Economics formulas. ( Micro and Macro).

1. PED = %∆𝑸𝒅 ii) YED = %∆𝑸𝒅

%∆𝑷 %∆𝒀

2. PES = %∆𝑸𝒔
%∆𝑷

3. Calculating the effect of excise tax on consumers and producers.

1. 𝒄𝒐𝒏𝒔𝒖𝒎𝒆𝒓 𝒔𝒖𝒓𝒑𝒍𝒖𝒔 = 𝑷 𝒊𝒏𝒕𝒆𝒓𝒄𝒆𝒑𝒕 𝒐𝒇 𝑫 𝒄𝒖𝒓𝒗𝒆 −
𝑷 𝒐𝒇 𝒄𝒐𝒏𝒔𝒖𝒎𝒆𝒓𝒔 𝑿 𝑸𝒖𝒂𝒏𝒕𝒊𝒕𝒚 𝒑𝒖𝒓𝒄𝒉𝒂𝒔𝒆𝒅
2

2. 𝑷𝒓𝒐𝒅𝒖𝒄𝒆𝒓 𝒔𝒖𝒓𝒑𝒍𝒖𝒔 = 𝑷 𝒐𝒇 𝒑𝒓𝒐𝒅𝒖𝒄𝒆𝒓𝒔 −

𝑷 𝒊𝒏𝒕𝒆𝒓𝒄𝒆𝒑𝒕 𝒐𝒇 𝑺𝟏 𝒄𝒖𝒓𝒗𝒆 𝑿 𝑸 𝒔𝒐𝒍𝒅
2

4. Incidence of indirect tax of consumers = (𝑷𝒄 − 𝑷 ∗) 𝑿 𝑸𝒕

Incidence of producers = (𝑷 ∗-Pp) X Qt

5. Calculating the effects of subsidies on consumers and producers.

1. Consumer surplus = 𝑷 𝒊𝒏𝒕𝒆𝒓𝒄𝒆𝒑𝒕 𝒐𝒇 𝑫 𝒄𝒖𝒓𝒗𝒆 −
𝑷 𝒐𝒇 𝒄𝒐𝒏𝒔𝒖𝒎𝒆𝒓𝒔 𝑿 𝑸 𝒑𝒖𝒓𝒄𝒉𝒂𝒔𝒆𝒅
2

2. Producer surplus = P of producers – P intercept of S1 X Q sold

2

6. 1. AP = TP 2. MP = ∆TP
Unit of labour (input) ∆ 𝑼𝒏𝒊𝒕 𝒐𝒇 𝒍𝒂𝒃𝒐𝒖𝒓 (𝒊𝒏𝒑𝒖𝒕)

7. Economic cost = Total Explicit cost + Total Implicit cost

8. TC = TVC+TFC

9. ATC = AVC + AFC OR TC/Q (AVC=TVC/Q) (AFC= TFC/Q)

10. 𝑴𝑹 = ∆𝑻𝑹/∆𝑸 𝑨𝑹 = 𝑻𝑹/𝑸

11. Profit = Profit/Q X Q

a. P= Minimum AVC = Shut down price

b. P= minimum ATC = normal or zero profit

c. P> 𝐴𝑇𝐶 = 𝐸𝑐𝑜𝑛𝑜𝑚𝑖𝑐 𝑜𝑟 𝑠𝑢𝑝𝑒𝑟 𝑛𝑜𝑟𝑚𝑎𝑙 𝑝𝑟𝑜𝑓𝑖𝑡

 d. ATC> 𝑃 > 𝐴𝑉𝐶 = 𝑙𝑜𝑠𝑠 𝑏𝑢𝑡 𝑐𝑜𝑛𝑡𝑖𝑛𝑢𝑒 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛

e. P< 𝐴𝑉𝐶 = 𝑠ℎ𝑢𝑡 𝑑𝑜𝑤𝑛

12. GDP = C+I+G+(X-M)

13. Calculating GDP 1) Income approach 2) expenditure approach 3) output
approach.
14. Green GDP = GDP- the value of environmental degradation.
15. GNI = GDP + Inflow - outflow
𝒏𝒐𝒎𝒊𝒏𝒂𝒍 𝑮𝑫𝑷
16. GDP deflator = 𝑿 𝟏𝟎𝟎
𝒓𝒆𝒂𝒍 𝑮𝑫𝑷

