Arc Elasticity

A A A

DEFINITION

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.

INVESTOPEDIA EXPLAINS

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 demand for a ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, ...
  3. Price Elasticity Of Demand

    A measure of the relationship between a change in the quantity demanded of a ...
  4. Income Elasticity Of Demand

    A measure of the relationship between a change in the quantity demanded for ...
  5. Quantity Demanded

    A term used in economics to describe the total amount of goods or services that ...
  6. Subprime Meltdown

    The sharp increase in high-risk mortgages that went into default beginning in ...
  7. Event Risk

    1. The risk due to unforeseen events partaken by or associated with a company. ...
  8. Marginal Rate of Technical Substitution

    The rate at which one factor has to be decreased in order to retain the same ...
  9. Sharpe Ratio

    A ratio developed by Nobel laureate William F. Sharpe to measure risk-adjusted ...
  10. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that ...
Related Articles
  1. Why We Splurge When Times Are Good
    Personal Finance

    Why We Splurge When Times Are Good

  2. Economics Basics
    Economics

    Economics Basics

  3. Herding Tendencies Among Analysts
    Investing Basics

    Herding Tendencies Among Analysts

  4. Great Company Or Growing Industry?
    Markets

    Great Company Or Growing Industry?

  5. Understanding Leveraged Buyouts
    Fundamental Analysis

    Understanding Leveraged Buyouts

  6. How The Sarbanes-Oxley Era Affected ...
    Fundamental Analysis

    How The Sarbanes-Oxley Era Affected ...

  7. Where's The Market Headed Now?
    Fundamental Analysis

    Where's The Market Headed Now?

  8. Does Higher Risk Really Lead To Higher ...
    Active Trading

    Does Higher Risk Really Lead To Higher ...

  9. Invest Like Madoff - Without The Jail ...
    Options & Futures

    Invest Like Madoff - Without The Jail ...

  10. Bad Investor Behavior: Overemphasizing ...
    Investing

    Bad Investor Behavior: Overemphasizing ...

comments powered by Disqus
Hot Definitions
  1. XW

    A symbol used to signify that a security is trading ex-warrant. XW is one of many alphabetic qualifiers that act as a shorthand to tell investors key information about a specific security in a stock quote. These qualifiers should not be confused with ticker symbols, some of which, like qualifiers, are just one or two letters.
  2. Quanto Swap

    A swap with varying combinations of interest rate, currency and equity swap features, where payments are based on the movement of two different countries' interest rates. This is also referred to as a differential or "diff" swap.
  3. Genuine Progress Indicator - GPI

    A metric used to measure the economic growth of a country. It is often considered as a replacement to the more well known gross domestic product (GDP) economic indicator. The GPI indicator takes everything the GDP uses into account, but also adds other figures that represent the cost of the negative effects related to economic activity (such as the cost of crime, cost of ozone depletion and cost of resource depletion, among others).
  4. Accelerated Share Repurchase - ASR

    A specific method by which corporations can repurchase outstanding shares of their stock. The accelerated share repurchase (ASR) is usually accomplished by the corporation purchasing shares of its stock from an investment bank. The investment bank borrows the shares from clients or share lenders and sells them to the company.
  5. Microeconomic Pricing Model

    A model of the way prices are set within a market for a given good. According to this model, prices are set based on the balance of supply and demand in the market. In general, profit incentives are said to resemble an "invisible hand" that guides competing participants to an equilibrium price. The demand curve in this model is determined by consumers attempting to maximize their utility, given their budget.
  6. Centralized Market

    A financial market structure that consists of having all orders routed to one central exchange with no other competing market. The quoted prices of the various securities listed on the exchange represent the only price that is available to investors seeking to buy or sell the specific asset.
Trading Center