In particular, we compute arc elasticity
around the equilibrium market price for each hour.
As outlined by Vazquez (2008), discussion and debate on the accuracy and applicability of Allen's arc elasticity has a long history, dating back to the 1930s and continuing into the 1980s, 1990s, and 2000s (e.
He further argues that a geometric mean calculation of the arc elasticity formula retains the positive attributes of Allen's analysis and provides instructors and practitioners with the flexibility of choosing from among at least three approaches: the conventional percentage change method, Dalton's upper and lower elasticity measures, or a standardizing ray technique.
The arc elasticity
computation (Phelps and Newhouse 1972; Gemmill, Costa-Font, and McGuire 2007) is preferred when only specific points on the demand curve are observed.
In a computation of arc elasticity, it is shown that the demand for camping at the recreational site was relatively inelastic.
In a computation of arc elasticity, the demand for fishing at the site was very inelastic.
equals the percentage change in energy use relative to the average of the new and old values for both quantity (Q) and price (P), as depicted in the following equation:
For this article elasticity measures were estimated using point elasticities followed by an arc elasticity
estimate to account for the endpoints of the income ranges.
Unfortunately, the concept of arc elasticity
does not allow for an unambiguous ranking of the two markets: For small price intervals around the kink in the demand curves the arc elasticity
ranks the elasticity of the first market lower, but for larger intervals and for intervals that do not contain that price, in particular, for intervals around either of the critical prices at which the firm may consider pricing, the ranking is in line with the results from the use of the more common point elasticity.
In their recent article in this journal, "Restrictions of Allen's Arc Elasticity
of Demand; Time to Consider the Alternative?
The critical arc elasticity
of demand between the initial price and the monopoly prices is given by 1(r + t/50).
Gould and Ferguson's [1980, 110] formula to calculate the arc elasticity
of demand implies that the export demand elasticity over this period was -0.