AP Micro Formulas

Total Revenue (TR)

P × Q (Total money earned = Price × Quantity sold)

Profit

TR - TC (What you keep after costs)

Total Cost (TC)

FC + VC (Fixed + Variable Costs)

Average Total Cost (ATC)

TC / Q (Cost per unit made)

Average Fixed Cost (AFC)

FC / Q (Spreads fixed cost over each unit)

Average Variable Cost (AVC)

VC / Q (Variable cost per unit)

Marginal Cost (MC)

ΔTC / ΔQ (Cost of 1 more unit)

Marginal Revenue (MR)

ΔTR / ΔQ (Revenue from 1 more unit)

Profit-Maximizing Rule

MR = MC (Produce where revenue = cost for 1 more)

Elasticity of Demand

%ΔQ / %ΔP (Q over P - how quantity reacts to price)

Elastic Demand

Elasticity > 1 (Q changes a lot when P changes)

Inelastic Demand

Elasticity < 1 (Q changes little when P changes)

Unit Elastic

Elasticity = 1 (Q changes exactly with P)

Cross-Price Elasticity

%ΔQ of A / %ΔP of B (+ = substitutes, - = complements)

Income Elasticity

%ΔQ / %ΔIncome (+ = normal goods, - = inferior goods)

Total Product (TP)

Total output produced

Marginal Product (MP)

ΔTP / ΔInput (Output from 1 more input)

Diminishing Marginal Returns

MP eventually declines as more input is added

Productive Efficiency

Producing at lowest ATC

Allocative Efficiency

P = MC (Resources go where they're most wanted)