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Arc elasticity

  1. Feb 13, 2008 #1
    Price.............Quantity demanded..............total revenue.............Arc elasticity(elastic, unitary elastic,inelastic)
    10..........................50
    20..........................40
    30..........................30
    40..........................20
    50..........................10

    a)complete the total revenue column

    b)complete the arc elasticity for each price change and complete the elasticity column.

    Is there an equation I should use to find the total revenue?
    Can someone give a brief definition of what elastic, unitary elastic,inelastic mean.
    Thanks =)
     
  2. jcsd
  3. Feb 13, 2008 #2
    Total Revenue is just price times quantity.

    Can you give me a definition of "Arc" Elasticity? I've never heard of that term before. I'm just aware of Elasticity and want to know if Arc Elasticity is the same or something different.
     
  4. Feb 13, 2008 #3

    EnumaElish

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    Elastic means |elasticity| > 1, inelastic is |elasticity| < 1, and unitary elastic implies |elasticity| = 1.
     
  5. Feb 13, 2008 #4
    I'm not sure about the definition exactly, but it has to do with calculations involving....

    Q2-Q1 divide by 2
    Q2+Q1

    P2-P1 divide by 2
    P2+P1

    = %change
    % change (price)

    I'm not sure how to apply it to the numbers given.....
     
  6. Feb 14, 2008 #5
    I think it's just (% change in Q) / (% change in P) at all the various points.

    If I am correct then the first one would be -0.2

    I found this by calculating:
    % change in Q = (50 - 40) / 50 = 0.2
    % change in P = (10 - 20) / 10 = -1.0
     
  7. Feb 14, 2008 #6

    EnumaElish

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    A slightly different formula uses the midpoint as the "base" (i.e., the denominator) for each of % change in Q and % change in P:

    % change in Q = (50 - 40) / ((50+40)/2) = 10/45 = 0.22
    % change in P = (10 - 20) / ((10+20)/2) = -10/15 = -0.67

    arc elasticity = 0.22/-0.67 = -0.33 = -15/45.
     
    Last edited: Feb 14, 2008
  8. Feb 14, 2008 #7
    Thanks EnumaElish. I wasn't aware of that forumula.
     
  9. Feb 14, 2008 #8
    When I work through the calculations....is there only suppose to be 4 answers out of the five row column?
     
  10. Feb 14, 2008 #9
    Yes, because although there are 5 rows, there are only 4 changes.
     
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