Microeconomics Formulas
Microeconomics formulas explained with examples.
Consumer surplus, producer surplus, elasticity, and market structures.
Cobb-Douglas Production Function
Q = A × L^α × K^β. The Cobb-Douglas production function models output from labor and capital inputs. Widely used in economics and econometrics.
Consumer Surplus Formula
Consumer surplus = ½ × Q × (Pmax - P). Measure the economic benefit consumers gain when they pay less than their maximum willingness to pay.
Lerner Index (Market Power Formula)
Lerner Index = (P - MC) / P. Measure a firm's market power: how far its price exceeds marginal cost. From 0 (competition) to 1 (monopoly).
Price Elasticity of Supply Formula
PES = (% change in quantity supplied) / (% change in price). Measure how responsive producers are to price changes. Includes elastic vs inelastic examples.
Producer Surplus Formula
Producer surplus = ½ × Q × (P_market - P_min). Measure the economic benefit sellers gain when they receive more than their minimum acceptable price.