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Econ Formula/Terms
| Question | Answer |
|---|---|
| Marginal Cost | additional cost of producing one more unit |
| Marginal private cost (MPC) | extra cost a producer faces for making one additional unit of a good or service, accounting only for their own expenses, such as materials and labor. |
| Formula for Marginal Social Cost | ( MPC) + (MEC) = MSC .....Marginal Private Cost + Marginal External Cost = Marginal Social Cost |
| When is something not Pareto efficient? | When MEC > P- MPC (P= Price) |
| Marginal social benefit (MSB) | MSB is the benefit of the production or consumption of an additional unit of a good, including both the benefit for the producer or consumer (marginal private benefit) and the benefits conferred on others. |
| Formula for Marginal Social Benefit | MSB = MPB + MEB. (Marginal Private Benefit + Marginal External Benefit = Marginal Social Benefit) |
| Condition for Pareto Efficiency | MSB = MSC |
| Marginal Revenue Formula | MR= ΔTR / ΔQ or just the derivative of TR |
| Maximum Profit Foruma | Maximum Profit= Total Revenue- Total Cost |
| Marginal Cost Formula | Change in Total Cost/ Change in Quantity, or Derivative of Total Cost |
| CPE | Cross Price Elasticity of Demand |
| CPE Formula | Change in Quantity Demanded of X / Change in Price of Y |
| If CPE> 0 what do consumers prefer? | Substitutes |
| IF CPE < 0 what do consumers prefer? | Compliments |
| Total Cost Formula | TVC+ TFC (Total Fixed Costs + Total Variable Costs) |
| Total Revenue Formula | Price x Quantity |
| Deadweight Loss occurs when.. | Price > Marginal Cost |
| No deadweight loss present when.. (Hint: This is also profit maximization) | MR=MC |
| Income Elasticity of Demand Formula | %Change in Quantity Demanded/ % Change in Consumer Income |
| % Change formula is.. | (New-Old / Old ) x 100 |
| If IED > 0... | It signifies a positive income elasticity and that a good is a"Normal Good". If the IED is greater than one the good is a "luxury" good. |
| If IED< 0 | Signifies negative income elasticity and that a good is "Informal/ Inferior Good" . |
| (IED) Income elasticity of demand measures.. | how the quantity demanded of a good responds to changes in consumer income, indicates whether a good is a necessity or a luxury |
| Marginal Benefit Formula is.. | Change In Total Benefit/ Change in Quantity |
| Government Revenue Formula | Amount Produced x Amount Taxed |
| Average Total Cost (ATC) Formula is.. | FC+VC/Q |
| GPD Deflator Formula | GDP Deflator Formula: (Nominal GDP/ Real GDP) X 100 |
| Expenditure Method for Calculating GDP | Y= C+I+G+(X-M) |
| Labor Force Participation Rate Formula | (Labor Force / Potential Workers) x 100 |
| Labor Force Formula | Unemployed Workers + Employed Workers |
| Unemployment Formula | (Unemployed Workers/ Labor Force) x 100 |
| Aggregate Production Function | Y= A x f(K,H) |
| Aggregate Production Function, what does the 'K' stand for? | K stands for physical capital ( factories, machines, etc.) |
| Aggregate Production Function, what does the 'H' stand for? | H stands for human capital (ex. Labor force AND skills (education)) H= L x h |
| PPP Adjustment Factor Formula | Cost of Basket in Dollars / Cost of Basket in Local Currency |
| PPP GDP per capital formula | PPP Adjustment Factor x GDP per Capita (local. currency) |
| GDP per capital local currency = GDP Per Capita |
Created by:
Yzou