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BULL MARKET: A condition of the stock market in which stock prices are generally rising and most of the participants expect this to continue. In other words, the stock market is into an extended period of "charging ahead" like a mad bull. A bull market usually occurs because investors see a healthy, vibrant, profitable economy on the horizon. Compare bear market.
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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, 20002014. [Accessed: July 28, 2014]. Check Out These Related Terms...       Or For A Little Background...       And For Further Study...      
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State of the ECONOMY
Prime Rate
June 17, 2014
3.25%
WSJ Prime
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BEIGE MUNDORTLE [What's This?]
Today, you are likely to spend a great deal of time looking for the new strip mall out on the highway trying to buy either a rim for your spare tire or decorative celebrity figurines. Be on the lookout for slow moving vehicles with darkened windows. Your Complete Scope
This isn't me! What am I?


The penny is the only coin minted by the U.S. government in which the "face" on the head looks to the right. All others face left.


"You miss 100% of the shots you never take. "  Wayne Gretzky, hockey player


BPEA Brookings Papers on Economic Activity


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