Micro Formulae

• Total cost


  Total fixed cost plus total variable cost
• Total fixed cost


  Total cost minus total variable cost
• Total variable cost


  Total cost minus total fixed cost
• Average cost


  Total cost divided by quantity
• Average fixed cost


  Total fixed cost divided by quantity
• Average variable cost


  Total variable cost divided by quantity
• Marginal cost


  Change in total cost divided by change in quantity
• Total revenue


  Price multiplied by quantity
• Marginal revenue


  Change in total revenue divided by change in quantity
• Total product


  Average product multiplied by quantity of labor
• Average product


  Total product divided by quantity of labor
• Marginal product


  Change in total product divided by change in quantity of labor
• Returns to scale


  • Increasing: Percentage change in output > Percentage change in input

  Constant: Percentage change in output = Percentage change in input

  Decreasing: Percentage change in output < Percentage change in input
• Profit


  Total revenue minus total cost

  Average revenue minus average cost
• Super normal profit


  Total revenue greater than total cost

  Average revenue greater than average cost
• Subnormal profit (loss)


  Total revenue less than total cost

  Average revenue less than average cost
• Normal profit (break-even)


  Total revenue equals total cost

  Average revenue equals average cost
• Profit maximization


  Marginal revenue equals marginal cost
• Revenue maximization


  Marginal revenue is zero
• Sales maximization


  Average revenue equals average cost
• Allocative efficiency


  Demand equals supply

  Marginal benefit equals marginal cost

  Marginal social benefit equals marginal social cost
• Productive efficiency


  Firm operating at lowest point on average cost curve
• 1. efficiency


  Firm minimizing waste and cost at any given quantity
• Dynamic efficiency


  Long-run supernormal profit reinvested
• Minimum efficient scale


  Minimum output level where all economies of scale are fully exploited
• Shutdown condition


  Average revenue equals average variable cost
• Concentration ratio


  N (number of firms) and their total market share
• Total utility


  Average utility multiplied by quantity
• Average utility


  Total utility divided by quantity
• Marginal utility


  Change in total utility divided by change in quantity
• Utility maximization


  Marginal utility is zero or equal to price
• Price elasticity of demand


  Percentage change in quantity demanded / Percentage change in price
• Price elasticity of supply


  Percentage change in quantity supplied / Percentage change in price
• Cross-elasticity of demand


  Percentage change in quantity demanded of good A / Percentage change in price of good B
• Income elasticity of demand


  Percentage change in quantity demanded / Percentage change in income
• Percentage change


  (Difference between two numbers) / Original number x 100
• Index number


  Raw number / Base raw number x 100
• Profit maximization in labor market

  Employ workers up to where marginal revenue product equals marginal cost of labor
• Gini coefficient


  Area between Lorenz curve and line of perfect equality / Total area beneath line of perfect equality