Arkelasticitet

Arkelasticitet, often referred to in English as arc elasticity, is a measure used in microeconomics to assess the responsiveness of quantity demanded or supplied to price changes over a finite interval. It provides an estimate of elasticity between two points on a demand or supply curve, useful when data do not permit a precise point elasticity calculation.

Definition and formula: For two prices P1 and P2 with corresponding quantities Q1 and Q2, the arc elasticity of demand (E_arc) is defined as E_arc = (ΔQ/ΔP) × (P1+P2)/(Q1+Q2), where ΔQ = Q2 − Q1 and ΔP = P2 − P1. The same result can be written as E_arc = (ΔQ/Q_avg) / (ΔP/P_avg), with Q_avg = (Q1+Q2)/2 and P_avg = (P1+P2)/2.

Calculation example: Suppose P1 = 100, Q1 = 50; P2 = 120, Q2 = 40. Then ΔQ = −10, ΔP = 20, ΔQ/ΔP = −0.5, P1+P2 = 220, Q1+Q2 = 90, so E_arc = −0.5 × 220/90 ≈ −1.22. The negative sign indicates that price and quantity move in opposite directions.

Interpretation and use: Arc elasticity is useful when the demand or supply curve is nonlinear or when data cover a finite price range. It facilitates comparisons of elasticity across different price intervals or products using the same two-point method, without requiring a single instantaneous slope.

Limitations: Estimates depend on the chosen interval; endpoints can yield different results. Arc elasticity assumes a linear relation between the two points and may not capture variation within the interval. For robustness, analysts may compare with point elasticity or other measures. See also elasticity of demand and elasticity of supply.