The correct answer is D. Arc elasticity measures the average elasticity over a range of prices.
A demand function is a mathematical expression that shows the relationship between the quantity demanded of a good or service and the price of that good or service. The demand curve is a graphical representation of the demand function. It shows the quantity demanded of a good or service at different prices.
Elasticity is a measure of how responsive the quantity demanded of a good or service is to changes in its price. There are two types of elasticity: point elasticity and arc elasticity. Point elasticity measures the elasticity at a specific point on the demand curve. Arc elasticity measures the average elasticity over a range of prices.
Point elasticity is calculated as follows:
$E_d = \frac{\frac{\Delta Q}{Q}}{\frac{\Delta P}{P}}$
Arc elasticity is calculated as follows:
$E_d = \frac{(Q_2 – Q_1)}{(Q_2 + Q_1)/2} \cdot \frac{(P_2 – P_1)}{(P_2 + P_1)/2}$
In general, point elasticity is more accurate than arc elasticity. However, arc elasticity is easier to calculate and interpret.
In the case of the question, option D is incorrect because it states that arc elasticity measures the elasticity at a point on the arc of the demand curve. This is not true. Arc elasticity measures the average elasticity over a range of prices.