Using the method of arc elasticity to calculate price elasticity of demand eliminates the problem of:
A) different elasticities, depending on whether price decreases or increases.
B) different elasticities, because price and quantity are inversely related on the demand curve.
C) total revenue falling when price falls and demand is inelastic.
D) total revenue increasing when price falls and demand is elastic.

Question

Quizplus · Accepted Answer

The method of arc elasticity calculates the average elasticity between two points on a demand curve, regardless of whether the price is increasing or decreasing. This eliminates the problem of different elasticities depending on the direction of the price change.

Using the Method of Arc Elasticity to Calculate Price Elasticity