Economics formulas

% change∈quantity demanded
 Price elasticity of demand =
% change∈ price
% change∈quantity supplied
 Price elasticity of supply =
% change∈ price
% change∈demand
 Income elasticity =
% change∈income
% change∈demand of product A
 Cross price elasticity =
% change∈ price for product B
 Consume surplus = maximum price willing to spend – actual price
 Producer surplus = total revenue – total cost
total cost
 Average total cost (ATC) =
quantity
total variable cost
 Average variable cost (AVC) =
quantitny
 Average fixed cost (AFC) = ATC – AVC
 Total cost (TC) = (AVC + AFC) * quantity
 Total variable cost (TVC) = AVC * output
 Total fixed cost (TFC) = TC – TVC
change∈the total costs
 Marginal cost (MC) =
change∈output
change∈total revenue
 Marginal product (MP) =
change∈ variable factor
change∈total revenue
 Marginal revenue (MR) =
change∈quantity
TP
 Average product (AP) =
variable factor
 Total revenue (TR) = price * quantity
TR
 Average revenue (AR) =
output
 Total product (TP) = AP * variable factor
 Economic profit = TR – TC > 0
 Pure profit (for economists) = revenue – (costs + opportunity cost)
 A profit = value of sales – all costs
 A loss = TR – TC < 0
 Break-even point (BEP) – AR = ATC
 Profit maximizing condition – MR = MC
 Revenue maximization – MR = 0
 Sales maximization – AR = ATC
 Allocative efficiency – P = MC