Economic Formulas

The following formulas are used in economics classes.
Macroeconomics

 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

 

 GDPGDP                                                                                                 

 

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

Microeconomics

 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)

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