exam material

ECN-601-Economics: Exam 1 Formula Sheet

Elasticity

Price Elasticity of Demand

Ep =

Price Elasticity of Supply

Ep =

Income Elasticity

Ep =

Cross-Price Elasticity

EXY =

Mid-Point Formula or Arc-Price Elasticity

Where Q1, Q2 is quantity 1 and quantity 2 for prices P1 and P2 respectively.

Quantities can be quantity supplied or demanded depending on the problem.

Costs

TC = TFC+TVC

ATC = TC/Q

AFC = TFC/Q

AVC = TVC/Q

MC = ∆TQ/∆Q

MR = ∆TR/∆Q

Profit = TR – TC or Profit = (P-ATC) * Q

Economic Profit = TR – (Implicit + Explicit) Costs

Accounting profit = TR – Explicit Costs

Net Present Value

PV = FV / (1+r)k

FV = future value

PV = present value

r = yearly rate of return

k = number of years

or

Present Value = = -C0 + + +……+

C – cash flow

r – yearly rate of return

n – number of periods

Break-even point is given by the formula

Break-even point (units) = Fixed Cost/ (Selling Price per unit – Variable cost per unit)

QB = TFC/(P-AVC)

QB – break-even point (units)

TFC – total fixed costs

P – selling price per unit

AVC – variable cost per unit