Formula Chart โ AP Microeconomics
Unit 2 โ Supply and Demand
Total Revenue = price x quantity
Coefficient of price elasticity of demand:
% โ quantity demanded
% โ price
Coefficient > 1 = elastic demand
Coefficient < 1 = inelastic demand
Coefficient = 1 = unit elastic demand
Coefficient = โ = perfectly elastic demand
Coefficient = 0 = perfectly inelastic demand
Cross elasticity of demand: comparing 2 items:
% โ quantity of 1
st
item
% โ price of 2
nd
item
Cross elasticity coefficient positive = items
substitute for each other
Cross elasticity coefficient negative = items
complement each other
Income elasticity of demand: % โ quantity
% โ income
Income elasticity coefficient positive = normal
good
Income elasticity coefficient negative = inferior
good
Supply elasticity: % โ quantity supplied
% โ price
Tax Revenue = (Price w/tax โ price seller
receives) x Quantity
Unit 3 โ Production Markets
Revenue:
Total Revenue = price x quantity
TR
Q output
โTR
โ Q output
TR @ maximum when MR goes negative
In perfect competition, MR = price (demand)
for individual sellers
In perfect competition, individual seller
price = market price (price taker)
In imperfect competition, MR < price (Demand)
In imperfect competition, individual seller IS
THE MARKET (price maker)
Cost:
Total Cost = Total fixed cost + Total average cost
Total Cost = unit cost x quantity output
Average fixed cost = TFC
Q output
Average variable cost = TVC
Q output
Average total cost = TC
Q output
Average total cost = AFC + AVC
Marginal cost = โ TC
โ Q output
Product (aka output):
Average product = Total product
Q input
Marginal product = โ TP
โ Q input
TP @ maximum when MP goes negative
In perfect competition market supply = โ individual
seller cost curves or S = โ mcโs
Utility maximization rule
Marginal Utility of Good A Marginal Utility of Good B
Unit cost of A Unit cost of B
=
Average Revenue =
Marginal Revenue =
Total revenue test
P๎ and TR๎ then demand elastic
P๎ and TR๎ then demand inelastic
P๎ and TR๎ then demand elastic
P๎ and TR๎ then demand inelastic
