Explain the Arc Method of Measurement of Elasticity
Explain the Arc Method of Measurement of Elasticity.
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Arc Method: the Geometric or point method is applicable only while there are minute (very small) variation in price and demand. But, Arc elasticity measures elasticity among two points. This is a measure of the average elasticity in words of Watson that Arc elasticity is the elasticity upon the mid-point of demand curve arc. Formulate measure elasticity is as illustrates below:
ED = ?Q/ ?P × (P1+P2)/ (Q1+Q2) or
(Change in D/ Average D) x (Average P/Change in P).
Here, ?Q= change in quantity
Q1= original quantity
P1 = original price
Q2= new quantity
P2 = New price and
?P= change in price.
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A purely competitive resource market shows that an individual firm faces a resource supply curve which is: (w) perfectly inelastic. (x) perfectly elastic. (y) downward sloping. (z) backward bending. Discover Q & A Leading Solution Library Avail More Than 1447533 Solved problems, classrooms assignments, textbook's solutions, for quick Downloads No hassle, Instant Access Start Discovering 18,76,764 1955163 Asked 3,689 Active Tutors 1447533 Questions Answered Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!! Submit Assignment
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