economics paper 3 equations

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66 Terms

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Percentage Change (%Δ)
%Δ \= (New - Old / Old) x 100
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Market Equilibrium
When Qd \= Qs
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PED (Price Elasticity of Demand)
%Δ in Qd of the product / %Δ in P of the product
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XED (Cross Elasticity of Demand)
%Δ in Qd of product A / %Δ of P of product B
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YED (Income Elasticity of Demand)
%Δ in Qd of the product / %Δ in the income of the consumer
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PES (Price Elasticity of Supply)
%Δ in Qs of the product / %Δ in P of the product
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PED Indicators (Values)
PED \> 1 - Price Elastic
PED < 1 - Price Inelastic
PED \= 1 - Unit Elastic
PED \= 0 - Perfectly Inelastic
PED \= ∞ - Perfectly Elastic
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XED Indicators (Values)
Positive Value - Substitutes
Negative Value - Complements
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YED Indicators (Values)
YED < 0 - Inferior Good
YED \> 0 - Normal Good
YED \> 1 - Luxury Good
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PES Indicators (Values)
PES \> 1 - Supply Elastic
PES < 1 - Supply Inelastic
PES \= 0 - Vertical Supply Curve (inelastic), 0 response to ΔP
PES \= ∞ - Horizontal Supply Curve (elastic)
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GDP (Gross Domestic Product)
GDP \= C + I + G + (X - M)

C: Consumption
I: Investment
G: Government Expenditure
X: Exports
M: Imports
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AD (Aggregate Demand)
AD \= C + I + G + (X - M)

C: Consumption
I: Investment
G: Government Expenditure
X: Exports
M: Imports
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GDP Per Capita
GDP / Population
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Nominal GDP
Quantity of goods x Price

or

Real GDP x GDP Deflator
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GNI (Gross National Income)
GNI \= GDP + (Income from abroad - Income sent abroad)
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Real GDP
Real GDP \= Nominal GDP / GDP Deflator

or

Quantity x Base Year Price

or

Money GDP x ( Price Index in a Base Year / Price Index in the Current Year)
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Green GDP / GGDP
Green GDP \= GDP - Environmental Costs of Production
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Keynesian Multiplier
1 / MPS + MPT + MPM

or

1 / 1-MPC

or

Changes in Real GDP / Initial Change in Spending
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MPC (Marginal Propensity to Consume)
MPC \= Change in Consumption / Change in Income
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MPS (Marginal Propensity to Save)
MPS \= Change in Savings / Change in Income
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MPT (Marginal Propensity to Tax)
MPT \= Change in Tax / Change in Income
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MPM (Marginal Propensity to Import)
MPM \= Change in Imports / Change in Income
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CPI (Consumer Price Index)
CPI \= ( Price of Goods in Specific Year / Price of Goods in the Base year ) x 100
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Inflation Rate
Inflation Rate \=
( CPI new - CPI old / CPI old ) x 100
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Weighted Price Index
( Cost of Basket in a specific year / Cost of Basket in the base year ) x 100
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Gini Coefficient
Area between the Line of Equality and Lorenz Curve / Entire area underneath the Line of Equality

or

A / A + B

(Refer to Lorenz Curve)
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Unemployment Rate
( Number of Unemployed People / Total Labour Force ) x 100
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Total Labour Force
Labour Force \= Total Number of Employed People + Total Number of Unemployed people
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TR (Total Revenue)
TR \= p x q
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AR ( Average revenue)
AR \= TR / q
AR \= (pxq) /q
so... AR \= p
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MR (Marginal Revenue)
Rate of Change in TR
∆TR / ∆Q
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AP (Average Product)
The output produced on average by each worker (variable factor)
TP / V
Total Product / Quantity of Labour (or other variable factor employed)
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MP (Marginal Product)
The extra output produced by using an extra worker (variable factor)

Rate of Change in TP
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TC (Total Cost)
TFC + TVC
Total fixed costs + Total variable costs
AC * Q
Average Cost * Quantity
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AFC (Average Fixed Cost)
The fixed cost per unit of output
TFC / q
q \= level of output
AFC falls as output is increased
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AVC (Average Variable Cost)
The variable cost per unit of output
TVC / q
q \= level of output
AVC tends to fall as output is increased
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ATC or AC (Average Total Cost)
The total cost per unit of output
TC / q
q \= level of output
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MC (Marginal Cost)
The total cost of producing an extra unit of output
change in TC / change in q
q \= level of output
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TFC (Total Fixed Costs)
Total Costs - Total Variable Costs
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TVC (Total Variable Costs)
Total Costs - Total Fixed Costs
AVC * C
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Terms of Trade
PED index of average export prices/ PED index of average import prices *100
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Rate of Change of Currency Value
Current Account + Capital Account + Financial Account + Errors \= 0
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Marshall Lerner Condition
PED of Exports + PED of Imports \> 1
Has to be elastic in order to have auto-correction of a trade deficit.
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Profit
TR - TC
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Supernormal (Abnormal) Profit
Occurs when AR\>AC
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Subnormal Profit
Occurs when AR
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Profit Maximization
MR\=MC
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Revenue Maximization
MR\=0
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When price is at AC\=AR...
Normal Profits, Sales Maximized, Break Even, Entry Limit Price.
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Allocative Efficiency
D\=S
MSB\=MSC
P\=MC
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Productive Efficiency
Minimum point on AC
AC\=MC
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X Efficiency occurs when...
At any point on AC
E.g X efficiency at point__
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Dynamic Efficiency
LR Abnormal Profits
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Minimum Efficient Scale
At the lowest quantity when AC stops decreasing
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Shutdown Condition
May Occur when AR\=AVC
Will occur when AR
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Average Utility
Total Utility / Q
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Marginal Utility
∆TU / ∆Q
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Utility Max
MU \= 0
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Social Cost
Private Costs + External Costs
Can be positive or negative
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Social Benefit
Private Benefits + External Benefits
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Profit Maximization in the Labour market
Marginal Revenue Product \= Marginal Cost of Labour
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Marshall-Lerner condition
PEDx + PEDm \> 1
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terms of trade
Average index price of exports / average index price of imports x 100
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taxable income
Total income - tax free allowance
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average rate of tax
Total income tax paid / total income x 100
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marginal rate of tax
Change in total income tax paid / change in total income x 100