Microeconomics Formulae

Flashcards for Microeconomics Formula Sheet

Allocative Efficiency Condition

Marginal Social Benefit = Marginal Social Cost

Average Fixed Cost (AFC)

Total Fixed Cost / Quantity of Output

Average Product (AP)

Total Product / Quantity of Input

Average Profit

Total Profit / Quantity

Average Revenue

Total Revenue / Quantity

Average Total Cost (ATC)

Total Cost / Quantity of Output

Average Variable Cost (AVC)

Total Variable Cost / Quantity of Output

Cross-Price Elasticity of Demand

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

Distributive Efficiency Condition

Marginal Utility of X / Price of X = Marginal Utility of Y / Price of Y

Elasticity of Supply

Percentage Change in Quantity Supplied / Percentage Change in Price

Factor of Production Hiring Rule

Marginal Revenue Product = Marginal Factor Cost

Gini Coefficient

Area between the line of equality and the Lorenz Curve / Total area under the line of equality

Marginal Cost (MC)

Change in Total Cost / Change in Quantity

Marginal Product of Labor (MPL)

Change in Total Product / Change in Labor

Marginal Revenue (MR)

Change in Total Revenue / Change in Quantity

Marginal Revenue Product of Labor (MRP)

Marginal Product of Labor * Marginal Revenue

Optimal Combination of Resources Condition

Marginal Product of Labor / Wage = Marginal Product of Capital / Rental Rate

Optimal Consumption Rule

Marginal Utility of X / Price of X = Marginal Utility of Y / Price of Y

Price Elasticity of Demand

(% Change in Quantity Demanded)/(% Change in Price)

Production Efficiency Condition

Marginal Product of Labor / Wage = Marginal Product of Capital / Rental Rate; or P=min ATC

Profit

Total Revenue - Total Cost

Profit-Maximizing Output Level (Rule)

Marginal Revenue = Marginal Cost

Slope

Change in Y / Change in X

Socially Optimal Level of Output

Marginal Social Benefit = Marginal Social Cost

Total Costs

Total Fixed Costs + Total Variable Costs