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Formulas To KnowChapter 12 NotesSpecial Topics: Uncertainty and Information LectureChapter 20 NotesInequality, Poverty, and Income DistributionExam 1 ReviewExam 2 ReviewExam 3 ReviewAdditional Lectures Study Guide:Lecture and TextbookECO 2023Dr. McCalebTable of Contents:FORMULAS TO KNOW 2 CHAPTER 12 NOTES 5 SPECIAL TOPICS: UNCERTAINTY AND INFORMATION LECTURE 6 CHAPTER 20 NOTES 10 INEQUALITY, POVERTY, AND INCOME DISTRIBUTION 11 EXAM 1 REVIEW 14 EXAM 2 REVIEW 16 EXAM 3 REVIEW 18 `Formulas To KnowReview from Midterm 1: - Slope of a Line:o M = Change in Y over change in X o M = ΔY/ΔXo M = Y2-Y1/X2-X1- Net Benefit (NB):o NB = Total Benefit – Total Cost o NB = TB - TC- The optimal amount of any activity:o Is when the Marginal Benefit is equal to the Marginal Costo When MB = MC- Marginal Benefit (MB):o MB = Change in Total Benefit/Change in Quantityo MB = ΔTB/ΔQ o MB = (TB2-TB1)/(Q2-Q1)- Marginal Cost (MC):o MC = Change in Total Cost/ Change in Quantityo MC = ΔTC/ΔQ o MC = (TC2-TC1)/(Q2-Q1)- When to increase the amount of an activity (Production Possibilities Frontier):o If Marginal Benefit > Marginal Costo If MB > MC - When to decrease the amount of an activity (Production Possibilities Frontier):o If Marginal Cost > Marginal Benefit o If MC > MB - Labor Force (LF):o = Employed + Unemployedo = E + U- Market Equilibriumo When the quantity demanded equals the quantity supplied. o Equilibrium: QD=QSMidterm 2:- Price Elasticity of Demand:o Elasticity (η) = % Change in Quantity Demanded / % Change in Priceo = %ΔQD / %ΔP-Midpoint Method to Calculating the Price Elasticity:o Percent Change in Quantity = [(New Quantity – Initial Quantity) / ((New Quantity + Initial Quantity) / 2)] x 100o %ΔQ = [(Q2 - Q1) / ((Q2 + Q1) / 2)] x 100o Percent Change in Price = [(New Price – Initial Price) / ((New Price + Initial Price) / 2)] x 100o %ΔP = [(P2 - P1) / ((P2 + P1) / 2)] x 100- Price elasticity of supply:o Elasticity (η) = % change in quantity supplied / % change in priceo = %ΔQS / %ΔP- Cross elasticity of demand:o Elasticity (η) = % change in quantity demanded of a good / % change in the price of one of its substitutes or complements. o = %ΔQD / %ΔPS/C- Income elasticity of demand:o Elasticity (η) = % change in quantity demanded / % change in incomeo = %ΔQD / %ΔI- Total Revenue and the Price Elasticity of Demando Total Revenue (TR) = Total Expenditure (TE) = Price (P) x Quantity (Q)o TR = PQ or TE = PQ o Change in Total Revenue = Change in Price + Change in Quantity Demandedo ΔTR = ΔP + ΔQ- Consumer Surpluso Consumer Surplus (CS) = Marginal Benefit – Priceo CS = MB - P- Producer Surpluso Producer Surplus (PS) = Price – Marginal Costo PS = P – MC- Efficient Quantityo When Marginal Benefit = Marginal Costo When MB = MC- Market Equilibriumo When quantity demanded = quantity suppliedo Where QD = QS- Consumer Surpluso The marginal benefit from a good or service in excess of the price paid for it, summed over the quantity consumed o CS = MB / QD- Producer Surpluso The price of a good in excess of the marginal cost of producing it, summed over the quantity supplied. o PS = MC / QS- Total Surpluso The sum of producer surplus and consumer surplus. o TS = PS + CS- Deadweight Losso The Total Surplus of Efficient quantity and price (TSE) – the total surplus of the inefficient quantity and price (TSI)o TSE- TSI- Marginal Social Benefito The sum of the marginal private benefit and the marginal external benefit. o MSB = MB + MEB- Marginal Social Costo The sum of the marginal private cost and the marginal external cost. o MSC = MC + MECMidterm 3:- Individual Transferrable Quotas (ITQ)o The marginal private cost with the ITQ equals the marginal social cost and the equilibrium with the ITQ is efficiento MC + Price of ITQ = MSC- Private Property Rightso The marginal cost of fishing equals the marginal social cost. o S= MC = MSC- Economic Profito = Total Revenue minus the total costo = (Price x Quantity) – (explicit costs + implicit costs)o = (PQ)- (EC+IC)o = (PQ) – (Total Fixed Cost + Total Variable Cost)o = (PQ) – (TFC + TVC)- Total Costo = Explicit Costs + Implicit Costso = Total Fixed Cost + Total Variable Costo Opportunity Cost- Average Total Costo = Average Fixed Cost + Average Variable Costo = AFC + AVC- Marginal Revenue Equals Priceo When an additional unit is sold, the increase in total revenue equals the price. o (ΔTR + ΔQ) = MR = PChapter 12 NotesCitation:Bade, Robin, and Michael Parkin. Foundations of Microeconomics. 6th ed. Boston: Pearson/Addison-Wesley, 2013. Print.Private InformationInformation relevant to a transaction that is possessed by some market participants but not all (292). Asymmetric InformationA situation in which either the buyer or the seller has private information (292).Lemons ProblemThe problem that when it is not possible to distinguish reliable products from lemons, there are too many lemons and too few reliable products (292).Adverse SelectionThe tendency for people to enter into transactions that bring them benefits from their private information and impose costs on the uninformed party (295). SignalingWhen an informed person takes an action that sends information to uniformed people (296). Pooling EquilibriumThe outcome when only one message is available and an uninformed person cannot determine quality (297).Separating EquilibriumThe outcome when signaling provides full information to a previously uninformed person (297).Moral HazardThe tendency for a person with private information to use it in different ways that impose costs on an uninformed party with whom they have made an agreement (301).Screening When an uninformed person creates an incentive for an informed person to reveal relevant private information (302).Special Topics: Uncertainty and Information LectureCitation:McCaleb, Thomas. "Special Topics: Uncertainty and Information." Florida State University. 0102 Bellamy, 113Collegiate Loop Tallahassee, FL. 17 April 2014. PowerPoint Lecture.Asymmetric Information is a Source of InefficiencyWhen one party to a transaction has more relevant or better information than the other party. Asymmetric information increases the cost to the less-informed person of entering into a transaction with the better informed person. Some transactions that could make both parties better off do


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