A Primer on Arc Elasticity

One of the problems with the standard formulas for elasticity that are in many freshman texts is the elasticity figure you come up with is different depending on what you use as the start point and what you use as the endpoint. An example will help illustrate this. When we looked at Price Elasticity of Demand, we calculated the price elasticity of demand when the price went from $9 to $10 and demand went from 150 to 110 was 2.4005. But what if we calculated what the price elasticity of demand when we started at $10 and went to $9? So wed have: Price(OLD)10Price(NEW)9QDemand(OLD)110QDemand(NEW)150 First wed calculate the percentage change in quantity demanded: [QDemand(NEW) - QDemand(OLD)] / QDemand(OLD) By filling in the values we wrote down, we get: [150 - 110] / 110 (40/110) 0.3636 (Again we leave this in decimal form) Then wed calculate the percentage change in price: [Price(NEW) - Price(OLD)] / Price(OLD) By filling in the values we wrote down, we get: [9 - 10] / 10 (-1/10) -0.1 We then use these figures to calculate the price-elasticity of demand: PEoD (% Change in Quantity Demanded)/(% Change in Price) We can now fill in the two percentages in this equation using the figures we calculated earlier. PEoD (0.3636)/(-0.1) -3.636 When calculating a price elasticity, we drop the negative sign, so our final value is 3.636. Obviously, 3.6 is a lot different from 2.4, so we see that this way of measuring price elasticity is quite sensitive to which of your two points you choose as your new point, and which you choose as your old point. Arc elasticities are a way of removing this problem. When calculating Arc Elasticities, the basic relationships stay the same. So when were calculating Price Elasticity of Demand we still use the basic formula: PEoD (% Change in Quantity Demanded)/(% Change in Price) However, how we calculate the percentage changes differ. Before when we calculated Price Elasticity of Demand, Price Elasticity of Supply,  Income Elasticity of Demand, or Cross-Price Elasticity of Demand wed calculate the percentage change in Quantity Demand the following way: [QDemand(NEW) - QDemand(OLD)] / QDemand(OLD) To calculate an arc-elasticity, we use the following formula: [[QDemand(NEW) - QDemand(OLD)] / [QDemand(OLD) QDemand(NEW)]]*2 This formula takes an average of the old quantity demanded and the new quantity demanded on the denominator. By doing so, we will get the same answer (in absolute terms) by choosing $9 as old and $10 as new, as we would choosing $10 as old and $9 as new. When we use arc elasticities we do not need to worry about which point is the starting point and which point is the ending point. This benefit comes at the cost of a more difficult calculation. If we take the example with: Price(OLD)9Price(NEW)10QDemand(OLD)150QDemand(NEW)110 We will get a percentage change of: [[QDemand(NEW) - QDemand(OLD)] / [QDemand(OLD) QDemand(NEW)]]*2 [[110 - 150] / [150 110]]*2 [[-40]/[260]]*2 -0.1538 * 2 -0.3707 So we get a percentage change of -0.3707 (or -37% in percentage terms). If we swap the old and new values for old and new, the denominator will be the same, but we will get 40 in the numerator instead, giving us an answer of the 0.3707. When we calculate the percentage change in price, we will get the same values except one will be positive and the other negative. When we calculate our final answer, we will see that the elasticities will be the same and have the same sign. To conclude this piece, Ill include the formulas so you can calculate the arc versions of price elasticity of demand, price elasticity of supply, income elasticity, and cross-price demand elasticity. We recommend calculating each of the measures using the step-by-step fashion we detail in the previous articles. New Formulas: Arc Price Elasticity of Demand PEoD (% Change in Quantity Demanded)/(% Change in Price) (% Change in Quantity Demanded) [[QDemand(NEW) - QDemand(OLD)] / [QDemand(OLD) QDemand(NEW)]] *2] (% Change in Price) [[Price(NEW) - Price(OLD)] / [Price(OLD) Price(NEW)]] *2] New Formulas: Arc Price Elasticity of Supply PEoS (% Change in Quantity Supplied)/(% Change in Price) (% Change in Quantity Supplied) [[QSupply(NEW) - QSupply(OLD)] / [QSupply(OLD) QSupply(NEW)]] *2] (% Change in Price) [[Price(NEW) - Price(OLD)] / [Price(OLD) Price(NEW)]] *2] New Formulas: Arc Income Elasticity of Demand PEoD (% Change in Quantity Demanded)/(% Change in Income) (% Change in Quantity Demanded) [[QDemand(NEW) - QDemand(OLD)] / [QDemand(OLD) QDemand(NEW)]] *2] (% Change in Income) [[Income(NEW) - Income(OLD)] / [Income(OLD) Income(NEW)]] *2] New Formulas: Arc Cross-Price Elasticity of Demand of Good X PEoD (% Change in Quantity Demanded of X)/(% Change in Price of Y) (% Change in Quantity Demanded) [[QDemand(NEW) - QDemand(OLD)] / [QDemand(OLD) QDemand(NEW)]] *2] (% Change in Price) [[Price(NEW) - Price(OLD)] / [Price(OLD) Price(NEW)]] *2] Notes and Conclusion So now you can calculate elasticity using a simple formula as well as using the arc formula. In a future article, we will look at using calculus to compute elasticities. If youd like to ask a question about the elasticities, microeconomics, macroeconomics or any other topic or comment on this story, please use the feedback form.

