: Firms maximize profit where Marginal Revenue (MR) = Marginal Cost (MC) . 4. Elasticity: Measuring Sensitivity
: The cost of producing one more unit, found by taking the first derivative of the Total Cost function: microeconomics with simple mathematics pdf
Ed=%ΔQ%ΔP=dQdP⋅PQcap E sub d equals the fraction with numerator % cap delta cap Q and denominator % cap delta cap P end-fraction equals the fraction with numerator d cap Q and denominator d cap P end-fraction center dot the fraction with numerator cap P and denominator cap Q end-fraction : If , demand is elastic (consumers are sensitive to price). If , demand is inelastic. Summary Checklist for Microeconomic Math : Firms maximize profit where Marginal Revenue (MR)
subject to the budget constraint. Using the (the derivative of utility), consumers reach an optimum when the ratio of marginal utilities equals the ratio of prices: If , demand is inelastic