Midpoint formula= Point Slope= (△Q÷△P) x (P÷Q)

Point slope at a certain point= inv of slope x (P÷Q)

If Price Decreases, then total revenue will increase if EDP > 1
If Price Increases, then total revenue will Decrease if EDP > 1
If Price Decreases, then total revenue will Decrease if EDP < 1
PPI= winners win by mre than loser lose If Price Increases, then total revenue will increase if EDP < 1 Cross- Price Elasticity of
Demand Income Elasticity Compliments EDP > 0 = goods are substitute EDN > 0 = goods are normal - a compliment will have
negative EDP EDP < 0 = goods are compliments EDN < 0 = goods are inferior - a substitute will have positive EDP

Price controls
Social Benefit = Private benefits + External benefits Social Costs = Private Costs + External Costs
Social Surplus = Social Benefits ( tax revenue) - Social Costs ( gov’t spending)
△ Social Surplus = △PS + △CS

Price Floors

- producers are better off

- Makes some seller better off
but harm some Change in PS
- Makes all buyers worse off -
PS at E1 = F + G - creates XS
(excess supply) - PS at E2 = B
+ F - Change in CS - △ PS =
B-G
- CS at E1 = A + B + C DWL
=C+G
- CS at E2 = A SS at E1 = A + B + C + C + F + G - △ CS = B + C or - ( B - C) SS at E2 = A + B + F Price
floors make MS ↓
CS ↑ , PS depends on EDP

Price Ceiling Quota

E2 Should be on SUPPlY CURVE -PS ↓ ,
CS depends on EDP -- makes all sellers worse
off makes MS ↓ - some buyers better off
but not all Change in CS - creates XD ( excess
demand) CS at E1= A + B + C - CS at E1 = A +
B + C CS at E2 = A - CS at E2 = A + B + F - △
CS = B + C - △ CS = F - C Change in PS Price
ceiling makes MS ↓ H - PS at E1 = F + G PS
↓ , CS depends on EDP - PS at E2 = B + F
PS at E1 = F + G + H △ PS = B - G PS at E2 =
H
- △ PS = F + G DWL is smaller the more elastic demand is △ SS = C + G = DWL ( the flatter the curve is)

Taxes Subsidies - The more

vertical Demand is the
consumer PS goes up ↑ will
end up having more of the
burden CS goes up ↑ - SS =
△CS + △PS+ △(t x Q) △ PS =
A + B - △ CS = A + B △ CS =
C + D - △ PS = C + F DWL =
E - △ (t x Q) = gov’t revenue
- △ (t x Q) = A + C
- taxes cause profits to fall
- causes CS↓ , PS↓ , SS↓
- DWL = B + F
Tariffs
PA= price that will prevail in the
domestic
Market DWL = C2 + C4
PW + tariff Domestic PS = F
PW = world price - SS = A + B +
C+F
- CS ( before t) = A + B + C
- CS ( after t) = A + B1 + C1
- △ CS = B2 + C2 + C3 + C4
- PS ( before t) = F
- PS (after tax) = F + B2
- △ PS = B2 - Tariff revenue =
C3

Negative
Externalities
MEC = marginal
external costs At Q*
QE = maximizes
market surplus - MS
= F + G Q* =
maximizes social
surplus - SB = F +
G + H - △ SS =
△SC + △SB - SC =
G + H - △ SC = A +
B + C - SS = F - △ SB = A + B - SC = PC(s) + EC - DWL = C - EC = ∞ At QE - EB = 0 - MS = F
+ G + B - - SB = F + G + H + A + B
- SC = G + H + A + B + C
- SS =
F-C
- EC =
G
- PC =
H

Pos

Externalities
- △ SC = F + G
-△ SB = F + G + H
- SS ↑ = H
- At Q*
- SC = C + B + F
- MS = B - F
- SS = H = DWL
- SB = A + B + C + H + G + F
- At QE
- SB = A + B + C
- SC = C
- SS = A + B
EC ↓
△ CS = B + C + G
△ PS = F + H + N

Before tax
EC = M+H+C+N+G+K
After tax
EC = M+H + C
△ EC = N + G + K (Gain)