Posted by Anjali Kaur on Nov 15, 2021

# Important Formulas used in Microeconomics

Important Formulas used in Microeconomics, Class XI, CBSE include formulas from introduction to Microeconomics, Demand, supply, and market. You can also download the formula list at the end of this post.

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## Formulas and Key Concepts

• Slope of the Production Possibility Curve is Marginal Opportunity Cost
• PPC is also known as the Production Possibility Frontier or Transformation Curve.
• PPC is generally Concave in shape.
• Price Elasticity of Demand (Ped) =  Percentage Change in Quantity Demanded by Percentage Change in Price
• Percentage change in quantity demanded =  Change in Quantity Demanded over Original Quantity Demand x 100
• Where P means original or old price, Q means original or old quantity
• Ped is a pure number with no unit of its own.
• Marginal Utility (MU) =  Change in TU upon Change in units consumed
• MU =  TU2 – TU1
• TU = U1 + U2 + U3 + ……. so on
• Downward sloping portion of Demand curve is also called Demand Curve.
• Budget Equation is -> M = P1X1 + P2X2 ; M is income or money income, P1 is price of good1, P2 is price of good2, X1 is quantity of good 1, X2 is quantity of good 2, P1X1 is expenditure on good 1, P2X2 is expenditure on good 2
• Slope of budget line = – Price ratio
• Indifference  curve slope is Marginal rate of substitution ( MRS)
• IN INDIFFERENCE CURVE ANALYSIS CONSUMER ATTAINS EQUILIBRIUM WHEN MRSxy = Change in Y over Change in X, ALSO IC SHOULD BE CONVEX TO THE ORIGIN AT THAT POINT.
• Supply curve is positively sloped
• Price Elasticity of Supply =  Percentage change in Quantity Supplied/ Percentage change in Price
• Total Product TP = Total output produced X number of labour units
• Average Product AP of labour= TP/L  ; AP of capital =  TP/K
• TOTAL COST TC = TOTAL FIXED COST (TFC) + TOTAL VARIABLE COST (TVC)
• TC = FC + VC
• AC = AFC + AVC
• MC IS ALSO CALLED SMC OR SHORT RUN MARGINAL COST. ALL COST CURVES ARE U SHAPED, EXCEPT AFC IT IS RECTANGULAR HYPERBOLA BECAUSE AREAS UNDER THE CURVE REMAINS THE SAME.
• UPWARD SLOPING PORTION OF MC CURVE IS ALSO CALLED SUPPLY CURVE.
• TFC ALWAYS REMAINS FIXED, IT NEVER CHANGES
• TVC IS O AT O LEVEL OF OUTPUT
• TC AND TFC STARTS FROM THE SAME POINT
• TC AND TVC ARE PARALLEL TO EACH OTHER AND THEY ARE INVERSE S SHAPE

TOTAL REVENUE (TR) = P X Q

• AR IS ALWAYS EQUALS TO THE PRICE
• MARKETS;  PERFECT COMPETITION ONLY EARNS NORMAL PROFIT IN THE LONG RUN WITH A PROFIT MAXIMIZATION CONDITION OF MR = MC AND MC SHOULD BE RISING
• MONOPOLY HAVE INELASTIC AR AND MR CURVES AND MR = ½ OF AR
• MONOPOLISTIC HAVE ELASTIC AR AND MR CURVES WITH MR = ½ OF AR

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Take a look at some other practice tests for class XI, Economics:

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