Arc elasticity

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Updated: Aug 20, 2021

Arc elasticity

This measure is called an are elastieity measurement because it is taking finite changes in X and Y, and so, ifwe imagine the relationship between X and Ybeing portrayed as a curve between two axes, we are measuring the proportionate change in Y as a result of a change in X over an are of this curve. The defects of this measure are that the value of the elasticity may depend on the size of the change in X taken (which is essentially arbitrary), and will certainly differ according to which of the three methods of measuring the proportionate change is chosen. These defects are avoided by the second measure: Point elasticity.



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James Knight
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James is the Editor of Education for Invezz, where he covers topics from across the financial world, from the stock market, to cryptocurrency, to macroeconomic markets.... read more.