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Economics > Microeconomic formulas/MCQ points > Flashcards

Microeconomic formulas/MCQ points Flashcards

1
Q

How is YED calculated?

A

% change in QD /
% change in income

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2
Q

How is XED calculated?

A

% change in QD of A /
% change in Price of B

If XED negative, its complementary, if its positive, its a substitute

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3
Q

How is PED calculated?

A

% change in QD
divided by
% change in P

HINTSB

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4
Q

How is PES calculated?

A

% change in QS
divided by
% change in P

PSSST

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5
Q

How are total costs calculated?

A

TC = TFC + TVC

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6
Q

How are avg costs calculated?

As well as AFC and AVC?

A

AC = TC / Q
AFC = TFC / Q
AVC = TVC / Q

AC is also known as ATC.

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7
Q

How do you calculate labour productivity?

A

Output / Total no. of workers

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8
Q

How is MC calculated?

(marginal cost)

A

Change in TC / Change in Q

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9
Q

How is TR calculated?

A

TR = P x Q

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10
Q

How is average revenue calculated?

A

AR = TR / Q

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11
Q

How is MR calculated?

(marginal revenue)

A

Change in TR / Change in Q

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12
Q

How is profit calculated?

A

TR - TC

TR = TC is profit and TR > TC is supernormal profit.

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13
Q

How are concentration ratios calculated, (calculating n-firm things)? + idea behind it

(Oligopolies)

A
  • e.g. 3 firms control 90% of market, with 40 firms controlling another 10% of the market.
    For calculations…
    3-firm concentration ratio = 90%:
  • if market worth £45m, and 3-firm concentration needs to be calculated…
  • 3 biggest firms have revenues of £15m, £9m and £7m…
  • 3 firm concentration ratio is 15+9+7 / 45 x 100 = 68.9%.

(check flashcard 15)

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14
Q

The formula for calculating concentration ratio…

A
  • revenue of each firm / total market value x 100

(check flashcard 14)

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15
Q

How to calculate MRP…

A

MRP = MPP x MR
(marginal revenue product = marginal physical product x marginal revenue)

MR = price or avg revenue (AR)

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16
Q

Why does MPP lower at some point?

(On a table)

A
  • Due to the law of diminishing returns.
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17
Q

A function of the market mechanism…

A
  • Providing incentives for firms to provide goods to make a profit
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18
Q

When calculating elasticities…

A
  • % NOT required on calculator
  • Remember to CORRECTLY POSITION VALUES in correct spaces ON FORMULA
  • If below 1, inelastic and if above 1, elastic
  • When looking at final value, plus or minus sign is IRRELEVANT
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19
Q

YED answers/values…

A

For a normal good:
- If YED income elastic/ + value - Normal luxury good
- If YED income inelastic? ‘-‘ value -> Normal necessity good
For an inferior good:
- If YED +1, income elastic
- If YED -1, income inelastic
- If YED zero, perfectly income inelastic

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20
Q

Working out govt. tax revenue from supply curves on diagram…

(MCQs)

(Be mindful of units e.g. price or qty may be in thousands etc)

A

To work out govt. tax revenue…
- highest price - lowest price on diagram (Price at y-axis) OR correct axis value
- Then, multiply this by qty at s2 (qty at x-axis)
—–> (Highest price - lowest price) x qty s2

(Revenue = price x qty)

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21
Q

Working out tax per unit when the govt. imposes an indirect tax…

(MCQs)

A
  • Difference between highest price and lowest price
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22
Q

A left shift in AD leads to…

(UK financial crisis0

A
  • Negative output gap and cyclical unemployment

(With additional LRAS curve and SRAS curve)

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23
Q

According to Fisher’s equation of exchange, most likely effect of inflation would be…

A
  • Rise in (V) and fall in (Q)
24
Q

At what level of employment can a firm max. its output…

A
  • Perhaps when marginal returns are at its lowest
25
Q

A firm in a perfectly competitive market…

A
  • Minimises its losses by staying in the market in the short-run
26
Q

In a monopsony labour market, where is employer’s profit-maximising wage rate and level of employment is a…

