[amp_mcq option1=”$${e_a} = \\frac{{{Q_1} – {Q_2}}}{{{Q_1} + {Q_2}}} \\div \\frac{{{P_1} – {P_2}}}{{{P_1} + {P_2}}}$$” option2=”$${e_a} = \\frac{{{Q_1} + {Q_2}}}{{{Q_1} – {Q_2}}} \\div \\frac{{{P_1} + {P_2}}}{{{P_1} – {P_2}}}$$” option3=”$${e_a} = \\frac{{{Q_1} – {Q_2}}}{{{P_1} – {P_2}}} \\div \\frac{{{Q_1} – {Q_2}}}{{{P_1} + {P_2}}}$$” option4=”None of these” correct=”option3″]<\/p>\n
The correct answer is: C. $${e_a} = \\frac{{{Q_1} – {Q_2}}}{{{P_1} – {P_2}}} \\div \\frac{{{Q_1} – {Q_2}}}{{{P_1} + {P_2}}}$$<\/p>\n
The arc elasticity of demand is a measure of the responsiveness of the quantity demanded of a good or service to a change in its price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price.<\/p>\n
The formula for arc elasticity is:<\/p>\n
$$e_a = \\frac{\\frac{Q_2 – Q_1}{Q_1 + Q_2}}{\\frac{P_2 – P_1}{P_1 + P_2}}$$<\/p>\n
where:<\/p>\n
The arc elasticity of demand can be positive, negative, or zero. A positive arc elasticity indicates that the quantity demanded increases when the price decreases. A negative arc elasticity indicates that the quantity demanded decreases when the price decreases. A zero arc elasticity indicates that the quantity demanded is not affected by a change in price.<\/p>\n
The arc elasticity of demand is a useful tool for businesses to understand how consumers will respond to changes in price. It can also be used to compare the responsiveness of different goods and services to changes in price.<\/p>\n
Here is a brief explanation of each option:<\/p>\n
[amp_mcq option1=”$${e_a} = \\frac{{{Q_1} – {Q_2}}}{{{Q_1} + {Q_2}}} \\div \\frac{{{P_1} – {P_2}}}{{{P_1} + {P_2}}}$$” option2=”$${e_a} = \\frac{{{Q_1} + {Q_2}}}{{{Q_1} – {Q_2}}} \\div \\frac{{{P_1} + {P_2}}}{{{P_1} – {P_2}}}$$” option3=”$${e_a} = \\frac{{{Q_1} – {Q_2}}}{{{P_1} – {P_2}}} \\div \\frac{{{Q_1} – {Q_2}}}{{{P_1} + {P_2}}}$$” option4=”None of these” correct=”option3″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[],"class_list":["post-46771","post","type-post","status-publish","format-standard","hentry","category-economics","no-featured-image-padding"],"yoast_head":"\n