Economics Formulas Cheat Sheet: Micro and Macro

A principles of economics exam is mostly concepts, but a surprising share of the marks sit on about forty formulas. They are scattered across the book, and the same symbols (P, Q, C, I) mean different things in different chapters. This sheet pulls them together, microeconomics first and macroeconomics second, using the definitions from the note cards in Encodr's free microeconomics and macroeconomics courses.

Two tools check the most calculation-heavy parts: the price elasticity calculator and the inflation and real value calculator. Percent change throughout is (new - old) / old x 100 unless a formula says otherwise.

Microeconomics

Elasticity (unit 5)

Quantity	Formula
Midpoint % change	(new - old) / ((new + old) / 2) x 100
Price elasticity	% change in quantity / % change in price (absolute value for demand)
Elastic / unitary / inelastic	Greater than 1 / equal to 1 / less than 1
Total revenue	Price x quantity sold
Predicted % change in quantity	Elasticity x % change in price
Income elasticity	% change in quantity demanded / % change in income (keep the sign: positive normal good, negative inferior good)
Cross-price elasticity	% change in quantity of A / % change in price of B (positive substitutes, negative complements)
Wage elasticity of labor supply	% change in hours supplied / % change in the wage

Round the elasticity to 2 decimals and compute with unrounded percentages. Elasticity has no units and is not the slope. The revenue rule: with elastic demand, raising price lowers total revenue; with inelastic demand, raising price raises it. Price elasticity of demand explained works through every case.

Demand, supply and surplus (units 3-4)

Quantity	Formula
Equilibrium	Qd = Qs. With Qd = a - bP and Qs = c + dP, set equal, solve for P, then substitute for Q
Surplus	Qs - Qd (price above equilibrium)
Shortage	Qd - Qs (price below equilibrium)
Consumer surplus (straight-line curves)	1/2 x equilibrium quantity x (demand price intercept - equilibrium price)
Producer surplus (straight-line curves)	1/2 x equilibrium quantity x (equilibrium price - supply price intercept)
Social surplus	Consumer surplus + producer surplus
Deadweight loss under a binding control	1/2 x (equilibrium quantity - quantity traded) x (demand price - supply price at the quantity traded)

A price ceiling binds only below equilibrium and a price floor only above it. The four-step process: sketch the starting equilibrium, decide whether demand or supply is affected, decide the direction of the shift, then compare the new equilibrium with the old.

Consumer choice (unit 6)

Quantity	Formula
Marginal utility	Change in total utility / change in quantity
Total utility	Sum of the marginal utilities of every unit consumed
Marginal utility per dollar	MU / price
Optimum (equal-marginal rule)	MU1 / P1 = MU2 / P2, or P1 / P2 = MU1 / MU2
Budget line	Income = P1 x Q1 + P2 x Q2; axis intercept = income / that good's price

Costs and profit (unit 7)

Quantity	Formula
Total cost	TC = FC + VC
Average costs	AFC = FC / Q, AVC = VC / Q, ATC = TC / Q = AFC + AVC
Marginal cost	Change in TC / change in Q
Average product	TP / L
Marginal product	Change in TP / change in labor
Accounting profit	Total revenue - explicit costs
Economic profit	Total revenue - explicit costs - implicit costs
Profit	TR - TC = (P - ATC) x Q

MC crosses AVC and ATC at their minimum points. Economic profit is never larger than accounting profit.

Firm decisions and market structure (units 8-11)

Quantity	Formula or rule
Profit-maximizing output	Produce where MR = MC (for a price taker, P = MC)
Marginal revenue	Change in TR / change in Q; for a price taker MR = P
Break-even point	MC crosses ATC at the minimum of ATC
Shutdown point	MC crosses AVC at the minimum of AVC; shut down if P is below it
Long-run perfect competition	P = MR = MC = minimum ATC, zero economic profit
Allocative efficiency	P = MC
Monopoly, straight-line demand P = a - bQ	MR = a - 2bQ
Four-firm concentration ratio	Sum of the market shares (percent) of the four largest firms
HHI	Sum of the squared market shares (percent) of all firms; a monopoly is 10,000
HHI change in a merger	2ab, for merging firms with shares a and b

For a monopoly, choose Q where MR = MC, go up to the demand curve for the price, then compute profit.

