Arc Elasticity

What is 'Arc Elasticity'

Arc elasticity is the elasticity of one variable with respect to another between two given points. It is used when there is no general function to define the relationship of the two variables. Arc elasticity is also defined as the elasticity between two points on a curve.

BREAKING DOWN 'Arc Elasticity'

Price elasticity of demand is the percentage change in quantity demanded for a unit change in price. Arc elasticity computes the percentage change between two points in relation to the average of the two prices and the average of the two quantities, rather than the change from one point to the next. This provides the average elasticity for the arc of the curve between the two points. Hence, the term "arc elasticity."

RELATED TERMS
  1. Demand Elasticity

    In economics, the demand elasticity refers to how sensitive the ...
  2. Price Elasticity Of Demand

    A measure of the relationship between a change in the quantity ...
  3. Elastic

    An economic term referring to the change in behavior that buyers ...
  4. Elasticity

    A measure of a variable's sensitivity to a change in another ...
  5. Cross Elasticity Of Demand

    An economic concept that measures the responsiveness in the quantity ...
  6. Income Elasticity Of Demand

    A measure of the relationship between a change in the quantity ...
Related Articles
  1. Markets

    What's Demand Elasticity?

    Demand elasticity is the measure of how demand changes as other factors change. Demand elasticity is often referred to as price elasticity of demand because price is most often the factor used ...
  2. Personal Finance

    How Demand Changes With a Variation in Price

    What is demand elasticity?
  3. Markets

    What Is Elasticity?

    Elasticity measures the relationship between a good and its price based on consumer demand, consumer income, and its available supply. Learn the basics about it here.
  4. Markets

    Price Elasticity Of Demand

    Price elasticity of demand describes how changes in the cost of a product or service affect a company's revenue.
  5. Markets

    Calculating Income Elasticity of Demand

    Income elasticity of demand is a measure of how consumer demand changes when income changes.
  6. Markets

    Calculating Cross Elasticity of Demand

    Cross elasticity of demand measures the quantity demanded of one good in response to a change in price of another.
  7. Markets

    Why We Splurge When Times Are Good

    The concept of elasticity of demand is part of every purchase you make. Find out how it works.
  8. Markets

    What Does Inferior Good Mean?

    The term “inferior good” does not describe a lack of quality, but rather, is an economic term used when discussing elasticity of demand for a good.
  9. Markets

    Macroeconomics: Supply, Demand and Elasticity

    By Stephen Simpson DemandDemand is driven by utility – the pleasure or satisfaction that a consumer obtains from consuming a good or service. Total utility is a function of the quantities ...
  10. Markets

    What Does Inelastic Mean?

    The supply and demand for an inelastic good or service is not drastically affected when its price changes.
RELATED FAQS
  1. How many years can structural unemployment last?

    Understand the two different types of price elasticities, and learn how each one affects the stock purchasing decision of ... Read Answer >>
  2. Under what circumstances might price elasticity significantly change?

    Discover under what circumstances price elasticity of demand might change and why it is such an important economic concept ... Read Answer >>
  3. How does price elasticity change in relation to supply and demand?

    Learn about how variations in price elasticity affect the supply and demand curves and what factors cause differences in ... Read Answer >>
  4. What are some examples of demand elasticity other than price elasticity of demand?

    Learn about income elasticity of demand and cross elasticity of demand and how to interpret these two measures of demand ... Read Answer >>
  5. If a particular good's price elasticity is high, does this mean the supplier should ...

    Learn the basics of price elasticity of supply and demand and how each influences a company's production of goods and pricing ... Read Answer >>
  6. What types of consumer goods demonstrate the price elasticity of demand?

    Learn how the price elasticity of demand is more sensitive for some types of consumer goods than others, and see what factors ... Read Answer >>
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center