# All-in-one list with the Economics formulas

## 1. Topics in Demand and Supply Analysis

Price Elasticity

$Price~elasticity = \frac {\%\Delta~Quantity~demanded~(Qx)}{\%\Delta~Price~(Px)}$

$0 > e > -1 \rightarrow$ inelastic demand
$-1 > e > -∞ \rightarrow$ elastic demand
$e = -1 \rightarrow$ unit elastic demand
$e = 0 \rightarrow$ perfectly inelastic demand
$e = -∞ \rightarrow$ perfectly elastic demand

Income Elasticity

$Income~elasticity = \frac {\%\Delta~Quantity~demanded~(Qx)}{\%\Delta~Income~(Ix)}$

$e > 0 \rightarrow$ normal goods
$e < 0 \rightarrow$ inferior goods
$ε{_Y}$ = Income elasticity

Cross-price Elasticity

$Cross-price~elasticity = \frac {\%\Delta~Quantity~demanded~(Qx)}{\%\Delta~Price~of~a~related~good~(Py)}$

$e > 0 \rightarrow$ the related product is a substitute
$e < 0 \rightarrow$ the related product is a complement
$y$ = Related product
$ε{_{py}}$ = Cross-price elasticity

## 2. The Firm and Market Structures

For all market structures, Max Profit $\longrightarrow$ when $MC = MR$

$MC$ = Marginal cost
$MR$ = Marginal revenue

Breakeven points:
$AR = ATC$ (perfect competition)
$TR = TC$ (imperfect competition)

$ATC =$ Average Total Cost
$AR =$ Average Revenue
$TR =$ Total Revenue
$TC =$ Total Cost
$AR = ATC$ holds true in imperfect competition

Short-run shutdown points:
$AR < AVC$ (perfect competition)
$TR < TVC$ (imperfect competition)

Market structures:
Perfect Competition
Monopolistic Competition
Oligopoly
Monopoly

## 3. Aggregate Output, Prices, and Economic Growth

Total GDP = final value of goods and services produced (market value)
+ government services (at cost)
+ rental value of owner-occupied housing (an estimate)

$GDP~Deflator = \frac{Nominal~GDP}{Real~GDP} \times 100$
$Nominal~GDP{_t} = P{_t} \times Q{_t}$
$Real~GDP{_t} = P{_{b}} \times Q{_t}$

$t$ = Current year
$b$ = Base year
$P{_t}$ = Prices in year {_t}
$P{_b}$ = Prices in base year
$Q{_t}$ = Quantity produced in year {_t}

Expenditure Approach

$Real~GDP = Consumption~spending~(C) + Investment~(I) + Government~spending~(G) + Net~exports~(X-M)$

$X$ = Exports
$M$ = Imports

Income Approach

$Real~GDP = National~income + Capital~consumption~allowance + Statistical~discrepancy$
$Real~GDP = Consumption~spending~(C) + Savings~(S) + Taxes~(T)$
$Savings~(S) = Investments~(I) + Fiscal~Balance~(G-T) + Trade~Balance~(X-M)$
$S – I = Fiscal~Balance~(G-T) + Trade~Balance~(X-M)$

National Income = Employees’ compensation
+ Corporate and government profits before taxes
+ Interest income
+ Rent
− Subsidies

Personal Income = National income
+ Transfer payments (social insurance, unemployment or disability payments)
− Corporate income taxes
− Undistributed corporate profits

Personal Disposable Income = Personal income – Personal taxes

Potential GDP = Aggregate hours worked × Labor productivity
$\longrightarrow$ Aggregate hours worked = Labor force × Average hours worked per week
$\longrightarrow$ Growth in Potential GDP = Growth in labor force + Growth in labor productivity

The Production Function

$Y = A \times f (K, L)$

$Y$ = Aggregate output
$A$ = Total Factor Productivity (TFP)
$K$ = Capital
$L$ = Labor

Growth in Potential GDP = Growth in technology + WL × (growth in labor) + WC × (growth in capital)
WL = Labor’s percentage share of national income
WC = Capital’s percentage share of national income

$Unemployment~Rate = \frac {Number~of~unemployed~people}{Total~labor~force}$
$Participation~Rate~(Activity~Ratio) = \frac {Total~labor~force}{Total~working–age~population}$
$Labor~Force = Unemployed~people + Employed~people$

Unemployed = Looking for job

$Consumer~Price~Index = \frac {Cost~of~basket~at~current–year~prices}{Cost~of~basket~at~base–year~prices} \times 100$
$Laspeyres’ Index = \frac {\Sigma~(Current–year~price \times Base–year~quantity)}{\Sigma~(Base–year~price \times Base–year~quantity)}$
$Fisher’s~Index = \sqrt {(Laspeyres’~Index) \times (Paashe~Price~Index)}$
$Paashe~Price~Index = \frac {\Sigma~(Current–year~price \times Current–year~quantity)}{\Sigma~(Base–year~price \times Base–year~quantity)}$

## 4. Monetary and Fiscal Policy

$Money~Multiplier = \frac {1}{Reserve~requirement}$
$Fiscal~Multiplier = \frac {1}{1- MPC \times (1- t)}$

$MPC$ = Marginal propensity to consume
$t$ = Tax rate

Equation of Exchange

$MV = PY~(Money~supply \times Velocity = Price \times Real~output)$

Fisher Effect

$Nominal~Interest~Rate = Real~interest~rate + Expected~inflation~rate$

Neutral Interest Rate

$Neutral~interest~rate = Real~trend~rate~of~economic~growth + inflation~target$

## 5. International Trade and Capital Flows

GDP

$GDP = C + I + G + X - M$

$C$ = Consumption
$I$ = Investments
$G$ = Government Spending
$X$ = Export
$M$ = Import

Balance of Payments

$Current~Account + Capital~Account + Financial~ Account = 0$

$X - M = Private~Savings + Government~Savings - Investments~in~domestic~capital$

## 6. Currency Exchange Rates

$Real~Exchange~Rate = Nominal~exchange~rate \times \frac {CPI~base~currency}{CPI~price~currency}$