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 a different 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 (XED) measures how the quantity demanded of one good responds when the price of a different good changes. The formula is the percentage change in quantity demanded of Good A divided by the percentage change in the price of Good B. Regular price elasticity of demand looks at one good talking to itself. Cross-price elasticity looks at two goods talking to each other.
The sign of the answer is the whole point. If XED is positive, the goods are substitutes. When Pepsi gets pricier, people buy more Coke, so Coke's quantity demanded moves in the same direction as Pepsi's price. If XED is negative, the goods are complements. When peanut butter gets pricier, people buy less jelly, so the two move in opposite directions. If XED is zero (or close to it), the goods are unrelated. The CED's essential knowledge for 2.5.A says it directly: elasticity can be measured for any determinant of demand, not just a good's own price, and economists use cross-price elasticity specifically to sort goods into substitutes and complements.
This term lives in Topic 2.5 (Other Elasticities) in Unit 2: Supply and Demand, and it hits all three learning objectives there. You need to define it (AP Micro 2.5.A), explain what its sign tells you about the relationship between two goods (AP Micro 2.5.B), and calculate it from a table or graph (AP Micro 2.5.C). It also reaches backward into Topic 2.1, where substitutes and complements first appear as determinants of demand. Cross-price elasticity is just that idea turned into a number. Instead of saying 'the price of a substitute rose, so demand shifts right,' you can now say exactly how much quantity demanded responds. On the exam, the sign interpretation (positive = substitutes, negative = complements) is one of the most reliable easy points in Unit 2.
Keep studying AP Microeconomics Unit 2
Substitutes and Complements (Unit 2)
Cross-price elasticity is the math version of substitutes and complements. In Topic 2.1 you learn that a substitute's price change shifts demand; in Topic 2.5 you learn to measure that relationship and read its sign. Positive XED means substitutes, negative means complements.
Price Elasticity of Demand (Unit 2)
Both use the same percentage-change setup, but price elasticity of demand compares a good's quantity to its own price, while cross-price compares it to a different good's price. Another big difference is that with own-price elasticity you care about the size of the number, but with cross-price you care about the sign.
Income Elasticity of Demand (Unit 2)
Income elasticity is the sibling concept in the same Topic 2.5, swapping 'price of another good' for 'consumer income.' Its sign sorts goods into normal (positive) and inferior (negative), just like cross-price sorts goods into substitutes and complements. Learn the two sign rules together and you cover most of Topic 2.5.
Cross-price elasticity shows up most often in multiple-choice questions, and they almost always test the sign. A classic stem gives you a number like -2 and asks what happens to demand for one good when the other's price rises (negative means complements, so demand falls). Another version flips it and asks what a positive XED implies about the relationship between the goods. You should also be ready to calculate it from a table using percentage changes, since 2.5.C is a calculation objective. On the free-response side, no released FRQ has asked for cross-price elasticity by name, but FRQs regularly build on the substitute/complement logic it formalizes, like the consumer-choice questions involving two goods (2019 Q2, 2025 Q3). The fastest exam move is memorizing the sign rule cold, then checking which good's quantity and which good's price the question is asking about.
Price elasticity of demand measures how a good's quantity demanded responds to its OWN price change, and since demand slopes downward, you mostly care about the magnitude (elastic vs. inelastic). Cross-price elasticity measures how a good's quantity demanded responds to ANOTHER good's price change, and the thing that matters is the sign. If an exam question mentions two different goods, you're in cross-price territory.
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, because a price increase for one raises quantity demanded of the other.
A negative cross-price elasticity means the two goods are complements, because a price increase for one lowers quantity demanded of the other.
A cross-price elasticity near zero means the goods are unrelated, so a price change in one barely affects demand for the other.
Unlike own-price elasticity, where the magnitude matters most, the sign of cross-price elasticity carries the main meaning on the AP exam.
Cross-price elasticity turns the substitutes-and-complements demand shifters from Topic 2.1 into a measurable number, which is exactly what LO 2.5.A asks you to do.
It's the percentage change in quantity demanded of one good divided by the percentage change in the price of a different good. Economists use it to determine whether two goods are substitutes or complements, which is essential knowledge under LO 2.5.A in Unit 2.
No. A negative cross-price elasticity means the goods are complements, like peanut butter and jelly. The normal/inferior distinction comes from income elasticity of demand, which uses income changes, not another good's price.
Price elasticity of demand compares a good's quantity demanded to its own price, while cross-price elasticity compares it to a different good's price. With cross-price, the sign tells the story (positive = substitutes, negative = complements); with own-price, you focus on whether the magnitude is greater or less than 1.
The goods are complements, and the relationship is strong. A 1% increase in the price of one good causes a 2% decrease in the quantity demanded of the other. This exact setup is a common AP multiple-choice question.
Yes. It's part of Topic 2.5 (Other Elasticities) in Unit 2, and you're expected to define it, interpret its sign, and calculate it from a table or graph under LOs 2.5.A through 2.5.C. It appears most often in multiple-choice questions testing the substitute/complement sign rule.