Enter the demand and price of a good or service at two different points to calculate the arc elasticity.
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Arc Elasticity Formula
The following formula is used to calculate the arc elasticity.
- Where Ep is the arc elasticity
- Q is the quantity of good sold
- P is the price of the good at the same time
Arc Elasticity Definition
Arc elasticity is a measure of how the relationship between the demand and price of a good or service changes over time with a change in either of those metrics.
Arc Elasticity Example
How to calculate an arc elasticity?
- First, determine the quantity.
Calculate the initial and final quantities.
- Next, determine the price.
Calculate the initial and final price.
- Finally, calculate the arc elasticity.
Calculate the arc elasticity using the equation above.
Similar to price elasticity, arc elasticity measures the relationship with how the demand for a good or service changes with a change of price.