IB Economics ALL formulas, equations and condiions

Total Fixed Cost (TFC) + Total Variable Cost (TVC)

or

Average cost (AC) x Q

Total Cost (TC) - Total variable Cost (TVC)

or

Average Fixed Cost (AFC) x Q

Total Cost (TC) - Total Fixed Cost (TFC)

or

Average Variable Cost (AVC) x Q

Total Cost (TC) / Q

or

Average Fixed Cost (AFC) + Average Variable Cost (AVC)

Total Fixed Cost (TFC) / Q

or

Average Cost (AC) - Average Variable Cost (AVC)

Total Variable Cost (TVC) / Q

or

Average Cost (AC) - Average Fixed Cost (AFC)

ΔTC / ΔQ

Change in Total Cost / Change in Quantity

P x Q

Price x Quantity

Price (P)

ΔTR / ΔQ

Change in total revenue / Change in Quantity

AP x Q_L

Average Product x Quantity of Labour

TP / Q_L

Total Product / Quanity of Labour

ΔTP / ΔQ_L

Change in Total Product / Change in Quantity of Labour

Increased return to scale (LRAC curve slopes downwards)

Constant returns to scale (LRAC curve is flat)

Decreased return to scale (LRAC curve will slope upwards)

TR - TC

Total Revenue - Total cost

or

AR - AC (calculation per unit)

Average revenue - Average Cost (calculation per unit)

TR > TC

Total Revenue > Total Cost

AR > AC (Calculation per unit)

Average Revenue > Average Cost (Calculation per unit)

TR < TC

Total Revenue < Total Cost

AR < AC (Calculation per unit)

Average Revenue < Average Cost (Calculation per unit)

TR = TC

Total Revenue = Total Cost

AR = AC

Average Revenue = Average Cost

MR = MC

Marginal Revenue = Marginal Cost

MR = 0

Marginal Revenue = Zero

AR = AC

Average Revenue = Average Cost

Any quantity between profit maximisation and sales maximisation

D = S

Demand = Supply

or

MB = MC

Marginal Benefit = Marginal Cost

or

P = MC

Price = Marginal Cost

Lowest point of the Average Cost Curve (AC)

On Average Cost Curve (AC) at any quantity (Q)

Long-Run supernormal profit (Re-invested back into the company)

Minimum output level where all Economies of Scale are fully exploited (Minimum Point on LRAC curve)

AR = AVC

Average Revenue = Average Variable Cost

If AR < AVC = should shut down

If AR > AVC = continue operating

Micro - Theory of the Firm

n : market share

number of firms (n) : total market share

AU x Q

Average Utility x Quantity

TU / Q

Total Utility / Q

ΔTU / ΔQ

Change in Total Utility / Change in Quanity

MU = 0

Marginal Utility = Zero

or

MU = P

Marginal Utility = Price

% ΔQ_d / % ΔP

% Change in Quantity Demanded / % change in Price

% ΔQ_s / % ΔP

% Change in Quantity Supplied / % change in Price

% ΔQ_da / % ΔP_b

% Change in Quantity Demanded of Good A / % change in Price in Good B

% ΔQ_d / % ΔY

% Change in Quantity Demanded / % change in Income

[(new - old) / old] x 100

[Raw Number / Base Year Raw Number] x 100

An employer will empoly workers up unti Marginal Revenue Price (MRP) = Marginal Cost of Labour (MC_L)

A / (A+B)

C + I + Gs + Xn

Consumption + Investment + Government Spending + Net Exports

Output Method: The final value of all goods and services produced in an economy

Income Method: All factor incomes earned in an economy (wages, salaries, rent, profit, interest)

Expenditure Method: C + I + Gs + Xn

[Nominal GDP / Price Index] x 100

[Nominal GDP / Real GDP] x 100

GDP + Net Factor Income

Net Factor Income = (Any income earned by domestic factors of production abroad - Any income earned by foreign factors of production domestically)

GDP - Environmental Costs

Investment + Government Spending + Export = Savings + Taxation + Imports (equillibrium)

Investment + Government Spending + Export > Savings + Taxation + Imports (growth)

Investment + Government Spending + Export < Savings + Taxation + Imports (shrinking)

1 / 1 - Marginal Propensity to Consume (MPC)

Initial Injection x Keynesian Spending Multiplier

↑ Rate of GDP Growth → ↑ Investment

Government Spending > Tax Revenue (in a fiscal year)

Government Spending < Tax Revenue (in a fiscal year)

[Unemployed / (Employed + Unemployed) ] x 100

1. Convert Price to Index ([raw number / Base Year Raw Number)] x 100)

2. Multiply by weights

3. Add up weighted prices

4. Divide by total weight

Nominal Interest rate - Inflation rate

Income - Tax Free Allowance

[Income Tax Paid / Total Income Earned] x 100

[Δ Income Tax Paid / Δ Total Income Earned] x 100

Income Earned < 1.90$ per day

Income Earned < 50% of Median Income

Financial Account + Capital Account Surplus

Financial Account + Capital Account Deficit

• If the sum of the PEDs for imports and exports is greater than 1, i.e. PEDm + PEDx > 1, devaluation/depreciation will imporve the trade balance (making deficit smaller)

• If the sum of the two PEDs is less than 1, devaluation/depriciation will worsen the trade balance (making the deficit bigger

• If the sum of the two PEDs is equal to 1, devaluation/depriciation will leave the trade balance unchanged

[Index of Export Prices / Index of Import Prices] x 100

0.8 and obove - Very High

0.7 - 0.79 High

0.55 - 0.69 - Medium

< 0.55 - Low

[Interest Rate on the Bond / Market Price of the Bond] x 100

1 / Reserve Requirement (r)