Tuesday  September 17, 2024
 AmosWEB means Economics with a Touch of Whimsy!
 HARD PEG: Establishing a fixed exchange rate between one national currency (usually that of a small country) and another national currency (usually that of an industrial power). One country, in other words, "pegs" the value of its currency to the value of another currency. This is commonly done by countries with a history of monetary instability is used as a means of restoring and maintaining order. This U.S. dollar is frequently used for a hard peg by other smaller nations. The result of a hard peg is to eliminate control by the pegging nation and relying on the actions of the targeting nation.

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.

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Recommended Citation:

POINT ELASTICITY, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2024. [Accessed: September 17, 2024].

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