Microeconomics and Macroeconomics Formula Sheet

Allocative Efficiency Condition

P = MC, or more precisely, Marginal Social Benefit (MSB) = Marginal Social Cost (MSC)

Average Fixed Cost

AFC = Total Fixed Cost (TFC)

Average Product

AP = Total Product / Quantity of Input

Average Profit

Average Profit = Total Profit / Quantity

Average Revenue

Average Revenue = Total Revenue / Quantity

Average Total Cost

ATC = Total Cost (TC) / Quantity of Output (Q)

Average Variable Cost

AVC = Total Variable Cost (TVC) / Quantity of Output (Q)

Cross-Price Elasticity of Demand

Percentage Change in Quantity Demanded of Good X / Percentage Change in Price of Good Y

Distributive Efficiency Condition

MU_P / MU_C = F / C

Elasticity of Supply

Percentage Change in Quantity Supplied / Percentage Change in Price

Factor of Production Hiring Rule

Hire Until MRP = MFC

Gini Coefficient

Cumulative % of Income / Cumulative % of Families

Marginal Cost

MC = ΔTC / ΔQ

Marginal Product of Labor

MPL = ΔTP / ΔL

Marginal Revenue

MR = ΔTR / ΔQ

Marginal Revenue Product of Labor (MRPL)

MRPL = MPL × MRoutput

Optimal Combination of Resources Condition

w = MP_L / r

Optimal Consumption Rule

MU_X / P_X = MU_Y / P_Y

Price Elasticity of Demand

Percentage Change in Quantity Demanded / Percentage Change in Price

Price for a Competitive Firm

P = MR = AR

Production Efficiency Condition

w / r = MP_L / MP_K

Profit

Profit = TR - TC

Profit-Maximizing Output Level

MR = MC

Slope of the Total Product Curve

Slope = Change in Total Product / Change in the Number of Units of an Input

Socially Optimal Level of Output

MSB = MSC

Total Costs

Total Costs = Total Fixed Costs + Total Variable Costs, TC = TFC + TVC