𝑵𝒐𝒎𝒊𝒏𝒂𝒍
𝑮𝑫𝑷
17.Real GDP = 𝑷𝒓𝒊𝒄𝒆 𝑿 𝟏𝟎𝟎
𝒑𝒓𝒊𝒄𝒆 𝒅𝒆𝒇𝒍𝒂𝒕𝒐𝒓

∆ 𝒊𝒏 𝑹𝑮𝑫𝑷
18.Keynisian multiplier =
𝒊𝒏𝒊𝒕𝒊𝒂𝒍 ∆ 𝒊𝒏 𝒆𝒙𝒑𝒆𝒏𝒅𝒊𝒕𝒖𝒓𝒆

𝟏
19. The relationship between Multiplier and MPC is Multiplier is =
𝟏−𝑴𝑷𝑪
20. The value of the multiplier = MPC+MPS+MPT+MPM=1
𝒖𝒏𝒆𝒎𝒑𝒍𝒐𝒚𝒆𝒅
21. Unemployment rate = 𝒏𝒖𝒎𝒃𝒆𝒓 𝒐𝒇 𝑿 𝟏𝟎𝟎
𝒍𝒂𝒃𝒐𝒖𝒓 𝒇𝒐𝒓𝒄𝒆

22. CPI (Inflation) =

𝒔𝒑𝒆𝒄𝒊𝒇𝒊𝒄 𝒚𝒆𝒂𝒓
𝒗𝒂𝒍𝒖𝒆 𝒐𝒇 𝒃𝒂𝒔𝒌𝒆𝒕 𝒐𝒇 𝒈𝒐𝒐𝒅𝒔 𝒂𝒏𝒅 𝒔𝒆𝒓𝒗𝒊𝒄𝒆𝒔 𝒊𝒏 𝒂 𝑿 𝟏𝟎𝟎
𝒗𝒂𝒍𝒖𝒆 𝒐𝒇 𝒕𝒉𝒆 𝒔𝒂𝒎𝒆 𝒃𝒂𝒔𝒌𝒆𝒕 𝒊𝒏 𝒃𝒂𝒔𝒆 𝒚𝒆𝒂𝒓

𝒊𝒏𝒊𝒕𝒊𝒂𝒍 𝒗𝒂𝒍𝒖𝒆
23. Rate of inflation = 𝒇𝒊𝒏𝒂𝒍 (𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝒗𝒂𝒍𝒖𝒆 − 𝑿 𝟏𝟎𝟎
𝒊𝒏𝒊𝒕𝒊𝒂𝒍 𝒗𝒂𝒍𝒖𝒆

24. Economic growth. %∆ 𝒊𝒏 𝑹𝑫𝑷 = 𝒇𝒊𝒏𝒂𝒍 𝒗𝒂𝒍𝒖𝒆 𝒐𝒇 𝑹𝑮𝑫𝑷 −

𝒊𝒏𝒊𝒕𝒊𝒂𝒍 𝒗𝒂𝒍𝒖𝒆 𝒐𝒇 𝑹𝑮𝑫𝑷
𝑿 𝟏𝟎𝟎
𝒊𝒏𝒊𝒕𝒊𝒂𝒍 𝒗𝒂𝒍𝒖𝒆 𝒐𝒇 𝑹𝑮𝑫𝑷
𝐀
25. Gini co-efficiency (Lorenz curve of Inequality) = 𝐚𝐫𝐞𝐚 𝐚𝐫𝐞𝐚 𝐀+𝐁
26. Average tax rate = tax paid/ the total income X 100

27. Marginal tax rate = tax rate paid on additional income

Eg; annual income is $ 59 000.

Annual income $ Marginal tax rate (0x100000 + (0.09x15000) + (0.22x30000)

% +(0.40x4000) = 0+ 1350+ 6600+ 1600
0 – 10 000 0
10 001 – 25 000 9 = $ 9550.
25 001 - 55 000 22
55 001 - 1,15,000 40
1, 15, 001 and 55
above