--%>
Assignment Help - homework help

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 : Decline in equilibrium marginal revenue

    Declines within the equilibrium marginal revenue product of a firm’s workers are probably to follow the adjustments to: (1) increases in specific training. (2) decreases in the wage rate. (3) increases in the demand for output. (4) hikes in the

    		•
  • Q : Extra revenue from the extra output

    Extra revenue by the extra output produced from an additional unit of a resource is the marginal resource: (1) profit to the firm. (2) revenue product. (3) iso-utility curve. (4) resource cost. (5) productive value.

    Q : What are the important areas of

    What are the important areas of decision making?

    		•
  • Q : Find demand when Supply and Demand

    Suppose that the auto started began at the intersection of S0 and D0, and then Congress passed a main personal income tax cut. So, how will it affect the auto market?: (w) No change. (x) Demand shifts to D2. (y) Demand shifts to D

    		•
  • Q : Substitution Consequence on Labor Supply

    The substitution consequence on labor supply decision of an individual is more powerful than the income effect while: (1) higher wage rates result within increased hours worked. (2) cuts in wage rates yield discouraged worker effects. (3) the supply c

    		•
  • Q : Elasticity of the supply possible

    When Chandra and Morgan are identically skilled and every can decide the number of hours she works as: (w) the elasticity of Morgan’s labor supply exceeds the elasticity of supply for Chandra’s labor at each possible quantity of labor. (x) Morgan’s i

    		•
  • Q : Illustrate Screening by Asymmetric

    Insistence by a potential employer which job applicants submit a résumé is an illustration of: (1) networking. (2) screening. (3) signaling. (4) bragging. (5) qualifying. Please choose the right answer from above...I

    		•
  • Q : Consumer Interview Survey method of

    Explain the Consumer Interview Survey method of Demand Forecasting.

    		•
  • 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 : Value of marginal product and wage rate

    Profit maximizing competitive firms will competitively hire supplied labor up to that point where VMP is: (w) is at its maximum. (x) equals the wage rate. (y) minus MRP is minimized. (z) minus W is at its maximum.