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Revision:Formulae

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PED

  • \frac{\% \mathrm{change\ in\ quantity}}{\% \mathrm{change\ in\ price}}
  • \mathrm{\frac{change\ in\ quantity}{original\ quantity} \times \frac{original\ price}{change\ in\ price}}
\frac{\Delta Q}{Q} \times \frac{P}{\Delta P}
  • \frac{\Delta Q}{Q1 + Q2} \times \frac{P1 + P2}{\Delta P}
    • PED >1 elastic
    • PED <1 inelastic
    • PED =1 unitary

PES

PES = \frac{\% \mathrm{change\ in\ quantity\ supplied}}{\% \mathrm{change\ in\ price}}

YED

  • \frac{\% \mathrm{change\ in\ quantity}}{\% \mathrm{change\ in\ income}}
\frac{\% \Delta Q}{\% \Delta Y}
  • \frac{\Delta Q}{Q1 + Q2} \times \frac{Y1 + Y2}{\Delta Y}
    • positive = normal good
    • negative = inferior good
    • YED > 1 = luxury good

XED

  • \frac{\Delta Qy}{\Delta Px}
    • Substitutes: XED > 0
    • Complements: XED <0

Macroeconomics

  • APC: the proportion of income consumed
APC = \frac{C}{Y}
  • APS: the proportion of income saved
APS = \frac{S}{Y}
  • APC + APS = 1
  • MPC = \frac{\Delta C}{\Delta Y}
  • MPS = \frac{\Delta S}{\Delta Y}
  • MPC + MPS = 1
  • \mathrm{Consumption} = \mathrm{autonomous\ C + MPC \times Income}
C = a + b(Y)
  • AD = C + I + G + (X-M)
  • m = \frac{Y}{I}
  • m = \frac{1}{MPS} in a simple closed economy.
  • Gov. Spending m = \frac{Y}{G}
  • Bank/credit m = \frac{1}{\mathrm{Reserve\ ratio}}
  • MV = PQ
    • M = Money Supply
    • V = income velocity of circulation
    • P = price level
    • Q = real GDP
    • Monetarists believe: \Delta M = \Delta P
  • Standard of Living = \frac{\mathrm{Real\ GDP}}{\mathrm{Population}}


If you need anymore help, here are some useful notes for IB economics: [1]

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