Arc Elasticity of Demand  

Definition: Arc elasticity of demand measures the elasticity at the midpoint between two points on a curve.

Formula for Average of 'midpoint' elasticity of demand

(change in Q / average Q )
---------------------------
(change in P / average P)

or:

arc elasticity

Arc elasticity measures elasticity at the mid point between the two selected points:

 

Example of Arc Elasticity of Demand:

 

PED = % change Q.D/ % change in price

The % change in quantity is 20 / 30 = - 0.667

The % change in price is 2p / 11 = 0.18

Therefore PED = -0.667 / 0.18 = - 3.7

 

Example of Difference between Point and Arc Elasticity A to B

Demand_curve-wiki

Point elasticity A to B

Arc (Mid Point) Elasticity A to B

(or ( 3.5/250)  * 100/1 = - 1.4)

 

 

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