Formulas
Change in TC/ Change in Q
Total Profit is
TR - TC
Where is Profit Maximization
output where MR=MC
Price elasticity of supply
measures how responsive the quantity supplied of a good is to changes in its price.
Marginal Revenue is
Change in TR /Change in Q
Total Cost is
TVC + TFC
If MR>MC at an output the producers will
keep producing more
When sellers are sensitive to price changes the supply is more_____________
elastic
Profit is
Revenue - Costs
Total fixed costs are
costs that do not vary with output
If MR<MC a producer will
stop producing and decrease production
Let's say a toy supply elasticity is high and the price of the said toy goes up. What happens to supply?
Supply increases greatly.
ATC is
the average cost per unit of output.
TC/Q
increase as quantity produced increases
When profit is negative
it is called a loss
What does high elasticity of supply mean?
The amount that producers supply is greatly affected when there is a change in price of a good.
Total Revenue (TR) is
AFC is
Total fixed cost/ output
Normal profit
is when profit is zero. This is what firms want.
What does low elasticity of supply mean?
The amount that producers supply is not very affected when there is a change in price of a good.