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This is used in the absence of any general function to define the relationship between two variables. For this, one has to calculate the averages of initial and final figures of price and quantity demanded.Īrc elasticity is the elasticity of a variable in relation to another between two sets of points. Have you ever wondered, how can we measure elasticity between two points on the same demand curve? So, we could do this through arc elasticity. In conclusion, as we move from S towards s, elasticity keeps on increasing.Īlso Read: Difference Between Demand and Quantity Demanded What is Arc Elasticity? at the beginning of the segment, elasticity equals infinity. end of the segment, elasticity equals zero. One must note that, at the corner point, i.e. to the right of the midpoint, elasticity will be less than unity. Whilst, at lower points on the same curve, i.e. to the left of the mid-point, elasticity will be greater than unity. However, at the higher points on the same curve, i.e. With the above graph we have understood that at the mid-point on the linear demand curve, elasticity equals unity. One can use the formula given hereunder to measure elasticity:Įlasticity at different points on the Demand Curve This concept is important when the change in price and the resultant change in demand is infinitesimally small. Practically, point elasticity is a measure of proportionate change in quantity demanded as a result of a very small proportionate change in the price. In geometry, the term ‘point’ refers to something that occupies no space and dimensions. It measures the demand at any point of the curve when the demand curve is linear.Īs per this method, the price elasticity of demand of various points on the demand curve shall be different. Geometric measurement of price elasticity is possible through a method called the point elasticity method. Point Elasticity measures elasticity at a finite point of the demand curve.Īrc Elasticity measures elasticity at the central point of an arc between a pair of two points on the demand curve. In this post, we will discuss the differences between point and arc elasticity Content: Point Vs Arc Elasticity

Outlay method, or Total expenditure method.Īlso Read: Difference Between Elastic and Inelastic Demand.Further, when it comes to the measurement of elasticity of demand, there are three methods through which we can calculate elasticity. This is because, due to their inverse relationship, it gives a positive value. When we talk about elasticity of demand we generally refer to price elasticity of demand. In other words, it is the rate of change in the quantity demanded with respect to the rate of change in price. What is Elasticity?Įlasticity is the responsiveness of the quantity demanded, as a result of a change in price. In such a case we use the arc elasticity method, wherein we use an average of both initial and final price. But, what to do when the change is substantial? One can neither take the initial price nor the final price as a base.