hi everybody formula key equations Key conditions for everything in the micro course use this to Blitz through your macro exams to access micro multiple choice questions your life will be so much easier so make sure you take all this information in let's get going with Theory The Firm total equations not just total cost but total fixed cost and total variable cost the easy way to get total cost is just total fixed cost plus total variable cost rearrange that to get TFC so TC minus total variable cost total variable cost is just total cost minus total fixed cost but the other way to get it is take the averages and multiply by Q so total cost just average cost multiply by Q total fixed cost average fixed cost multiply by Q TVC AVC multiplied by Q what about the average equations not just AC but AFC a VC well the easy way to get it take your total so TC divide by Q or TFC IDE by Q or here TVC IDE Q the other way to get it average cost is average fixed cost plus average variable cost rearrange that for AFC average cost minus AVC and average variable cost average cost minus average fixed cost so which equation do you use depends on the data you're given let that drive the equation that you use and now to marginal cost well a Nifty trick with any marginal equation it's just the average equation with changes in it so marginal cost is simply the change in total cost divided by the change in quantity your average equation with changes in it will always give you marginal move to revenue total revenue is p * Q average revenue yes is total revenue divided by q but if you expand that out TR is p * Q cancel out the like terms you're left with P so a nice trick average revenue is just price simple as that marginal revenue just the average equation with changes in it so now the change in total revenue divided by the change in quantity marginal revenue the product equations be careful with these we're working with the quantity of Labor so total product is average product multiplied by the quantity of Labor average product is total product divided by the quantity of Labor marginal product the same equation as average with changes in it so now the change in total product divided by the change in the quantity of Labor returns to scale uh to derive the shape of the long run average cost curve we are comparing the percentage change of output to the percentage change of input so if the percentage change of output is greater than the percentage change of input you get increasing returns to scale the LC Curve will slope downwards when the two are equal constant returns to scale the Curve will be uh not sloping down down or up it will be flat If the percentage change of output is less than the percentage change in input that is decreasing returns to scale go to profit now profit is total revenue minus total cost but also it's average revenue minus average cost that will give you profit per unit because we're working with averages very useful when we consider the next conditions coming super normal profit or abnormal profit is when TR is greater than TC or when AR is greater than AC that will be super normal profit per unit multiply that by quantity you get the total super normal profit that way subnormal profit or a loss more simply is when total revenue is less than total cost or an average revenue is less than average cost again that will be a loss per unit multipli by Q to get the total loss normal profit which is break even in economics is when TR equals TC or when AR equals AC but know that normal profit Break Even is also sales maximization it's also the limit price profit Max occurs when Mr is equal to MC Revenue Max is when Mr is zero sales Max we just said is when AR is equal to AC it occurs at break even profit satisficing occurs at any quantity between profit maximization and sales maximization great let's continue allocative efficiency very simply occurs where demand equals Supply more technically we can say it's where marginal benefit equals marginal cost assuming there are no externalities we can say it's where marginal social benefit equals marginal social cost but also on a market structures diagram we can say it occurs where price equals marginal cost price is average revenue which is the demand curve marginal cost is the supply code so all three is simply saying the same thing where demand equals Supply that's allocated efficiency for you productive efficiency occurs when a firm is operating at the lowest point on the average cost curve pure cost minimization there X efficiency occurs when a firm is operating on the average cost curve at any given quantity so not quite as Extreme as productive but economists would say a firm is minimizing waste minimizing cost at any given quantity for dynamic efficiency to occur they needs to be long run supernormal profit which is then reinvested back into the company the minimum efficient scale a very important point for a business here is the minimum output level whereby all economies of scale are fully exploited so it's the first output level where the lrc curve stops decreasing at that point all economies of scale are fully exploited the shutdown condition this occurs or the shutdown price when average revenue is equal to average variable cost if a firm is operating where AR is less than ABC that firm should shut down but if AR is greater than ABC they should continue operating in the short run shut down condition there a concentration ratio you will always write it in this form n the number of firms and then their total market share so for example if you need to calculate or work out a five firm concentration ratio n would be five the market share will be adding up the market shares of the five individual largest companies and then that would go there whatever the total market share is to work out total utility well this is just average utility multiplied by quantity if we go to average utility that's total utility divided by quantity if we take marginal utility same trick as always the average equation with changes in it so here the change in total utility divided by the change in quantity utility is maximized when marginal utility is zero or if there is a price where margin utility is equal to that price now elasticity equations just remember you Q before you P so price elasticity of demand is the percentage change in quantity demanded over the percentage change in price PS is the percentage change in quantity supplied over the percentage change in price cross elasticity of demand the percentage change in quantity demanded of one good call it good a over the percentage change in price of another call a good B income elasticity of demand is the percentage change change in quantity demanded over the percentage change in income to work out percentage change it's always the difference between two numbers divide by the original number times by 100 to work out an index number to convert a raw number to an index number you take the raw number that you want to convert and you divide by the raw number in the base here multiply that by 100 a profit Max employer in a labor market will employee workers up until where MRP is equal to the marginal cost of Labor and lastly the genie coefficient much better to learn this with words as opposed to using letters it's just the area between the Loren curve and line of perfect equality divided by the total area beneath the line of perfect equality so lope the line of perfect equality LC the Lorena much better way to learn it that way than just with letters from the Rens curve so that's it guys all the formulas the key equations Key conditions for everything in the micro course hopefully you've taken that all in and you're going to ace your micro exams because of it so thank you so much for watching make sure youve watched my macro video where I've done exactly the same thing for the macro course and I can't wait to see you in future videos [Music]