
ADVISORY COUNCILS, FEDERAL RESERVE SYSTEM: Three support committees that provide feedback to the Board of Governors of the Federal Reserve System to assist in its assorted regulatory responsibilities, including Federal Advisory Council, Thrift Institutions Advisory Council, and Consumer Advisory Council. The Federal Advisory Council is a broad ranging council comprise of commercial bankers. The Thrift Institutions Advisory Council is comprised of representatives of thrift institutions. The Consumer Advisory Council is comprised of consumer credit representatives.
Visit the GLOSS*arama




ARC ELASTICITY: The average elasticity for discrete changes in two variables. The distinguishing characteristic of arc elasticity is that percentage changes are calculated based on the average of initial and ending values of each variable, rather than initial values. Arc elasticity is generally calculated using the midpoint elasticity formula. The contrast to arc elasticity is point elasticity. For infinitesimally small changes in two variables, arc elasticity is the same as point elasticity. Arc elasticity is best considered the average elasticity over a range of values for a relation. Like any average, some values within the range are likely to be greater and some less. However, it provides a quick approximation of elasticity when more precise and sophisticated calculation techniques are not possible.Working Through an ExampleA Standard Demand Curve 

 The demand curve displayed to the right can be used to illustrate the measurement of arc elasticity using the midpoint elasticity formula. If the price declines from $12 to $8, the quantity demanded increases from 4 to 6, from point X to point Z. Using this midpoint formula (with price designated as P and quantity designated as Q) average price elasticity of demand is:midpoint elasticity  =  (Q[Z]  Q[X]) (Q[Z] + Q[X])/2  ÷  (P[Z]  P[X]) (P[Z] + P[X])/2 
midpoint elasticity  =  (6  4) (6 + 4)/2  ÷  (8  12) (8 + 12)/2  =  (2) (5)  ÷  (4) (10) 
midpoint elasticity  =  0.4  ÷  0.4  =  1.0 
Ignoring the minus sign, the price elasticity of demand over this segment of the demand curve from X to Z is 1.0.An Average ValueThis value of 1.0 is actually an average for the entire range between points X and Z. Precise estimates of point elasticity shows that the elasticity is 0.67 at point X and 1.5 at point Z. Moreover, the elasticity is different at each point on a straight line demand curve such as this one. The only point in which the elasticity is exactly equal to 1.0 is at point Y, the midpoint between X and Z.This last observation is worth emphasizing. The midpoint elasticity formula effectively estimates the point elasticity at the very midpoint of the overall segment. This means that the elasticity of any point on a demand curve (point elasticity) can be obtained by calculating the arc elasticity with the midpoint elasticity formula such that the desired point is dead center in the middle, the midpoint of the arc.
Recommended Citation:ARC ELASTICITY, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 20002018. [Accessed: February 19, 2018]. Check Out These Related Terms...       Or For A Little Background...       And For Further Study...      
Search Again?
Back to the WEB*pedia



PURPLE SMARPHIN [What's This?]
Today, you are likely to spend a great deal of time strolling around a discount warehouse buying club wanting to buy either blue cotton balls or a genuine downfilled pillow. Be on the lookout for slightly overweight pizza delivery guys. Your Complete Scope
This isn't me! What am I?


It's estimated that the U.S. economy has about $20 million of counterfeit currency in circulation, less than 0.001 perecent of the total legal currency.


"There are only two ways to live your life. One is as though nothing is a miracle. The other is as though everything is a miracle."  Albert Einstein


CHIPS Clearing House Interbank Payments Systems (US)


Tell us what you think about AmosWEB. Like what you see? Have suggestions for improvements? Let us know. Click the User Feedback link.
User Feedback

