Summary
Summary Formulas for Economics 114
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summary of the formulas used in Economics 114
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GDP Per Capita:!"# %&' ()* +*,'
-&./('+ ! 0 1&1.2,(3&/
Nominal GDP: 𝑝3 is the price of good 𝑖 , 𝑞3 is the quantity of good 𝑖
/
% 𝑝3 × 𝑞3
345
economic rent:
benefit from option taken − benefit from next best option
cost of combination of input (isocost):
cost = (wage × number of workers) + (price of a tonne of coal × number of tonnes) = (w×L)+(p×R)
OR cost = (price of input1 × quantity of input1) + (price of input2 × quantity of input2) + ⋯ + (price of
inputn × quantity of inputn)
Slope of isocost line:
!
−
"
Isocost equation: 𝑤 = 𝑤𝑎𝑔𝑒, 𝐿 = 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑤𝑜𝑟𝑘𝑒𝑟𝑠, 𝑝 = 𝑝𝑟𝑖𝑐𝑒 𝑜𝑓 𝑔𝑜𝑜𝑑𝑠, 𝑅 =
𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑜𝑓 𝑔𝑜𝑜𝑑𝑠
𝑐 = (𝑤 × 𝐿) + (𝑝 × 𝑅) = 𝑤𝐿 × 𝑝𝑅
Expressed in y=mx+c formula:
# !
𝑅= − 𝐿
" "
Generalised equation:
𝑄$ = 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑜𝑓 𝑔𝑜𝑜𝑑𝑠 𝑜𝑛 𝑦 − 𝑎𝑥𝑖𝑠, 𝑃$ = 𝑝𝑟𝑖𝑐𝑒 𝑜𝑓 𝑔𝑜𝑜𝑑𝑠 𝑜𝑛 𝑦 − 𝑎𝑥𝑖𝑠, 𝑄%
= 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑜𝑓 𝑔𝑜𝑜𝑑𝑠 𝑜𝑛 𝑥 − 𝑎𝑥𝑖𝑠, 𝑃% = 𝑝𝑟𝑖𝑐𝑒 𝑜𝑓 𝑔𝑜𝑜𝑑𝑠 𝑜𝑛 𝑥 − 𝑎𝑥𝑖𝑠, 𝑐
= 𝑡𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡 𝑟𝑒𝑔𝑎𝑟𝑑𝑖𝑛𝑔 𝑖𝑠𝑜𝑐𝑜𝑠𝑡 𝑙𝑖𝑛𝑒
# &"
𝑄$ = − 𝑄%
&! &!
Profit change in profit from switching from B to A: (economic rent of switching from B to A)
change in revenue − change in costs
Production function:
𝑌 = 𝑓(𝑋)
Average product of labour:
'(')* (,'",'
'(')* -,./01 (2 *)/(,1013
Maximum level of consumption: (income and substitution effect)
𝑐 = 𝑤(24 − 𝑡)
net utility per hour = wage − disutility of effort per hour = $12 − $2 = $10
total employment rent = employment rent per hour × expected lost hours of work = $10 per
hour × 1 540 hours = $15 400
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