Economic Formulas

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Last updated 8:48 AM on 3/8/26
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74 Terms

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Price Elasticity of Demand (PED)
% change in quantity demanded / % change in price
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Elastic Demand
PED > 1
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Inelastic Demand
PED < 1
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Price Elasticity of Supply (PES)
% change in quantity supplied / % change in price
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Elastic Supply
PES > 1
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Inelastic Supply
PES < 1
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Income Elasticity of Demand (YED)
% change in quantity demanded / % change in income
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Inferior Good
YED < 0
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Normal Good
YED > 0
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Necessity Good
0 < YED < 1
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Luxury Good
YED > 1
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Cross Price Elasticity of Demand (XED)
% change in quantity demanded of good A / % change in price of good B
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Substitute Goods
XED > 0
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Complementary Goods
XED < 0
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Consumer Surplus
Willingness to pay – market price
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Producer Surplus
Market price – minimum supply price
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Community (Social) Surplus
Consumer surplus + producer surplus
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Market Surplus
Quantity supplied > quantity demanded
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Market Shortage
Quantity demanded > quantity supplied
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Government Tax Revenue
Consumer tax burden + producer tax burden
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Accounting Profit
Total revenue – explicit costs
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Economic Profit
Total revenue – (explicit costs + implicit costs)
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Average Product (AP)
Total product / labour input
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Marginal Product (MP)
Change in total product / change in labour
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Total Cost (TC)
Total fixed cost + total variable cost
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Average Total Cost (ATC or AC)
Total cost / quantity OR AFC + AVC
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Marginal Cost (MC)
Change in total cost / change in quantity
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Average Fixed Cost (AFC)
Total fixed cost / quantity
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Average Variable Cost (AVC)
Total variable cost / quantity
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Total Revenue (TR)
Price × Quantity
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Average Revenue (AR)
Total revenue / quantity
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Demand Curve for Firm
AR = Price = Demand
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Marginal Revenue (MR)
Change in total revenue / change in quantity
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Supernormal (Economic) Profit
(TR > TC) OR (AR – AC) × Q
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Subnormal Profit (Loss)
(TC > TR) OR (AC – AR) × Q
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Normal Profit
TR = TC OR AR = AC
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Profit Maximisation
MR = MC
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Revenue Maximisation
MR = 0
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Growth Maximisation
AR = AC
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Allocative Efficiency
P = MC OR AR = MC
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Productive Efficiency
MC = AC at minimum AC
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GDP (Income Method)
Wages + profits + rent
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GDP (Expenditure Method)
C + I + G + (X – M)
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Gross National Income (GNI) / GNP
GDP + net property income from abroad
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Net Property Income from Abroad
Income earned from foreign assets – income paid to foreign assets
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GDP per Capita
GDP / population
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Aggregate Demand (AD)
C + I + G + (X – M)
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Multiplier (MPC formula)
1 / (1 – MPC)
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Multiplier (Leakages formula)
1 / (MPS + MPM + MPT)
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Multiplier Effect
Change in real GDP / change in government spending
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Money Multiplier
1 / minimum reserve requirement
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Real GDP
(Nominal GDP / GDP deflator) × 100
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GDP Deflator
(Nominal GDP / Real GDP) × 100
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Economic Growth Rate
(Real GDP current year – Real GDP previous year) / Real GDP previous year × 100
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Consumer Price Index (CPI)
Cost of basket in given year / cost of basket in base year × 100
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Inflation Rate
(CPI current year – CPI previous year) / CPI previous year × 100
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Unemployment Rate
Number unemployed / labour force × 100
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Natural Rate of Unemployment
Frictional + structural + seasonal unemployment
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Gini Coefficient
A / (A + B)
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Perfect Equality (Gini)
Gini = 0
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Perfect Inequality (Gini)
Gini = 1
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Average Tax Rate
Total tax paid / total income × 100
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Marginal Tax Rate
Change in tax paid / change in income × 100
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Disposable Income
Total income – income tax
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Opportunity Cost
Input of good X / input of good Y
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Exchange Rate Conversion
If 1 SGD = X USD, then 1 USD = 1/X SGD
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Current Account Balance
Trade in goods + trade in services + net income flows + net transfers
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Balance of Payments Identity
Current account = capital account + financial account + net errors and omissions
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Marshall–Lerner Condition
PED of exports + PED of imports > 1
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Human Development Index (HDI)
Higher value indicates higher level of development
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Gender Inequality Index (GII)
Higher value indicates greater gender inequality
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Real Interest Rate
Nominal interest rate – inflation rate
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Terms of Trade
Export price index / import price index × 100

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