Economic Formulas

The following formulas are used in economics classes.

 Consumer Price Index                                                                            


Base Year Quantities x Current Year Prices  x 100 = CPI

  Base Year Quantities x Base Year Prices


 Cross Price Elasticity of Demand                                                            


Percentage Change in Quantity Demanded of Good X

        Percentage Change in Price of Good Y


 Elasticity of Supply                                                                                 


Percentage Change in Quantity Supplied

       Percentage Change in Price




Expenditure Method:

     C + I + G + X - M = GDP

     C + I + G + Xn = GDP


Income Method:

NI + Depreciation + Indirect Taxes - Subsidies + Net Income of Foreigners = GDP


 Real GDP                                                                                                


 Nominal GDP                                                                       x 100

CPI for the same year as the nominal figure OR

GDP deflator for the same year as the nominal figure


 GDP Deflator                                                                                          


Current Year Quantities x Current Year Prices x 100

Current Year Quantities x Base Year Prices


 Unemployment Rate                                                                              


number of unemployed x 100 = UR

        labor force


 Labor Force Participation Rate                                                             


number in labor force x 100 = LFPR

    adult population


 Labor Force                                           Labor Force                            


Employed + Unemployed = Labor Force


 Allocative Efficiency                                                                                  


Price = Marginal Cost (P = MC) or
Marginal Social Benefit = Marginal Social Cost (MSB = MSC)


 Average Fixed Cost                                                                                   


Average Fixed Cost (AFC) = Total Fixed Cost (TFC)

                                          Quantity of Output (Q)


 Average Product                                                                                       


Average Product (AP) = Total Production

                                   Quantity of Input


 Average Profit                                                                                           


Average Profit = Total Profit

                        Quantity (Q)


 Average Revenue                                                                                      


Average Revenue (AR) = Total Revenue (TR)

                                         Quantity (Q)


 Average Total Cost                                                                                    


Average Total Cost (ATC) = Total Cost (TC)

                                        Quantity of Output (Q)


 Average Variable CostAverage Variable Cost                                           


Average Variable Cost (AVC) = Total Variable Cost (TVC)

                                                Quantity of Output (Q)


 Cross Price Elasticity of Demand                                                               


Percentage change in quantity demanded of Good A

Percentage change in price of Good B


 Distributive Efficiency Condition                                                                

Marginal Utility of food (MUF)  =  Marginal Utility of clothes (MUC)

Price of food (PF)                               Price of clothes (PC)


 Elasticity of Demand                                                                                  


Percentage change in the quantity demanded

Percentage change in price


 Elasticity of Supply                                                                                    

Percentage change in the quantity supplied

Percentage change in price


Factor of Production Hiring Rule                                                                  


Marginal Revenue Product (MRP) = Marginal Resource Cost (MRC) or

Marginal Revenue Product (MRP) = Marginal Factor Cost (MFC)


 Gini Coefficient                                                                                            



 Marginal Cost                                                                                              


Marginal Cost = Change in Total Cost (ΔTC) = Change in Total Variable Cost (ΔTVC)

                          Change in Quantity (ΔQ)          Change in Quantity (ΔQ)


 Marginal Product of Labor                                                                          


Marginal Product of Labor (MPL) = Change in Total Product (ΔTP)

                                                        Change in Labor (ΔL)


 Marginal Revenue                                                                                       


Marginal Revenue (MR) = Change in Total Revenue (ΔTR)

                                          Change in Quantity (ΔQ)


 Marginal Revenue Product of Labor                                                           


Marginal Revenue Product of Labor (MRPL) = Marginal Product of Labor (MPL) x Marginal Revenue of output (MRoutput)