Define ‘Arc Elasticity’.

In economics, the term "elasticity" refers to how much the
demand for (or supply of) a product changes when certain other variables change.  For example,
price elasticity of demand looks at the change in quantity demanded for a good or service when
the price of that good or service changes.  Arc elasticity is simply a slightly more
sophisticated way of finding elasticity.

The simpler formulas for
finding elasticity tend to take the percent change in demand (or supply) and divide it by the
percent change in the independent variable (say price).  These formulas tend to get the percent
change in demand by subtracting the quantity demanded at one price from the quantity demanded at
the second price.

However, this can yield different values even for
the same change, depending on which way the change goes.  (Please see the about.com link for an
example.  To remedy this, arc elasticity instead uses a slightly more complicated formula that
uses the average of the old and new quantities demanded as the denominator for finding percent
change.

Again, what this means is that arc elasticity is a more
sophisticated and consistent measure of elasticity.