Question

Write explanatory answer:
Explain ratio method and geometric method of measuring price elasticity of demand.

Answer 1

The Ratio method of measuring elasticity of demand is also known as Arithmetic or Percentage method also. In this method we consider percentage change in quantity demanded and divide it by percentage change in the price of the commodity.

The Geometric method measures the elasticity of demand at different points on the demand curve and is also known as the Point method of measuring the elasticity of demand. The elasticity of demand at different points on a straight line demand curve can be derived by this method.