Econ Equations

# Econ Equations - “Consumer’s surplus” Value to buyers...

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Econ Equations Slope – rise over run *gradient – slope of line between 2 points on graph y/ x ∆ ∆ *related to cost Elasticity – “Responsiveness” of Y with respect to X % change in Y (the “effect”) % change in X (the “cause”) = Y/Y = Y X *Slope of graph of Y vs. X X/X X Y % Change** “Simple Method” P= 11-10=1 % P=1/10=.1=10% Q=4-5=-1 % Q=-1/5=.2=20% *elasticity Q w.r.t. P = 20%/10% = 2 “Midpoint method” Change=new-old Level=Avg. of new and old values *(new + old)/2

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% change=change/level *(new – old) / [(new + old)/2] X 100% ∆P=11-10=1 %∆P=1/ [(10 + 11)/2] = 1/10.5 = 9.52% ∆Q=4-5 = -1 %∆Q= -1/ [(4 + 5)/2] = 1/ 4.5 = 22.22% *elasticity Q w.r.t. P = 22.22 / 9.52 = 2.33 Cost 24 meat, or 48 potatoes, or combos in between “Cost” of 1 meat is 2 potatoes and “cost” of 1 potato is ½ meat Surplus “Total surplus” Value to buyers – cost to sellers *(consumer surplus + producer surplus)

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Unformatted text preview: “Consumer’s surplus” Value to buyers – amount paid by buyers “Producer’s surplus” Amount received by sellers – cost to sellers *amount paid by buyers = amount received by sellers Supply and Demand “Demand Function” Dx = f(Px,P1,P2,…, I, T, Z,…) Dx=Quantity of good x demanded Px= Price of good x P1= Price of good 1 (etc.) I= Level of income T= General Environment Z= Expectations “Supply Function” Dx= f(Px, P1, P2, …, W1, W2, …, Z,…) Dx= quantity of good x supplied Px= Price of good x P1= Price of good 1 (etc.) W1= Price of input 1 (etc.) Z= Expectations T-Stat T-statistic = Absolute value of regression coefficient Standard error for that regression coefficient *above 2 = statistically significant Confidence Interval Coefficient +/- (2 x standard error) *interval not including 0 = statistically significant...
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Econ Equations - “Consumer’s surplus” Value to buyers...

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