Formulas

Question 1

What is the formula for Total Costs (TC)?

Answer 1

TC = TFC + TVC

Question 2

How is Total Variable Cost (TVC) calculated?

Answer 2

TVC = AVC x Q

Question 3

What is the formula for Total Fixed Cost (TFC)?

Answer 3

TFC = AFC x Q

Question 4

How is Average Cost (AC) defined?

Answer 4

AC = TC / Q

Question 5

What is the formula for Marginal Cost (MC)?

Answer 5

MC = Δ in TC / Δ Q

Question 6

How is Total Revenue (TR) calculated?

Answer 6

TR = P x Q

Question 7

What is the formula for Average Revenue (AR)?

Answer 7

AR = TR / Q

Question 8

How is Marginal Revenue (MR) defined?

Answer 8

MR = Δ TR / Δ Q

Question 9

What is the relationship between Total Product (TP) and Average Product (AP)?

Answer 9

TP = AP x QL

Question 10

How is Average Product (AP) calculated?

Answer 10

AP = TP / QL

Question 11

What is the formula for Marginal Product (MP)?

Answer 11

MP = Δ TP / Δ QL

Question 12

What indicates Returns to scale when %Δ Output > %Δ Input?

Answer 12

LRAC shaped downwards

Question 13

What does it mean when %Δ Output = %Δ Input in Returns to scale?

Answer 13

LRAC constant/flat

Question 14

What indicates Returns to scale when %Δ Output < %Δ Input?

Answer 14

LRAC shaped upwards

Question 15

How is Profit calculated?

Answer 15

Profit = TR - TC

Question 16

What is the condition for Supernormal Profit / Abnormal Profit?

Answer 16

TR > TC

Question 17

What indicates Subnormal Profit / Loss?

Answer 17

TR < TC

Question 18

What is the condition for Normal Profit / Sales Max?

Answer 18

TR = TC

Question 19

What is the profit maximization rule?

Answer 19

MR = MC

Question 20

What condition indicates Revenue Max?

Answer 20

MR = 0

Question 21

What indicates Sales Maximisation?

Answer 21

AR = AC

Question 22

What is Profit Satisficing?

Answer 22

• Any point between profit max. and sales max.

Question 23

What is Allocative Efficiency?

Answer 23

D = S, MSB = MSC, P = MC

Question 24

What indicates Productive Efficiency?

Answer 24

Minimum of AC

Question 25

How is Concentration Ratio defined?

Answer 25

Number of firms : Total Market Share

Question 26

What does Opportunity cost on a PPC represent?

Answer 26

Δ Y/Δ X

Question 27

What is the formula for Quantity Demanded?

Answer 27

Qd = a - b(P)

Question 28

What does 'a' represent in the Quantity Demanded formula?

Answer 28

Intercept (Qd when P=0)

Question 29

What does 'b' represent in the Quantity Demanded formula?

Answer 29

Slope

Question 30

What is the formula for Quantity Supplied?

Answer 30

Qs = c + d(P)

Question 31

What does 'c' represent in the Quantity Supplied formula?

Answer 31

Intercept (Qs when P=0)

Question 32

What does 'd' represent in the Quantity Supplied formula?

Answer 32

Slope

Question 33

What is the formula for Price Elasticity of Demand (PED)?

Answer 33

PED = %Δ Qd / %Δ P

Question 34

How is % Change calculated?

Answer 34

(Final - Initial) / Initial x 100

Question 35

What is the formula for Price Elasticity of Supply (PES)?

Answer 35

PES = %Δ Qs / %Δ P

Question 36

What does Income Elasticity of Demand (YED) measure?

Answer 36

YED = %Δ Qd / %Δ Y

Question 37

What is the formula for Aggregate Demand (AD)?

Answer 37

AD = G + C + I + (X-M)

Question 38

How is GDP Deflator calculated?

Answer 38

GDP Deflator = Nominal GDP / Real GDP x 100

Question 39

What is the formula for Unemployment rate?

Answer 39

Unemployment rate = Unemployed / Labour force x 100

Question 40

How is Labour force defined?

Answer 40

Labour force = unemployed + employed

Question 41

What is the formula for Consumer Price Index (CPI)?

Answer 41

CPI = (Value of basket in a specific year / Value of basket in base year) x 100

Question 42

How is Inflation measured?

Answer 42

%Δ of Consumer Price Index

Question 43

What is Real Income?

Answer 43

Real Income = Nominal Income / CPI x 100

Question 44

What is the formula for Marginal Tax?

Answer 44

Marginal Tax = Δ Tax / Δ Income

Question 45

How is Average Tax calculated?

Answer 45

Average Tax = Total Tax / Income