BEC Formulas (Economics)

Question 1

Price Elasticity of Demand

Answer 1

% change in quantity demanded / % change in price

Question 2

Income Elasticity of Demand

Answer 2

% change in quantity demanded / % change in income

Question 3

Cross Elasticity of Demand

Answer 3

% change in quantity demanded for product X / % change in quantity demanded for product Y

Question 4

Price Elasticity of Supply

Answer 4

% change in quantity supplied / % change in price

Question 5

Marginal Propensity to Save

Answer 5

change in savings / change in disposable income

Question 6

Marginal Propensity to Consume

Answer 6

change in spending / change in disposable income

Question 7

Returns to Scale : increases in output that result from increases in production costs

Answer 7

% increase in output / % increase in input

Question 8

Increase in Output (Equilibrium GDP)

Answer 8

change in spending / marginal propensity to save (MPS)

Question 9

Expenditure Approach for GDP

Answer 9

The “expenditure approach” to GDP determination includes personal consumption expenditures (C), gross private domestic investment (Ig), government purchases of goods and services (G), and exports minus imports or net exports (Xn). GDP = C + Ig + G + Xn

Question 10

Income Approach for GDP

Answer 10

Business profits, compensation to employees, and capital consumption allowance (depreciation) are all variables used in the “Income Approach” to GDP determination.