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Milan Vaishnav
Milan Vaishnav, Financial Advisor
Category: Finance
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Experience:  Technical Analyst in Financial Markets -- Experience of more than 10 years in consulting
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what is the arc method of elasticity

Customer Question

what is the arc method of elasticity?
Submitted: 6 years ago.
Category: Finance
Expert:  Milan Vaishnav replied 6 years ago.

Dear Friend,

 

The arc elasticity of demand refers to the relationship between changes in price and the subsequent change in quantity demanded.

 

graphic

 

Qo is the initial quantity demanded.

Q1 is the new quantity demanded.

Po is the initial price.

P1 is the new pric

 

The arc elasticity formula is used if the change in price is relatively large. It is more accurate a measure of elasticity than simple ''price elasticity''.

 

If the arc or price elasticity of demand is greater than 1, demand is said to be elastic. The demand curve has a ''flat'' appearance.

 

If the arc or price elasticity of demand is less than 1, demand is said to be inelastic. The demand curve has a ''steep'' appearance.

 

 

Reference:

 

http://www.ecoteacher.asn.au/Demand/elastsli/e16.htm

 

I hope the above helps...

Regards,



Edited by Milan Vaishnav on 9/22/2009 at 6:32 AM EST
Milan Vaishnav, Financial Advisor
Category: Finance
Satisfied Customers: 972
Experience: Technical Analyst in Financial Markets -- Experience of more than 10 years in consulting
Milan Vaishnav and other Finance Specialists are ready to help you
Customer: replied 6 years ago.
i little more detail
Expert:  Milan Vaishnav replied 6 years ago.

Dear Friend,

 

I have explained the Arc Method of elasticity. the above answer covers everything. What more do you need..?

 

Regards,