Microeconomics Formulas

Economic Problem

Opportunity Cost = Quantity forgone or sacrificed / Quantity achieved or gained

Quantity forgone or sacrificed =   (Current Quantity - Quantity before)

Quantity achieved or gained = (Current Quantity - Quantity before)

Demand

Relationship = > Price ⇧ ➜ Quantity Demanded ⬇️ = Inverse relation

                         Price ⬇️ ➜ Quantity Demanded ⇧ = Inverse relation

Utility

Relationship => Consumption ⇧ ➜ Satisfaction ⬇️ = Inverse relation

Equilibrium (single good) = MUx / MUm = Px or MUx / Px

Equilibrium (two goods) = MUX / MUY = PX / PY

Equilibrium (two goods) = MUX / PX = MUY / PY

Equilibrium (more than one good) = MUA / PA = MUB / PB = MUC / PC=...... = MUn / Pn

Supply

Relationship = > Price ⇧ ➜ Quantity Supplied ⇧ = Positive relation

                         Price ⬇️ ➜ Quantity Supplied ⬇️ = Positive relation

Elasticity of Demand (Ed) 

If Ed > 1 then Ed is Elastic

If Ed < 1 then Ed is Inelastic

If Ed = 1 then Ed is Unit elastic

If Ed = ∞ then Ed is Unit Perfectly elastic

If Ed = 0 then Ed is Unit Perfectly inelastic

Price Elasticity of Demand (PED) (if % given) = Percentage Change in Quantity Demanded / Percentage Change in Price 

PED (without % given) = [(Q2 - Q1) / Q1] * 100 / [(P2 - P1) / P1] * 100

PED (Mid-point) = {(Q2 - Q1) / [(Q2 + Q1) / 2]} / {(P2 - P1) / [(P2 + P1) / 2]}

Crosse Elasticity of Demand (XED) = Percentage Change in Quantity of Good X / Percentage Change in Price of Good Y

XED (without % given) = [(Q2X - Q1X) / Q1X] * 100 / [(P2Y - P1Y) / P1Y] * 100

XED (with "+" result) = Substitute Good

XED (with "-" result) = Complementary Good

Income Elasticity of Demand (YED) = Percentage Change in Quantity of Demand / Percentage Change in Income

YED (without % given) = [(Q2 - Q1) / Q1] * 100 / [(Y2 - Y1) / Y1] * 100

YED (with "+" result) = Normal Good

YED (with "-" result) = Inferior Good

Elasticity of Supply

Price Elasticity of Supply (PES) (if % given) = Percentage Change in Quantity Supply / Percentage Change in Price 

PES (without % given) = [(Q2 - Q1) / Q1] * 100 / [(P2 - P1) / P1] * 100

Equilibrium

Market Equilibrium = Demand = Supply

Market Failure 

Social Costs = Private Costs +  External Costs

Social Benefits =  Private Benefits + External Benefits

Negative Externality =  Social Costs > Private Costs = Over Use of Resources

Positive Externality = Social Benefits > Private Benefits = Under Use of Resources

Cost, Revenue and Profit

Total Cost = Total Fixed Cost + Total Variable Cost

Average Cost = Total Cost / Total Output

Average Fixed Cost = Total Fixed Cost / Total Output

Average Variable Cost = Total Variable Cost / Total Output

Marginal Cost = Change in Total Cost / Change in Output

Marginal Cost = Change in Total Variable Cost / Change in Output

Marginal Cost = C2 - C1 / Q2 - Q1

Cost Minimization = Factor A / Price of Factor A = Factor B / Price of Factor B  

Total Revenue (TR) = Price * Quantity

Average Revenue =  TR / Output

Marginal Revenue (MR) = Change in TR / Change in Output

Marginal Revenue(MR) = TR2 - TR1 / Q2 - Q1

MR is "+" = TR⇧

MR is "-" = TR⬇️

MR is "0" = TRMax

Profit =  TR - TC

Profit Maximization =  MR = MC level of output

Revenue Maximization = MR = 0

Perfect Competition

Short-Run Conditions = If Price < AC = Loss

                                         If Price > AC = Super Normal Profit

Long-Run Conditions = Price = AC = Normal Profit

Loss Minimization       =  AC > Price > AVC

Shut Down                   = AC >  AVC > Price 

Monopoly

Short-Run Conditions = If Price < AC (at MR=MC) = Loss

                                         If Price > AC (at MR=MC) = Super Normal Profit

Long-Run Conditions = Price > AC (at MR=MC) = Super Normal Profit

Efficiency 

Allocative Efficiency = P = MC

Productive Efficiency = Minimum Point of AC

Social Efficiency = Marginal Social Benefits = Marginal Social Costs

Dynamic Efficiency = P > AC at MR = MC