(Single employer and competitive labour supply)

A
  • Perhaps where lowest wage…
27
Q

If MCQ question involves labour markets…

A
  • know that answer should link with labour market terms e.g. earning and MRP
28
Q

Most likely short-run trade-off between macroeconomic objectives being achieved

A
  • Govt. budget deficit rises as unemployment rate reduced
29
Q

What to do when working out consumer surplus change on diagram - For MCQs

A
  • Pick answer in overall consumer and producer surplus area or ‘triangle’
30
Q

For MCQs

A
  • Link logical specific corresponding terms with answer and do not go to uncorresponding terms

(When its close, most of the time ;)

31
Q

Most likely result from increase in bank rate

A
  • Rise in savings from risen I.R rates
32
Q

MCQ links for price and subsidy (when subs are in question)…

A
  • Reduction in price
33
Q

If a good is inelastic, what could a firm do to boost its profits?

A
  • Boost the good’s price, and vice versa
34
Q

When MCQ diagram shows different prices ‘if it had been’ or ‘would have’ points…

A
  • When looking at amount buyers, look at price and quantity, not just price! -> Then, adjust the movements
35
Q

If things unit elastic…

A
  • Same rises and falls in changes
36
Q

When looking at MCQ tables…

A
  • Know whether to look at last value or first value etc
  • Underline q words
37
Q

According to Fisher’s equation of exchange, most likely effect of inflation would be…

A
  • Rise in (V) and fall in (Q)
38
Q

At what level of employment can a firm max. its output…

A
  • Perhaps when marginal returns are at its lowest
39
Q

A firm in a perfectly competitive market…

A
  • Minimises its losses by staying in the market in the short-run
40
Q

In a monopsony labour market, where is employer’s profit-maximising wage rate and level of employment is a…

(Single employer and competitive labour supply)

A
  • Perhaps where lowest wage…
41
Q

If MCQ question involves labour markets…

A
  • know that answer should link with labour market terms e.g. earning and MRP
42
Q

Working out govt. tax revenue from supply curves on diagram…

(MCQs)

(Be mindful of units e.g. price or qty may be in thousands etc)

A

To work out govt. tax revenue…
- highest price - lowest price on diagram (Price at y-axis) OR correct axis value
- Then, multiply this by s2 qty
—–> (Highest price - lowest price) x qty s2

(Revenue = price x qty)

43
Q

Working out tax per unit when the govt. imposes an indirect tax…

(MCQs)

A
  • Difference between highest price and lowest price
44
Q

Calculating subsidy value and consumer surplus on subsidy diagram…

(For MCQs)

A

For producer revenue:
- The enitre ‘rectangular’ section down till the bottom of diagram
- Calculate each corner (highest - lowest)

  • To calculate subsidy value, find the vertical difference between the two supply curves.
45
Q

Change in national income…

A

Initial injection x multiplier

46
Q

Calculate unemployment rate

A

No. of unemployed / labour force x 100

47
Q

Calculate taxable income

A

Income - Tax free allowance

48
Q

Calculate average rate of tax

A

Tax paid / income x 100

49
Q

Calculate marginal rate of tax…

A

Change in tax paid / change in income x 100

50
Q

How to calculate total product…

A

Total product / qty of labour

51
Q

Sales are maximised at

A

AR = AC

52
Q

Profits maximised at

A

MC = MR

53
Q

Revenue is maximised at

A

MR = 0

54
Q

Allocative efficiency occurs at

A
  • P = MC
  • MPB = MSB
  • D = S1
55
Q

Productive efficiency occurs at

A
  • MC = AC
  • On AC at Q
56
Q

Calculate gini coefficient

A

Area between lorenz curve and LOPE / Total area beneath LOPE

Economics (16 decks)

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