An Excellent Example of Individualism - 874 Words

An Excellent Example of Individualism Throughout history, there have been many people who have had to struggle and fight for individualism. Although for some of those people, they have been able to accomplish the seemingly impossible tasks needed to obtain their own. For example, the Greensboro Four, who non-violently protested against racial segregation, or Malcolm X, a black-right’s activist who believed in a brotherhood between races. Although one of the more historical icons that showed individualism is Martin Luther King Jr., a civil rights activist who peacefully fought for african-american rights as equals. Though he is not just remembered for his â€Å"I Have A Dream† speech, but for his fight for individualism, and for all humanity both present and future. But Martin Luther King Jr. didn’t simply wish or snap his fingers to win the fight for those rights that belong to him and his brethren. Unfortunately like others before him, M.L.K. had to struggle and use chief elements he found necessary for the individualism that he and so many others deserved. In order for a person to become an individual they would require chief elements that were demonstrated by Martin Luther King Jr.: Civil disobedience, others who share the same ideas of beliefs, self-reliance and peaceful tactics on how to achieve the desired goals. Martin Luther King Jr., a civil rights activist and an excellent example of what it means to be an individual. Unfortunately there are some people who believeShow MoreRelatedTranscendentalism Essay1051 Words   |  5 PagesEmerson and Transcendentalism as a whole believed in individualism through the power of the oversoul. This leads to the topic of whether Dead Poets Society represents transcendentalist ideals. Although the Dead Poets Society fails to include the importance of an oversoul that connects every living thing to nature, the movie does represent transcendentalist ideals with the representations of the importance of nature and the importance of individualism. First off, the most obvious transcendentalist idealRead MoreAn Instrument For The Discovery Of Truth1301 Words   |  6 PagesOn the contrary, Southern claims individualism stemmed from the development of knowledge and logic in the Middle Ages. He discusses how well-rounded knowledge directed a change in the structure of society. Knowledge is something present in all societies, but it is important to note that religious communities encouraged knowledge in expressing individualism, which was not present in the Catholic Church previously. The development of individualism in the secular society is crucial, because it meantRead MoreCultural Differences Of Business Practices1625 Words   |  7 Pagesforeign trade firms are good at taking flexible marketing strategies in international market. On the other hand, the UK is one of the earliest capitalist countries in the world. Its business development spanned for several centuries producing many excellent enterprises such as HSBC, BP, Landrover. The tertiary industry of Britain is developed and famous. This essay focus on cultural differences between the UK and China in international marketing. China is the Oriental ancient civilization countryRead MoreThe Age Of The Enlightenment1646 Words   |  7 Pagespamphlet, Thomas Paine uses excellent command of the English language to inspire passionate hatred for the tyrannical English government and love for the American colonies among the common people. Due to the emphasis on individualism, Paine’s perception of the American colonies is that of an individual separate from England that is entitled to individual rights and freedom. Therefore, Paine fervently argues that the American colonies are being forced to surrender its individualism to Great Britain’s tyrannicalRead MoreThe Influence Of Gothic Literature On The Human Condition1283 Words   |  6 Pagesnovel was individualism and egotism. The reader will also find numerous examples of mysteriousness, primitive living situations, and multiple nature scenes in which She lley described even the most exiguous detail all of which are major elements of The Romantic Era. Individualism was a theme that was seen in a countless amount of works, including Frankenstein, during the Romantic Era. Both of the main characters, Victor Frankenstein and the creature, exhibited characteristics of individualism. VictorRead MoreThe Individualism Of The American Colonies1693 Words   |  7 Pages In this passage, Paine emphasizes how the unique individualism of the American colonies cannot exist under Great Britain. While it may be a rational and more peaceful decision to remain under Great Britain’s control, the oppression of the American colonies’ individualism is one that goes against common sense and is a situation that calls for a passionate revolution. The emphasis on individualism and passionate expression of the self during the late 18th and early 19th century is also exemplifiedRead MoreThe Methodology Of Robert Putnam s Making Democracy Work Essay1239 Words   |  5 Pagesmethodological arguments that were taught this semester, this paper will discuss and evaluate in detail the various methodological strategies employed by the author. For the ‘Theory’ theme, this paper will examine casual mechanisms (and methodological individualism) topic, closely referencing the course reading Social Mechanisms by Peter Hedstrom and Richard Swedbeg. Next, for the ‘Measurement and Data’ theme, this paper will specifically examine the measurement validity and reliability topic, and will closelyRead MoreIn The Current World It Is Easy To Get Caught Up With Our1434 Words   |  6 Pagesâ€Å"The Common Life of Scott Russel sanders† is an excellent example of how participating with family and community can not o nly increase the aspect of the community as a whole, but build happiness and shape individual lives as well. In †The Common Life†, Scotts states the conflicts between individualism and communism. He recognizes the importance of individualism when he talks of the seasons of withdrawal from responsibilities and that individualism is important to providing an incentive for peopleRead MoreRussia Case Study852 Words   |  4 Pagesrelationship with Putin, future relations with the U.S. are still unknown. The call to rebuild and strengthen relationships has been put in place but this has been difficult due to the stark differences in business, politics and culture. Because the low individualism score, strained relations with Russia have resulted, and long term business deals have been uneasy. Tensions between Russia and the Ukraine have caused the U.S. to place certain sanctions on travel and business. 3.2 - As with most economiesRead MoreEssay Democracy in America1301 Words   |  6 Pagesequally important than the Europeans. The Americans recognize the roles of the women and men important in being part as a contribution in the community. Each of the gender contains the same understanding that makes the American gender undetectable. For example, Tocqueville notice, in the United States, that the American women, â€Å"who often exhibit a masculine strength of understanding and a manly energy, generally preserve great delicacy of personal appearance and always retain the manners of women, although

