AP Microeconomics important equations

Utility Maximizing Rule

MU_a / P_a = MU_b / P_b

Percent Change

(final P or Qd - initial P or Qd)/ initial P or Qd

Elasticity of Demand

(% D Quantity Demanded) / % D Price

Cross-Price Elasticity

(% D Quantity Demanded of Product X) / (% D Price of Product Y)

• - complements

• + substitutes

Income Elasticity

(% D Quantity Demanded) / (%. D Consumer Income)

Marginal Product

(change in outputs ) / (change in inputs)

Marginal Revenue

The additional revenue generated from selling one more unit of a good or service, calculated as the change in total revenue divided by the change in quantity sold.

Marginal Cost

(change in TC) / (change in quantity)

Average Total Cost

= AVC + AFC / Q

Average Variable Cost

TVC / Q

Average Fixed Cost

TFC / Q

Total Revenue

Price x Quantity OR Profit - total cost

Profit

total revenue - total cost

Profit Maximizing Rule/ Least Cost Rule

MR = MC OR utility maximizing rule

Marginal Revenue Product

= MR x MP OR (change in total revenue) / (change in resource quantity)

Marginal Factor Cost

= (change in total resource cost) / (change in resource quantity) = wage

Price Elasticty of Supply

(% D Quantity Supplied) / (% D Price)

Opportunity Cost for outputs

good y / good x

Opportunity Cost for inputs

time good x / time good y

Perfectly Inelastic

EV = 0

Relatively Inelastic

EV < 1

Unit Elastic

= 1

Relatively Elastic

> 1

Perfectly Elastic

= infinity

Producers pay more of tax

Elasticity of demand > elasticity of supply

Consumers pay more of tax

elasticity of supply > elasticity of demand

Consumers pay all the tax

Ed = 0 or Perfectly inelastic demand

Producers pay all of the tax

Es = 0 or Perfectly inelastic supply.

Consumers pay none of the tax

Ed = infinity or Perfectly elastic demand

Producers pay none of the tax

Es = infinity or Perfectly elastic supply.

Total Cost

Total Variable Cost + Total Fixed Cost