Equations Flashcards
Total Product
output per factor X number of factors
average product
TP / units of variable input
Marginal product
change in TP / change of variable input
total cost
TC = TFC+TVC
TC = ATC X Q
total fixed cost
TFC = TC - TVC
TFC = AFC X Q
total variable cost
TVC = TC - TFC
TVC = AVC X Q
Average total cost
ATC = TP/Q
ATC = AFC + AFV
Average fixed cost
AFC = TFC/Q
AFC = ATC - AVC
average variable cost
AVC = TVC/Q
AVC = ATC - AFC
Marginal cost
MC=∆TC/∆Q
total revenue
TR= P X Q
Average revenue
AV=TR/Q=P
Marginal revenue
MR=∆TR/∆Q
AD Equation
C+I+G+(X-M)
GNI
GNI is the total income received by the residents of a country in a year, regardless to where the factors of production owned by the residents are located.
GNP
GNP = GDP + net income from abroad (ex foreign investment from abroad)
GDP Deflator
measures the level of prices of all final goods and services produced in an economy
GDP Deflator = (New price)/(Base year price) x 100
Calculating the GDP using the GDP deflator
Real GDP = (Nominal GDP)/(GDP deflator) x 100
Unemployment rate
Unemployment rate= (number of unemployed workers)/(labour force) x 100
Green GDP
GDP - depreciating environmental capital - expenditure arising from fixed damages done to the environment
Multiplier effect (definition)
how an increase in the initial price leads to a higher increase in national income (real GDP).
Marginal propensity to consume (MPC) (definition)
the portion of additional income used for consumption
Marginal propensity to save (MPS) (definition)
the portion of income used for savings
Marginal propensity to tax (MPT) (definition)
the proportion of additional income paid as tax
Marginal propensity to import (MPM) (definition)
the portion of income spent on imports
marginal propensity equation / what they equal
MPC + MPS + MPT + MPM = 1
Total income generated in a household (multiplier effect equation) / Keynesian multiplier
Total income generated = Initial injection X 1/(1-MPC) = 1/(MPS+MPT+MPM)
or
MPS+MPT+MP=MPC-1
Economic growth
(Real GDP - Real GDP from previous period)/(Real GDP or previous period) X 100
Inflation rate
(price index in year n - price index in previous year) / price index in previous year) X 100
price index in year n
(value of basket in year n) / (value of basket in base year) X 100
average tax rate
(tax amount) / (income amount) X 100
Marshall-Lerner condition for the devaluation/depreciation in currency
PEDx + PEDm > 1 = improvement in CAD
PEDx +PEDm =1 = no change
PEDx + PEDm <1 = worsening of CAD
Terms of trade
(index of export prices) / (index of import prices)
terms of trade price index
(average price) / (average base year)
balance of trade
the difference between a country’s total exports and total imports
