Appendix: Key
formulae
AS Level
aggregate demand (AD)
AD = consumer expenditure + investment + government spending + (exports – imports)
=
C + I + G + (X – M)
average rate of taxation (art)
tax
paid
art =
=T
income
Y
cross elasticity of demand (XED)
% change in quantity demanded of product 𝐀
XED =
% change in the price of product 𝐁
equilibrium income in an open economy
equilibrium income in an open economy is achieved when investment +
government spending + exports = saving + taxation + imports
I+G+X=S+T+M
income elasticity of demand (YED)
% change in quantity demanded
XED =
% change in income
marginal rate of taxation (mrt)
change
in
tax
paid
mrt =
= ∆T
change in income ∆ Y
price elasticity of demand (PED)
% change in quantity demanded
PED =
% change in price
price elasticity of supply (PES)
% change in quantity supplied
PES =
% change in price
real GDP
price
index
in
base
year
real GDP = nominal GDP ×
price index in current year
terms of trade index
index
of
export
prices
terms of trade index =
× 100
index of import prices
total revenue (TR)
TR = price × quantity = P × Q
unemployment rate
unemployment rate
number
of
people
unemployed
=
× 100
number of people in the labour force
A Level
average fixed cost (AFC)
total
fixed
cost
average fixed cost (AFC) =
output
average product
total
product
average product =
number of workers
average revenue (AR)
AR = total revenue = TR
Q
quantity
average propensity to consume (apc)
consumption
C
apc = income = Y
average propensity to save (aps)
saving
S
aps = income = Y
average total cost (ATC)
total
cost
ATC =
output
average variable cost (AVC)
total
variable
cost
AVC =
output
bank credit multiplier
bank credit multiplier (after loans have been made)
= value of new assets created
value of change in liquid ssets
Bank credit multiplier (in advance) =
100
liquidity ratio
concentration ratio
4 firm concentration ratio = market size of top 4 firms ÷ total size of
market x 100%
consumption function
consumption = autonomous consumption + induced consumption
C = a + bY
equi-marginal principle:
MUA
MUB
MUC
MUN
=
=
... =
PA
PB
PC
PN
where MU = marginal utility
P = the price
A, B, C and N = different products
Fisher equation
money supply × velocity of circulation = price level × transactions
(output)
MV = PT
Gini coefficient
area
A
Gini coefficient =
area A + area B
marginal cost (MC)
change
in
total
cost
MC =
change in output
marginal propensity to consume (mpc)
change
in
consumption
∆
C
mpc =
=
change in income
∆Y
It can also be found by 1 – mps.
marginal propensity to import (mpm)
change
in
spending
on
imports
∆
M
mpm =
=
change in income
∆Y
marginal propensity to save (mps)
change
in
saving
∆
S
mps =
=
change in income ∆ Y
marginal revenue (MR)
change
in
total
revenue
∆
TR
MR =
=
change in quantity
∆Q
multiplier
change
in
income
∆
Y
multiplier =
=
change in injection ∆ J
1
1
multiplier =
= mpw
marginal propensity to withdraw
(mpw = mps + mrt + mpm)
profit
profit = total revenue – total costs, including normal profit
real exchange rate
nominal exchange rate × domestic price index
real exchange rate =
foreign price index
savings function
savings = – autonomous dissaving + induced saving
savings = – the amount that will be dissaved when income is zero + the
marginal propensity to save × income
S = –a + sY
social benefits (SB)
social benefits = private benefits + external benefits
social costs (SC)
social costs = private costs + external costs
supernormal profit
supernormal profit = total profit – normal profit
total cost (TC)
total cost = total fixed cost (TFC) + total variable cost (TVC)