--%>

Explain the Geometric Method of Measurement of Elasticity

Explain the Geometric Method of Measurement of Elasticity.

E

Expert

Verified

Geometric or Point method: It developed by Marshall. It is used as a measure of the change in quantity demanded in way to a very small change in the price. Under this method we can measure the elasticity at any of given point on a straight line demand curve using the given formula as:
ED = Lower section of the Demand curve/Upper section of Demand curve.

880_Geometric Method.png

In the given diagram, AB is a straight line demand curve along with P as its middle point. Further this is assumed as AB is 6 cm. so,

ED = PB/PA=3/3=1; at point P

ED = P1B/P1A= 4.5/1.5= 3=>1; at point P1

ED = AB/A= 6/0= α (infinity); at point A

ED = P2B/P2A = 1.5/4.5 = 1/3 = <1; at point P2

ED = B/BA = 0/6 = 0; at point B

   Related Questions in Managerial Economics

  • Q : Illustrates opinion of Samuelson to

    Illustrates the opinion of Samuelson for explaining Law of Demand?

  • Q : Illustrates the pricing policy and

    Illustrates the pricing policy and practices?

  • Q : Occupational Crowding in Wage

    Disadvantaged groups have historically been pressured toward low wage jobs in a procedure termed as: (1) occupational crowding. (2) labor staggering. (3) systemic discrimination. (4) reverse favoritism. (5) nepotism.

    Q : Persuade competitors by cartel member

    When a cartel member can persuade competitors to keep the cartel price but secretly give a discount price to certain customers, profits will rise: (w) for all members of the cartel. (x) since price cuts are only given to assigned customers. (y) as a result of an incre

  • Q : Trade types of cycle distinguished by

    What are the trade types of cycle distinguished by Schumpeter?

  • Q : Explain about the signaling Signaling :

    Signaling: (w) attempts to finesse adverse selection. (x) involves behavior by agents to communicate special qualifications which will elicit the offer of a contract from a principal. (y) refers to potential employees obtaining skills, education or ex

  • Q : Explain about cartel in economics A

    A cartel is: (a) an oligopoly model which relies on interdependence. (b) an organization of oligopolist firms behaving like a monopoly. (c) an organization of firms that jointly make decisions. (d) All of the above.

    Q : Explain marginal I/O relationship in

    Explain the marginal input-output relationship in short run and long run.

  • Q : Which progress illustration was Pilgrims

    Agricultural productivity within Massachusetts Bay Colony increased while Native Americans showed Pilgrims how crops grow faster and better when rotten fish are dropped in along with newly-planted seeds. This new knowledge for the Pilgrims was an illustration of: (1)

  • Q : States the implicit cost concept briefly

    States the implicit cost concept briefly.