# Important Formulas in Microeconomics | Class 11

### Chapter: Introduction

#### 1. Marginal Rate of Transformation

#### 2. Marginal Opportunity Cost (MOC)

### Chapter: Consumer’s Equilibrium

#### 1. Total Utility (TU)

TU_{n} = U_{1} + U_{2} + U_{3} + ……………..+ U_{n}

Where,

TU_{n} = Total Utility from n units of a given commodity

U_{1}, U_{2}, U_{3}, …………….., U_{n} = Utility from the 1^{st}, 2^{nd}, 3^{rd}, …………., n^{th} unit

n = Number of units consumed

OR

TU= ∑MU

#### 2. Marginal Utility (MU)

MU_{n} = TU_{n} – TU_{n-1}

Where,

MU_{n} = Marginal Utility from n^{th} unit

TU_{n} = Total Utility from n units

TU_{n-1} = Total Utility from n-1 units

n = Number of units consumed

OR

#### 3. Marginal Utility in terms of Money (Consumer’s Equilibrium in Single Commodity Case)

#### 4. Equilibrium Condition in case of Single Commodity

Let’s say, the consumer is in consumption of a single commodity ‘x’.

- The consumer will be in equilibrium if MU
_{x}= P_{x} - The consumer will not be in equilibrium if MU
_{x}> P_{x} - The consumer will not be in equilibrium if MU
_{x}< P_{x}

#### 5. Equilibrium Condition in case of Two Commodities

Let’s say, the consumer is in consumption of two commodities ‘x’ and ‘y’.

- The consumer will be in equilibrium if

and MU falls as consumption increases

- The consumer will not be in equilibrium if
- The consumer will not be in equilibrium if

#### 6. Marginal Rate of Substitution (MRS)

OR

#### 7. Algebraic Expression of Budget Line

M = (P_{A} x Q_{A}) + (P_{B} x Q_{B})

Where,

M = Money Income

Q_{A} Quantity of Apples (A)

Q_{B} = Quantity of Bananas (B)

P_{A} = Price of each Apple

P_{B} = Price of each Banana

#### 8. Algebraic Expression of Budget Set

M ≥ (P_{A} x Q_{A}) + (P_{B} x Q_{B})

Where,

M = Money Income

Q_{A} Quantity of Apples (A)

Q_{B} = Quantity of Bananas (B)

P_{A} = Price of each Apple

P_{B} = Price of each Banana

#### 9. Slope of Budget Line

#### 10. Price Ratio

#### 11. Condition of Consumer’s Equilibrium by Indifference Curve Analysis

- OR Slope of Indifference Curve = Slope of Budget Line
- MRS continuously falls

### Chapter: Demand

#### 1. Individual Demand Function

D_{x} = f(P_{x}, P_{r}, Y, T, F)

Where,

D_{x} = Demand for Commodity x

f = Functional Relationship

P_{x} = Prices of the given Commodity x

P_{r} = Price of Related Goods

Y = Income of the Consumer

T = Tastes and Preferences

F = Expectation of Change in Price in future

#### 2. Market Demand Function

D_{x} = f(P_{x}, P_{r}, Y, T, F, P_{o}, S, D)

Where,

D_{x} = Demand for Commodity x

f = Functional Relationship

P_{x} = Prices of the given Commodity x

P_{r} = Price of Related Goods

Y = Income of the Consumer

T = Tastes and Preferences

F = Expectation of Change in Price in future

P_{o} = Size and Composition of population

S = Season and Weather

D = Distribution of Income

#### 3. Market Demand Schedule

D_{m} = D_{A} + D_{B} + ……….

Where,

D_{m} = Market Demand

D_{A} + D_{B} + ………. = Individual Demands of Household A, Household B, and so on.

#### 4. Slope of Demand Curve

#### 5. Cross Demand

D_{x} = f(P_{y})

Where,

D_{x} = Demand for the given Commodity

f = Functional Relationship

P_{y} = Price of Related Commodity (Substitute or Complementary)

### Chapter: Elasticity of Demand

#### 1. Elasticity of Demand

**i) Percentage Method:**

**ii) Geometric Method:**

#### 2. Price Elasticity of Demand

**i) Percentage Method:**

Where,

**ii) Proportionate Method:**

Where,

Q = Initial Quantity Demanded

Q_{1} = New Quantity Demanded

= Change in Quantity Demanded

P = Initial Price

P_{1} = New Price

= Change in Price

#### 3. Degrees of Elasticity of Demand

| E |

| E |

| E |

| E |

| E |

### Chapter: Production Function: Returns to a Factor

#### 1. Production Function

O_{x} = f(i_{1}, i_{2}, i_{3} …………… i_{n})

Where,

O_{x} = Output of Commodity x

f = Functional Relationship

i_{1}, i_{2}, i_{3} …………… i_{n} = Inputs needed for O_{x}

#### 2. Total Product (TP)

Total Product (TP) = AP x Units of Variable Factor

OR

TP_{n} = MP_{1} + MP_{2} + MP_{3} +…………….MP_{n}

OR

TP = ∑MP

#### 3. Average Product (AP)

#### 4. Marginal Product (MP)

MP_{n} = TP_{n} – TP_{n-1}

Where,

MP_{n} = Marginal Product of n^{th} unit of variable factor

TP_{n} = Total products of n units of variable factor

TP_{n-1} = Total product of n-1 units of variable factor

n = Number of units of variable factor

OR

#### 5. Relationship between TP and MP

- MP increases when TP increases at an increasing rate
- MP starts declining when TP increases at a diminishing rate
- MP is zero when TP is maximum
- MP is negative when TP decreases

