Economics

Macro and micro relationships: national output, inflation, elasticity and the theory of money

Economics formulas help you make sense of how whole economies and individual markets work, from measuring GDP, inflation, and unemployment to understanding elasticity, costs, and spending effects. This category is useful for students, exam revision, and anyone applying economics in real-world analysis, because these formulas turn complex economic ideas into clear, testable relationships that show how policy, prices, and production affect people and businesses.

GDP (Expenditure Approach)

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

National output measured as total spending by households, firms, government and net exports.

GDP Growth Rate

g = \dfrac{GDP_1 - GDP_0}{GDP_0}\times 100\%

The percentage change in real output between two periods.

Inflation Rate

\pi = \dfrac{CPI_1 - CPI_0}{CPI_0}\times 100\%

The rate at which the general price level rises over time.

Unemployment Rate

u = \dfrac{Unemployed}{Labor\ Force}\times 100\%

The share of the labor force that is jobless and actively seeking work.

Real GDP

Real\ GDP = \dfrac{Nominal\ GDP}{Deflator}\times 100

Output adjusted for inflation, so growth reflects real production, not rising prices.

GDP Deflator

Deflator = \dfrac{Nominal\ GDP}{Real\ GDP}\times 100

A broad price index covering all goods in GDP, not just a consumer basket.

Price Elasticity of Demand

E_d = \dfrac{\%\Delta Q_d}{\%\Delta P}

How responsive quantity demanded is to a change in price.

Price Elasticity of Supply

E_s = \dfrac{\%\Delta Q_s}{\%\Delta P}

How responsive quantity supplied is to a change in price.

Marginal Cost

MC = \dfrac{\Delta TC}{\Delta Q}

The added cost of producing one more unit of output.

Marginal Revenue

MR = \dfrac{\Delta TR}{\Delta Q}

The added revenue from selling one more unit of output.

Marginal Propensity to Consume

MPC = \dfrac{\Delta C}{\Delta Y}

The fraction of an extra dollar of income that is spent rather than saved.

Spending Multiplier

k = \dfrac{1}{1 - MPC}

How much total output rises from an initial change in spending.

Quantity Theory of Money

M \times V = P \times Q

Links the money supply and its velocity to the price level and real output.

Fisher Equation

i \approx r + \pi

Relates nominal interest rates to the real rate plus expected inflation.

Consumer Surplus

CS = \tfrac{1}{2}\times \Delta P \times \Delta Q

The benefit consumers gain when they pay less than the maximum they were willing to pay.

GDP (Expenditure)

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

Gross domestic product by spending.

Price Elasticity of Demand

E_d = \frac{\%\Delta Q}{\%\Delta P}

Responsiveness of demand to price changes.

Consumer Price Index

CPI = \frac{\text{Basket now}}{\text{Basket base}}\times 100

Measures price levels relative to a base year.

Inflation Rate

\pi = \frac{CPI_1 - CPI_0}{CPI_0}\times 100

Percentage change in the price index.

Unemployment Rate

u = \frac{\text{Unemployed}}{\text{Labor Force}}\times 100

Fraction of the labor force without work.

Spending Multiplier

k = \frac{1}{1 - MPC}

Total impact of spending given marginal consumption.

Real GDP

Real = \frac{Nominal}{Deflator}\times 100

GDP adjusted for inflation.

Marginal Utility

MU = \frac{\Delta U}{\Delta Q}

Extra satisfaction from one more unit.

Opportunity Cost

OC = \frac{\text{what you give up}}{\text{what you gain}}

Value of the next best alternative foregone.

GDP per Capita

\frac{GDP}{Population}

Average economic output per person.