Fisheries Economics

2.2.8.2. ARC method

The point method considers minute changes in price and demand which is not realistic. In reality, we come across demand schedules with gaps in prices and quantities. Hence the point method has become absolute. The ARC method is a better method for measuring demand elasticity using the following formula.

Arc Elasticity of demand = $$\frac{\Delta{q}}{\frac {q1+q2}{2}}$$ $$\div$$ $$\frac{\Delta{p}}{\frac {p1+p2}{2}}$$ 

                                                      Where ∆q = change in quantity

                                                                   ∆p = change in price

                                                                    q₁ = original quantity

                                                                     q₂ = new quantity

                                                                      p₁ = original price

                                                                       p₂ = new price