#### 6. Relationship between AP and MP

- AP increases when MP>AP
- AP is constant and at its maximum point when MP = AP
- AP falls when MP<AP
- MP becomes negative, and AP remains positive

### Chapter: Concepts of Cost and Revenue

#### 1. Cost Function

C = f(q)

Where,

C = Cost of Production

f = Functional Relationship

q = Quantity of Output

#### 2. Total Cost (TC)

Total Cost (TC) = Total Fixed Cost (TFC) + Total Variable Cost (TVC)

#### 3. Average Fixed Cost (AFC)

#### 4. Average Variable Cost (AVC)

#### 5. Average Cost (AC)

OR

AC = AFC + AVC

#### 6. Marginal Cost (MC)

MC_{n} = TC_{n} – TC_{n-1}

Where,

n = Number of Units Produced

MC_{n} = Marginal Cost of the n^{th} unit

TC_{n} = Total Cost of n units

TC_{n-1} = Total Cost of n-1 units

OR

#### 7. Relationship between AC and MC

- AC falls when MC < AC
- AC is constant and at its minimum point when MC = AC
- AC rises when MC>AC
- MC increases at a faster rate as compared to AC

#### 8. Relationship between AVC and MC

- AVC falls when MC<AVC
- AVC is constant and at its minimum point when MC = AVC
- AVC rises when MC>AVC
- MC increases at a faster rate as compared to AVC

#### 9. Relationship between TC and MC

- MC decreases when TC rises at a diminishing rate
- MC is at its minimum point when the rate of increase in TC stops diminishing
- MC increases when TC rises at an increasing rate

#### 10. Relationship between TVC and MC

- Area under the Curve MC= TVC

#### 11. Total Revenue (TR)

Total Revenue = Quantity x Price

OR

TR_{n} = MR_{1} + MR_{2} + MR_{3} +…………….MR_{n}

OR

TR = ∑MR

#### 12. Average Revenue (AR)

#### 13. Marginal Revenue (MR)

MR_{n} = TR_{n} – TR_{n-1}

Where,

MR_{n} = Marginal Revenue of n^{th} unit

TR_{n} = Total Revenue of n units

TR_{n-1} = Total Revenue of n-1 units

n = Number of Units Sold

OR

#### 14. Relationship between AR and MR

**When Price remains Constant:**AR = MR and both curves coincide with each other in a horizontal line parallel to the X-axis

#### 15. Relationship between TR and MR

**When Price remains Constant:**TR increases at a constant rate, and the slope of the TR curve is a positive straight line because of constant MR

#### 16. Relationship between TR and Price Line

- Area under the curve MR = Area under the Price Line = TR

#### 17. Relationship between AR and MR

**When Price falls with rise in Output:**Slope of AR and MR curve is downward from left to right, but MR falls at a rate twice the fall rate in AR

#### 18. Relationship between TR and MR (When Price falls with rise in Output)

- TR increases as long as MR is positive
- TR is at its maximum point when MR = 0
- TR starts falling when MR becomes negative

#### 19. Break-even Point

- Break-even Point is determined when TR = TC or AR = AC

#### 20. Shut-down Point

- Shut-down Point is determined when TR = TVC or AR = AVC

### Chapter: Producer’s Equilibrium

#### 1. Conditions for Producer’s Equilibrium (MR-MC Approach)

- MC = MR
- MC > MR after MC = MR Output Level

#### 2. Conditions for Producer’s Equilibrium (TR-TC Approach)

- Difference between TR and TC is positively maximised
- Total profits fall after that output level

### Chapter: Theory of Supply

#### 1. Individual Supply Function

S_{x} = f(P_{x}, P_{o}, P_{f}, S_{t}, T, G)

Where,

S_{x} = Supply of the given Commodity x

f = Functional Relationship

P_{x} = Price of the given Commodity x

P_{o} = Price of other Goods

P_{f} = Price of Factors of Production

S_{t} = State of Technology

T = Taxation Policy

G = Goals of the firm

#### 2. Market Supply Function

S_{x} = f(P_{x}, P_{o}, P_{f}, S_{t}, T, G, N, F, M)

Where,

S_{x} = Supply of the given Commodity x

f = Functional Relationship

P_{x} = Price of the given Commodity x

P_{o} = Price of other Goods

P_{f} = Price of Factors of Production

S_{t} = State of Technology

T = Taxation Policy

G = Goals of the firm

N = Number of firms

F = Future expectations regarding P_{x}

M = Means of transportation and communication

#### 3. Market Supply Schedule

S_{m} = S_{A} + S_{B} + ……………..

Where,

S_{m} = Market Supply

S_{A} + S_{B} + …………….. = Individual Supply of Supplier A, Supplier B and so on

#### 4. Slope of Supply Curve

#### 5. Price Elasticity of Supply

**i) Percentage Method:**

Where,

**ii) Proportionate Method:**

Where,

Q = Initial Quantity Supplied

Q_{1} = New Quantity Supplied

= Change in Quantity Supplied

P = Initial Price

P_{1} = New Price

= Change in Price

#### 6. Kinds of Elasticities of Supply

| E |

| E |

| E |

| E |

| E |

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