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AP® Microeconomics · Unit 2 · Topic 2.3

Price Elasticity of Demand: Topic Checklist (Microeconomics 2.3)

Specific “I can…” statements for price elasticity of demand, each linked to the guide section and practice question that shows whether you can really do it.

Work through the list without notes. If you cannot do a statement, follow its link, then come back. Guide = study guide; Practice = practice questions.

Understanding

  • I can define price elasticity of demand and explain why it uses percentage changes rather than raw changes. (Guide: “What elasticity measures”)
  • I can classify demand as elastic, inelastic or unit elastic from the size of |PED|, and explain that the label applies to a price range. (Guide: “Elastic, inelastic and unit elastic”; Practice Q4)
  • I can describe and draw perfectly elastic and perfectly inelastic demand curves. (Guide: Figure 1; Practice Q7(c) for the perfectly inelastic case)
  • I can explain how substitutes, necessity, share of income, time and market definition affect PED. (Guide: “What makes demand more or less elastic”; Practice Q2, Q6)

Calculation and graphing

  • I can calculate PED with the midpoint method from a table, showing both percentage changes. (Guide: Worked example 1; Practice Q1, Q4, Q6)
  • I can calculate PED from given percentage changes, and use a known PED to predict a percentage change in quantity. (Guide: Worked example 2)
  • I can calculate total revenue before and after a price change. (Practice Q4, Q6)
  • I can draw a labelled straight-line demand curve and mark its unit-elastic midpoint and its elastic and inelastic sections. (Guide: Figure 2; Practice Q5)
  • I can show total revenue as a rectangle under the demand curve. (Practice Q5)

Reasoning

  • I can explain why slope is not elasticity, using numbers from a straight-line demand curve. (Guide: “Slope is not elasticity”; Practice Q5, Q7)
  • I can use the total revenue test in both directions: predict TR from elasticity, and infer elasticity from what happened to TR. (Guide: “Elasticity and total revenue”; Practice Q3)
  • I can advise a seller whether to raise or cut price to increase revenue. (Guide: Figure 3; Practice Q7)
  • I can explain why demand usually becomes more elastic over time. (Practice Q6)

All ticked? Move on to Topic 2.4, Price Elasticity of Supply, or return to the course roadmap.

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