Formulae
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• %D Q D / %D P
• D Q/Q * P/D P
• D Q/(Q1+Q2) * (P1+P2)/ D P
• >1 elastic // <1 inelastic // =1 unitary

PES: %D Q S / %D P

YED:

• %D QD / %D Y
• D Q/(Q1+Q2) * (Y1-Y2)/ D Y
• positive = normal good // negative = inferior good // YED > 1 = luxury good

XED: D Qy / D Px // Substitutes: XED > 0 // Complements: XED <0 //

APC: the proportion of income consumed, APC = C/Y

APS: APS = S/Y

APC + APS = 1

MPC: MPC = D C/D Y

MPS: D S/D Y

MPC + MPS = 1

C = a + b(Y) // Consumption = autonomous C + MPC*Income

AD = C + I + G + (X-M)

m = D Y/D I // also m = 1 / MPS in a simple closed economy.

Gov. Spending m = D Y/D G

Bank/credit m = 1 / Reserve Ratio

MV = PQ // M = Money Supply // V = income velocity of circulation // P = price level // Q = real GDP

Monetarists believe: D M à D P

Standard of Living = Real GDP / Population

Other Notes in this Category

1. Formulae
2. Inflation
3. Monetarism and Keynsianism
4. Resource Allocation in the Market
5. The Concept of Price

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