Formulas

• Positive XED


  Products are substitutes
• Negative XED


  Products are complements or jointly demanded
• Positive YED


  Normal Goods
• Negative YED


  Inferior Goods
• MUx


  Marginal Utility of Good X
• MUy


  Marginal Utility of Good Y
• Qx


  Quantity of Good X
• Px


  Price of Good X
• Qy


  Quantity of Good Y
• Py


  Price of Good Y
• Consumer Equilibrium or Equimarginal Principle

  Consumer Equilibrium is attained at the point where Indifference Curve (IC) is tangent to the Budget Line (BL)
• TC


  Total Cost
• TP


  Total Product
• What does PED stand for in microeconomics?

  Price Elasticity of Demand
• How is Price Elasticity of Demand (PED) calculated?

  PED = % Change in Quantity Demanded / % Change in Price
• If the new quantity demanded is 120 and the old quantity demanded is 100, what is the % change in quantity demanded?

  20%
• If the new price is $50 and the old price is $40, what is the % change in price?

  25%
• What does YED stand for?

  Income Elasticity of Demand
• What does a positive YED indicate about a good?

  It is a normal good
• What does a negative YED indicate about a good?

  It is an inferior good
• What does XED stand for?

  Cross Elasticity of Demand
• What does a positive XED indicate about two goods?

  They are substitutes
• What does a negative XED indicate about two goods?

  They are complements
• What does PES stand for?

  Price Elasticity of Supply
• How is Price Elasticity of Supply (PES) calculated?

  PES = % Change in Quantity Supplied / % Change in Price
• What is the formula for Total Revenue (TR)?

  TR = P × Q
• What does TC stand for?

  Total Cost
• How is Total Cost (TC) calculated?

  TC = TFC + TVC
• What does AC stand for?

  Average Cost
• How is Average Cost (AC) calculated?

  AC = TC / Q
• What does MC stand for?

  Marginal Cost
• How is Marginal Cost (MC) calculated?

  MC = ΔTC / ΔQ
• What does AR stand for?

  Average Revenue
• How is Average Revenue (AR) calculated?

  AR = TR / Q
• What does MR stand for?

  Marginal Revenue
• How is Marginal Revenue (MR) calculated?

  MR = ΔTR / ΔQ
• What is the formula for Profit?

  Profit = TR - TC
• What indicates supernormal profit?

  TR > TC
• What indicates normal profit?

  TR = TC
• What indicates a loss?

  TR < TC