Given to following two points on a supply curve (P = 10, Q = 5; and P = 12, Q = 8), what is the approximate arc elasticity?

Question

Quizplus · Accepted Answer

The formula for arc elasticity is:

(arc elasticity) = [(Q2 - Q1) / (Q2 + Q1) / 2] / [(P2 - P1) / (P2 + P1) / 2]

Plugging in the values from the two points given, we get:

(arc elasticity) = [(8 - 5) / (8 + 5) / 2] / [(12 - 10) / (12 + 10) / 2]
(arc elasticity) = [0.15 / 0.1]
(arc elasticity) = 1.5

Therefore, the approximate arc elasticity is 1.5, which is closest to option B (2.5).

Given to Following Two Points on a Supply Curve (P