# Economics Weight on the exam = 10% Number of formulas = 20   ## Formulas

#### Price elasticity of demand

Price elasticity of demand is the change in quantity demanded in response to a change in market price. Ep - price elasticity of demand

%Q - percent change in quantity demanded

%P - percent change in price Back on top

#### Cross elasticity of demand

Cross elasticity of demand is the change in quantity demanded in response to a change in market price of substitute or complimentary good. Ec - cross elasticity of demand

%Q - percent change in quantity demanded

%Ps or c - percent change in price of substitute or complimentary good Back on top

#### Income elasticity of demand

Income elasticity of demand is the change in quantity demanded in response to a change in consumer's income Ei - income elasticity of demand

%Q - percent change in quantity demanded

%I - percent change in consumer's income Back on top

#### Price elasticity of supply

Price elasticity of supply is the change in quantity supplied in response to a change in price Es - price elasticity of supply

%Qs - percent change in quantity supplied

%I - percent change in price Back on top

#### Total cost TC - total cost. It is the sum of all costs assosiated with the production of product

TFC - total fixed cost (property, plant and equipment plus normal profit, i.e. the value of the enterpreneurial ability of the firm's owners and managers.

TVC - total variable cost (labor, raw materials, fuel etc).

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#### Marginal cost MC - marginal cost. It is the increase in total cost for one additional unit of output

delta TC - change in total cost

delta Q - change in output

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#### Average fixed cost AFC - average fixed cost. It is total fixed cost per unit of output.

TFC - total fixed cost

Q - output

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#### Average variable cost AVC - average variable cost. It is total variable cost per unit of output.

TVC - total variable cost

Q - output

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#### Average total cost ATC - average total cost. It is total cost per unit of output.

TC - total variable cost

Q - output ATC - average total cost.

AFC - average fixed cost

AVC - average variable cost

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#### Unemployment rate

Unemployment rate is persentage of people in the labor forse who are unemployed Ru - unemployment rate

Nu - number of unemployed

LF - labor force

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#### Labor force participation rate

Labor force participation rate is the percentage of the working age population who are either employed or actively seeking employment. LFPR - labor force participation rate

WAP - working-age population

LF - labor force

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#### Employment-to-population ratio

Employment-to-population ratio is the persentage of employed in the working-age population ETPR - employment-to-population ratio

Ne - number of employed

WAP - working-age population

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#### CPI (Consumer price index)

CPI (Consumer price index) measures the average price of the defined basket of goods and services. CPI is an indicator of inflation. Basket consists of goods and services that represent a purchasing pattern of a typical urban household. CoBcur prices - cost of basket in current period

CoBbase prices - cost of basket in base period

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#### Inflation rate

Inflation rate is a percentage change in price level from a year ago. CPI0 - current CPI

CPI-1 - CPI year ago

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#### Aggregate demand

Aggregate demand is the sum of the demand for all final goods and services in the economy. C - consumption

I - investment

G - government spending

En - net export. It is equal to export minus import

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#### Potential deposit expansion multiplier

Potential deposit expansion multiplier is used to measure how much funds available for lending depending on the required reserve ratio. Required reserved ratio is a share of deposits that must be retained by the institution with the US Federal Reserve in either cash or as deposit PDEM - potential deposit expansion multiplier

RRR - required reserve ratio

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#### Potential increase in money supply

Potential increase in money supply measures the increase in amount of money supplied by institutions on the back of the increase in their excess reserves using potential deposit expansion multiplier. PIMS - potential increase in money supply

PDEM - potential deposit expansion multiplier

IES - increase in excess reserves

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#### Money multiplier

Money multiplier measures the extend of the change in money supply depending on the required reserve ratio and the percentage of money held in cash (currency drain effect) MM - money multiplier

RRR - required reserve ratio

c - currency drain. It is the effect when people hold money as currency instead of as deposits when money supply increases. Currency drain is measured as currency as a percentage of deposits.

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#### Change in quantity of money CQM - change in quantity of money

CMB - change in monetary base

MM - money multiplier

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#### Equation of exchange

Equation of exchange shows the relation between price, real output, money supply and velocity of money. M - money supply

V - velocity of money. It is the average number of times per year the currency unit is used to buy goods or services.

P - price

Q - real output

GDP - gross domestic product

The transformed equation of exchange illustrates the quantity theory of money. The latter states that an increase in money supply will cause a proportional increase in prices. Back on top

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