Which of the following formulas is used to calculate the arc elasticity of demand? A) Arc elasticity of demand = [(Q₂ - Q₁)/(Q₂/2)]/[(P₂ - P₁)/(P₂/2)] B) Arc elasticity of demand = [(Q₂ + Q₁)/(Q₂/2)]/[(P₂ + P₁)/(P₂/2)] C) Arc elasticity of demand = [(Q₂ - Q₁)/(Q₂ + Q₁)/2]/[(P₂ -P₁)/(P₂ + P₁)/2] D) Arc elasticity of demand = [(Q₁ - Q₂)/(Q₂ + Q1)]/[(P₁- P₂)/(P₂ + P₁)]

Question

Quizplus · Accepted Answer

Arc elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price, using the average quantity and price as the base. The formula in choice C correctly represents this calculation by taking the difference in quantities and prices between two points and dividing each by the average of those quantities and prices, respectively.

Which of the Following Formulas Is Used to Calculate the Arc