Q.Write a short note on: Arc method

The arc method measures elasticity of demand between two separate points on a demand curve by taking the average of the two prices and the average of the two quantities, and is used when price changes are large. ## Meaning The arc method (arc elasticity) is a way of measuring price elasticity of demand between two points on a demand curve (an 'arc'), rather than at a single point. It is used when the change in price is large, because point elasticity would give different answers depending on the direction of the change. To avoid this, the arc method uses the averages of the two prices and the two quantities: Arc elasticity = (Change in quantity / Average of the two quantities) ÷ (Change in price / Average of the two prices). Taking averages gives a single, consistent measure of elasticity over the whole range between the two points. …