microfor.py

Created on October 16, 2025
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📘 MICROECONOMICS FORMULAS (Modules 1–4)

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MODULE 1 – Supply & Demand
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No direct formula, but key equilibrium:
Equilibrium condition: Qd = Qs

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MODULE 2 – Elasticity
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1. Price Elasticity of Demand (PED):
   PED = (%ΔQd) / (%ΔP)

2. Midpoint method (exam formula):
   PED = [(Q2 - Q1) / ((Q2 + Q1)/2)] ÷ [(P2 - P1) / ((P2 + P1)/2)]

3. Total Revenue (TR):
   TR = Price × Quantity

4. Income Elasticity of Demand (YED):
   YED = (%ΔQd) / (%ΔIncome)

5. Price Elasticity of Supply (PES):
   PES = (%ΔQs) / (%ΔP)

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MODULE 3 – Consumer Choice
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1. Budget Constraint:
   Px * X + Py * Y = I

2. Marginal Rate of Substitution (MRS):
   MRS = MUx / MUy = Px / Py

3. Utility Equilibrium condition:
   MUx / Px = MUy / Py

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MODULE 4 – Welfare, Taxes & Subsidies
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1. Consumer Surplus (CS):
   CS = Willingness to Pay – Price paid

2. Producer Surplus (PS):
   PS = Price received – Cost of production

3. Total Surplus (TS):
   TS = CS + PS

4. Tax incidence:
   Tax burden shared according to elasticity:
   Less elastic side bears more burden.

5. Government subsidy cost:
   Cost = Subsidy × Quantity sold

6. Deadweight Loss (DWL):
   DWL = 0.5 × (Change in price) × (Change in quantity)