Impact of Western Culture free essay sample

What can one infer after reading the above lines? I guess, the first answer would be that India is changing over the course of time. India, as the name flickers, one thinks of religion, traditions, art and culture and it’s apt to think so because India is the country which is famous for its diversity in these aspects. The land where the great Raja Ram Mohan, Tagore, Gandhi transformed the thinking of people and removed the social stigmas like sati pratha (the practice of widows being forced to sit on the pior of their husbands), untouchability and many more.India was known as â€Å"Sone Ki Chidiya† (The Golden Bird) but the shine has faded away gradually with the change in I, YOU and WE. Indian society has evolved into a mixed breed of Western and Indian culture. People are becoming too much casual in both their personal and professional lives, how a â€Å"Good Morning Madam† has now become â€Å"Hi Diksha†, how a â€Å"Namaste Daadu† has become â€Å"Hey Grandpa†, courtesy the western culture. We will write a custom essay sample on Impact of Western Culture or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page The western culture has proved to be a setback for Indian culture, its rituals, its traditions and mannerism.The Indian morning which used to begin with bhajans and kirtans now begins with the rock of Metallica and the punk of Greenday. The age of losing virginity has gone down to teens — following the western culture, these days it has become a casual and usual trend to lose virginity as teenagers. The way in which Hollywood movies have created an impact on our society is blaspheme. The Indian movies are now more vulgar and obscene as they try to imitate the western trends and it is one of the major reasons that India’s youth is changing. But the coin has its other side too.The effect of western culture has been a boon in the field of education and technology. From the time of the British, Indians inclined themselves towards education for betterment of their lives. The education system has improved with the course of time and this was all because of the western culture. The way in which the homosexual community has been accepted in most parts of India, is a result of western culture coming to India. The western culture has given us the liberty to think beyond the somewhat prejudiced culture towards certain aspects of our society.India’s culture has influenced many countries, many people and many souls, a foreigner dancing to the melodious and religious bhajan â€Å"hare Rama, hare Krishna† and a foreigner coming to India in a boeing and carrying with him memories of a rickshaw wala and then missing them in their homeland. The western culture might have brought obscenity and disrespect but it has eradicated a lot of the social evils and has helped India in transforming into a better and progressed nation.