  Monday  June 5, 2023
 AmosWEB means Economics with a Touch of Whimsy! HHI: The common abbreviation for the Herfindahl-Hirshman index (or the Herfindahl index), which is a measure of concentration of the production in an industry that's calculated as the sum of the squares of market shares for each firm. This is an alternative method of summarizing the degree to which an industry is oligopolistic and the relative concentration of market power held by the largest firms in the industry. The Herfindahl index gives a better indication of the relative market control of the largest firms than can be found with the four-firm and eight-firm concentration ratios.                              POINT ELASTICITY:

The relative responsiveness of a change in one variable (call it B) to an infinitesimally small change in another variable (call it A). The notion of point elasticity typically comes into play when discussing the elasticity at a specific point on a curve.
Point elasticity can be calculated in a number of different ways. Sophisticated economists, using sophisticated mathematical techniques (better known as calculus) calculate point elasticity by using derivatives. Derivatives are calculus talk for infinitesimally small changes. The formula for calculating point elasticity using calculus is given as:

 pointelasticity = ∂BB ÷ ∂AA
The symbol that looks like a backward six (∂) is the mathematical notation for a derivative, or infinitesimally small change. The first term on the right-hand side of this formula is the percentage change in variable B and the second term is the percentage change in variable A.

Unsophisticated folks can also calculate point elasticity without the use of sophisticated calculus. This is done with the midpoint elasticity formula, presented here:

 midpointelasticity = (B2 - B1)(B2 + B1)/2 ÷ (A2 - A1)(A2 + A1)/2
The first term on the right-hand side of the equation is the percentage change in variable B. The second term is the percentage change in variable A. The individual items are interpreted as this: A1 is the initial value of A before any changes, A2 is the ending value after A changes, B1 is the initial value of B before any changes, and B2 is the ending value after B changes.

This midpoint elasticity formula actually calculates the average or arc elasticity of the entire line segment. However, it also calculates the point elasticity for the midpoint of a line segment.

 <= PLASTIC MONEY POLICY LAGS => Recommended Citation:

POINT ELASTICITY, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2023. [Accessed: June 5, 2023].

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