Explain the Geometric Method of Measurement of Elasticity

Explain the Geometric Method of Measurement of Elasticity.




Geometric or Point method: It developed by Marshall. It is used as a measure of the change in quantity demanded in way to a very small change in the price. Under this method we can measure the elasticity at any of given point on a straight line demand curve using the given formula as:
ED = Lower section of the Demand curve/Upper section of Demand curve.

880_Geometric Method.png

In the given diagram, AB is a straight line demand curve along with P as its middle point. Further this is assumed as AB is 6 cm. so,

ED = PB/PA=3/3=1; at point P

ED = P1B/P1A= 4.5/1.5= 3=>1; at point P1

ED = AB/A= 6/0= α (infinity); at point A

ED = P2B/P2A = 1.5/4.5 = 1/3 = <1; at point P2

ED = B/BA = 0/6 = 0; at point B

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