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Economics Formulas

This document defines key economics formulas used to calculate price elasticity of demand and supply, income elasticity, cross price elasticity, consumer and producer surplus, average and marginal costs, revenues, profits, losses, and conditions for profit maximization, revenue maximization, and allocative efficiency. It provides the formulas for total cost, total revenue, average cost, marginal cost, economic profit, and break-even point.

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352 views2 pages

Economics Formulas

This document defines key economics formulas used to calculate price elasticity of demand and supply, income elasticity, cross price elasticity, consumer and producer surplus, average and marginal costs, revenues, profits, losses, and conditions for profit maximization, revenue maximization, and allocative efficiency. It provides the formulas for total cost, total revenue, average cost, marginal cost, economic profit, and break-even point.

Uploaded by

Nela
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Economics formulas

% change∈quantity demanded
 Price elasticity of demand =
% change∈ price
% change∈quantity supplied
 Price elasticity of supply =
% change∈ price
% change∈demand
 Income elasticity =
% change∈income
% change∈demand of product A
 Cross price elasticity =
% change∈ price for product B
 Consume surplus = maximum price willing to spend – actual price
 Producer surplus = total revenue – total cost
total cost
 Average total cost (ATC) =
quantity
total variable cost
 Average variable cost (AVC) =
quantitny
 Average fixed cost (AFC) = ATC – AVC
 Total cost (TC) = (AVC + AFC) * quantity
 Total variable cost (TVC) = AVC * output
 Total fixed cost (TFC) = TC – TVC
change∈the total costs
 Marginal cost (MC) =
change∈output
change∈total revenue
 Marginal product (MP) =
change∈ variable factor
change∈total revenue
 Marginal revenue (MR) =
change∈quantity
TP
 Average product (AP) =
variable factor
 Total revenue (TR) = price * quantity
TR
 Average revenue (AR) =
output
 Total product (TP) = AP * variable factor
 Economic profit = TR – TC > 0
 Pure profit (for economists) = revenue – (costs + opportunity cost)
 A profit = value of sales – all costs
 A loss = TR – TC < 0
 Break-even point (BEP) – AR = ATC
 Profit maximizing condition – MR = MC
 Revenue maximization – MR = 0
 Sales maximization – AR = ATC
 Allocative efficiency – P = MC

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