1. What is Arc Elasticity?

Arc elasticity measures the responsiveness of quantity demanded to price changes between two points on a demand curve. It provides a more accurate measure of elasticity over a range of prices compared to point elasticity.

2. How Does the Calculator Work?

The calculator uses the arc elasticity formula:

Where:

• \( E \) — Arc elasticity coefficient
• \( Q_1 \) — Initial quantity
• \( Q_2 \) — Final quantity
• \( P_1 \) — Initial price
• \( P_2 \) — Final price

Explanation: The formula calculates the percentage change in quantity divided by the percentage change in price between two points.

3. Importance of Elasticity Calculation

Details: Arc elasticity is crucial for businesses to understand how price changes affect demand, set optimal pricing strategies, and predict revenue changes.

4. Using the Calculator

Tips: Enter initial and final quantities and prices. All values must be positive numbers greater than zero.

5. Frequently Asked Questions (FAQ)

Q1: What does the elasticity value indicate?
A: |E| > 1 indicates elastic demand, |E| < 1 indicates inelastic demand, and |E| = 1 indicates unit elastic demand.

Q2: How is arc elasticity different from point elasticity?
A: Arc elasticity measures elasticity over a range, while point elasticity measures at a specific point on the demand curve.

Q3: When should I use arc elasticity?
A: Use arc elasticity when you have data for two different price and quantity points and want to measure elasticity over that range.

Q4: What are the limitations of arc elasticity?
A: It assumes a linear relationship between price and quantity over the measured range and may not be accurate for large price changes.

Q5: Can arc elasticity be negative?
A: Yes, elasticity is typically negative due to the inverse relationship between price and quantity demanded (law of demand).