Macroeconomics

GDP, real values and growth (units 6-7)

Quantity	Formula
GDP (spending approach)	C + I + G + (X - M)
GDP per capita	GDP / population
Real GDP	Nominal GDP / (deflator / 100)
GDP deflator	Nominal GDP / real GDP x 100
Nominal GDP	Real GDP x (deflator / 100)
Real growth (exact)	Divide growth factors, for example 1.07 / 1.03 - 1
Compound growth	Start x (1 + g)^n, g as a decimal
Rule of 70	Years to double is about 70 / growth rate in percent
Output gap	Potential GDP - real GDP

Real growth is roughly nominal growth minus inflation, but only for small changes. Real vs nominal and how to adjust for inflation gives worked examples.

Unemployment and inflation (units 8-9)

Quantity	Formula
Labor force	Employed + unemployed
Unemployment rate	Unemployed / labor force x 100
Labor force participation rate	Labor force / adult population x 100
Natural rate of unemployment	Frictional + structural
Price index	Cost of the basket in a year / cost in the base year x 100
Inflation rate	(new index - old index) / old index x 100
Real value	Nominal value / (index / 100)
Real interest rate	Nominal rate - inflation rate

Do not subtract index numbers: 107 to 110 is 2.8%, not 3%. Adults are age 16 and older, and the unemployed must have searched in the previous four weeks.

Keynesian model and multipliers (units 12 and 17)

Quantity	Formula
Aggregate demand	AD = C + I + G + (X - M)
MPC and MPS	MPC + MPS = 1
Simple multiplier	1 / (1 - MPC) = 1 / MPS
Multiplier with an income tax rate t	1 / (1 - MPC x (1 - t))
Multiplier with taxes and imports	1 / (1 - [MPC x (1 - t) - MPI])
Tax multiplier (lump-sum taxes)	-MPC / (1 - MPC)
Size of policy needed to close a gap	Gap / multiplier
Consumption function	C = autonomous consumption + MPC x after-tax income

Leakages are saving, taxes and imports; smaller leakages mean a larger multiplier. Equilibrium in the expenditure-output model is where aggregate expenditure equals output.

Money, banking and the Fed (units 14-15)

Quantity	Formula
Required reserves	Deposits x reserve ratio
Excess reserves	Reserves - required reserves
Money multiplier	1 / reserve ratio
New money created	Multiplier x excess reserves
Total deposits from an original deposit D	D / reserve ratio
Net worth (bank capital)	Assets - liabilities
Quantity equation	M x V = P x Q = nominal GDP
Velocity	V = nominal GDP / money supply
Nominal interest rate (neoclassical)	Real rate + expected inflation

Write a 10 percent reserve ratio as 0.10. M1 is contained inside M2, so never add them together.

Budgets, debt and trade (units 17-18)

Quantity	Formula
Deficit as % of GDP	(spending - revenue) / GDP x 100
Debt at year end	Prior debt + deficit - surplus
Debt-to-GDP	Debt / GDP x 100
Average tax rate	Total tax / income x 100
Saving and investment identity	S + (M - X) = I + (G - T)
Investment	I = S + (T - G) + (M - X)
Trade balance form	M - X = I + (G - T) - S (positive means a trade deficit)

A deficit is a one-year flow and the debt is a stock. A percentage-point change is not a percent change, which matters when the course says a deficit increase of 1% of GDP raises long-term rates by about 0.5 to 1.0 percentage point.

How to use a sheet like this

Do not memorize it by rereading. Copy the tables by hand once, since handwriting versus typing notes is a real research question, and then close the page and rebuild each table from memory. Whatever you could not rebuild is what to put on a schedule. Pair it with the course overviews: what's in Principles of Microeconomics and what's in Principles of Macroeconomics show where each unit sits.