Managerial Economics

ECN_601_Economics: Exam 2 Formula sheet

Topic 4: Price Discrimination

Relationship between price, revenue, and elasticity is given by

, the Lerner’s index, Current Margin of Price

, the inverse price elasticity of demand, Desired Margin of Price

P – Selling price of a good or a service

MC – cost of producing an additional good or a service

Topic 6: Labor Markets

Profit = TR – TC

Marginal Revenue Product of Labor

=

∆TR – change in the total revenue due to change in total productivity

∆L – change in labor (units)

MRP = MR (L) * MP (L)

= and =

MRP (L) = * =

Marginal Factor Cost of Labor

=

∆TC – change in the total cost due by hiring an additional unit of labor. This is the wage paid by hiring an additional unit of labor.

∆L – change in labor (units)

Average Product of labor

APL =

Topic 7: Uncertainty and Decision Making

Expected Value or Expected Monetary Value or Expected Benefits is given by

EV =

i – 1, 2, n

X – Random variable which can have ‘n’ number of values, (1, 2, .n)

P – Probability associated with each random variable, (P1, P2…... Pn)

For example,

EV =

Where,

Difference-in-Difference Estimate

	Pre-change	Post-Change	First Difference
Treatment Group	X11	X12	∆X = X12 –X11
Control Group	Y11	Y12	∆Y = Y12 –Y11
Second Difference			DID = ∆X - ∆Y