these demand shifters. A positive sign confirms substitutes, a negative sign confirms complements, and the size of the number tells you how tightly the two goods are linked.
Price Elasticity of Demand (Unit 2)
Both use the same percentage-change formula, but PED compares a good's quantity to its own price, while cross-price compares it to a different good's price. PED's sign is always negative (so we often ignore it), but in cross-price the sign is the whole point.
Income Elasticity of Demand (Unit 2)
Its sibling in Topic 2.5. Income elasticity sorts goods into normal (positive) versus inferior (negative), the same sign-reading skill you use with cross-price. Exams love mixing the two, so check whether the denominator is income or another good's price.
Demand Curve Shifts (Unit 2)
A cross-price elasticity number predicts a shift, not a movement along the curve. If goods A and B are substitutes and B's price rises, the entire demand curve for A shifts right. Cross-price elasticity quantifies how big that shift is.
Cross-price elasticity is mostly multiple-choice territory. Typical stems give you a value (or two prices and two quantities) and ask you to identify the relationship. For example, practice questions ask what a positive and relatively large cross-price elasticity implies (the goods are strong substitutes, so a price hike on one sends buyers flocking to the other) or what a negative value means (the goods are complements). Be ready to do three things: calculate the value from a table per AP Micro 2.5.C, interpret the sign, and predict the demand-curve shift that follows. No released FRQ has asked you to compute cross-price elasticity directly, but FRQs like 2019 Q2 and 2025 Q3 deal with consumers choosing between two goods, and understanding how goods relate as substitutes or complements sharpens that whole family of questions. Watch for trap answers that confuse the sign convention or swap in income elasticity logic.
Price elasticity of demand (PED) measures how a good's quantity demanded responds to its OWN price; cross-price elasticity measures how it responds to ANOTHER good's price. With PED, the sign is always negative (law of demand), so you focus on the magnitude (elastic vs inelastic). With cross-price elasticity, the sign carries the meaning: positive means substitutes, negative means complements. If an MCQ gives you a negative elasticity, check which formula is in play before you answer.
Cross-price elasticity of demand equals the percentage change in quantity demanded of one good divided by the percentage change in the price of another good.
A positive cross-price elasticity means the two goods are substitutes, like Coke and Pepsi.
A negative cross-price elasticity means the two goods are complements, like hot dogs and buns.
A cross-price elasticity close to zero means the goods are unrelated.
The larger the absolute value, the stronger the relationship, so a large positive number means very close substitutes.
A change in one good's price shifts the entire demand curve for its substitute or complement; cross-price elasticity measures that connection.
It's the percentage change in quantity demanded of one good divided by the percentage change in the price of another good. It appears in Topic 2.5 of Unit 2, and economists use it to classify goods as substitutes or complements.
No, it's the opposite. Negative means complements (the goods are bought together, so a price increase on one reduces demand for the other). Positive means substitutes. This sign flip is one of the most common MCQ traps in Unit 2.
Price elasticity of demand compares a good's quantity demanded to its own price and is always negative, so only magnitude matters. Cross-price elasticity uses another good's price, and its sign is the answer: positive for substitutes, negative for complements.
Divide the percentage change in quantity demanded of Good A by the percentage change in the price of Good B, per learning objective AP Micro 2.5.C. For example, if Good B's price rises 10% and Good A's quantity demanded rises 20%, cross-price elasticity is +2, meaning strong substitutes.
The goods are very close substitutes. A price increase on one good sends a big chunk of consumers to the other, so the second good's demand curve shifts noticeably to the right. Practice questions often ask exactly this.