Suppose that the price of a commodity is 5birr and the quantity demanded at the price of the commodity fall to 4birr and the quantity demanded rise to 110unit ,the value of arc elasticity will be -------

Answer 1

To calculate the arc elasticity of demand, we can use the following formula:

Arc Elasticity of Demand = ((Q2 - Q1) / ((Q1 + Q2) / 2)) / ((P2 - P1) / ((P1 + P2) / 2))

Where:
Q1 = initial quantity demanded (100 units)
Q2 = new quantity demanded (110 units)
P1 = initial price (5 birr)
P2 = new price (4 birr)

Substitute the values into the formula:

Arc Elasticity of Demand = ((110 - 100) / ((100 + 110) / 2)) / ((4 - 5) / ((5 + 4) / 2))
Arc Elasticity of Demand = (10 / (210 / 2)) / (-1 / (9 / 2))
Arc Elasticity of Demand = (10 / 105) / (-1 / 4.5)
Arc Elasticity of Demand = 0.09524 / -0.22222
Arc Elasticity of Demand ≈ -0.4286

Therefore, the value of the arc elasticity will be approximately -0.4286.