Diploma Programme
Economics HL Formula Booklet
For assistance during the course and NOT during
the examinations. First examinations 2014
Edited in 2019 (Version 2)
Made by Stefano Delmanto
IB World Econ
ibworldecon.com
Contents
Topics 1
Topic 1—Microeconomics - Theory of the Firm 2
Topic 1—Microeconomics (Elasticities) 3
Topic 2—Macroeconomics 4
Topics 3 & 4— International & Development Economics 5
IB World Econ
ibworldecon.com 1
Topic 1— Microeconomics (Theory of The Firm)
Total Cost (TC) TC = Total Fixed Costs + Total Variable Costs
or
TC = Average Costs × Quantity
Total Fixed Cost (TFC) TFC = Total Cost - Total Variable Costs
or
TFC = Average Fixed Costs × Quantity
Total Variable Costs (TVC) TVC = Total Cost - Total Fixed Costs
or
TVC = Average Variable Costs × Quantity
Total Cost
Average Cost (AC) AC =
Quantity
or
Average Fixed Costs +Average Variable Costs
Marginal Cost (MC) ∆ Total Cost
MC =
∆ Quantity
Total Product
Average Product (AP) AP =
Quantity of Labor
∆ Total Product
Marginal Product (MP) MP =
∆ Quantity of Labor
Total Revenue (TR) TR = Price × Quantity
Average Revenue (AR) Total Revenue
AR= = Price
Quantity
∆ Total Revenue
Marginal Revenue (MR) MR =
∆ Quantity
Profit Profit = Total Revenue - Total Cost
Supernormal Profit Average Revenue > Average Cost
IB World Econ
ibworldecon.com 2
Subnormal Proifit Average Revenue < Average Cost
Profit Maximization Marginal Cost = Marginal Revenue
Revenue Maximization Marginal Revenue = 0
Normal Profit, Sales Maximization Point, Average Cost = Average Revenue
Economic Break-even Point, Entry Limit Price
Allocative Efficiency Demand = Supply, MSB = MSC, P = MC
Productive Efficiency Minimum Point on Average Cost Curve, AC = MC
X Efficiency At Any Point on Average Cost Curve
Dynamic Efficiency Long Run Supernormal Profit
Minimum Efficient Scale Lowest Quantity Level when AC Stops Decreasing
Shutdown Condition Average Revenue < Average Variable Costs
Total Utility
Average Utility
Quantity
∆ Total Utility
Marginal Utility
∆ Quantity
Utility Maximization Marginal Utility = 0
Social Cost Private Costs + External Costs
Social Benefit Private Benefit + External Benefit
Profit Maximization in Labor Market Marginal Revenue Product = Marginal Cost of Labor
Topic 1—Microeconomics (Elasticities)
PED Price Elasticity of % ∆ Quantity Demanded
Demand
% ∆ Price
PES Price Elasticity of Supply % ∆ Quantity Supplied
% ∆ Price
XED Cross Elasticity of %∆ Quantity Supplied of Good
Demand
%∆ Price of Good B
%∆ Quantity Demanded
YED Income Elasticity of
Demand
% ∆ Income
IB World Econ 3
ibworldecon.com
Topic 2—Macroeconomics
GDP Gross Domestic Product Output Method: Sum of All Goods & Services Produces in an
Economy in a Year.
Income Method: Sum of Factor incomes (Intrest, Wages &
Salary, Rent, Profit)
Expenditure Method: Total Spending in an Economy in a
Year = Consimer Expenditure (C) + Investment (I) +
Government Spending (G) + Net Exports(Exports -
Imports=(X-M)) = C+I+G+(X-M)
Nominal GDP Quantity Goods and Services Produced × Current Prices
Real GDP
Quantity Produced × Constant Prices
or
Nominal GDP
×100
Price Index*
*any price index: CPI, RPI, GDP Deflator
GDP Deflator
Nominal GDP
×100
Real GDP
GNI GDP + Net Factor Income
Green GDP GDP - Environmental Costs
Aggregate Demand C + I + G + (X-M)
GDP Per Capita GDP
Total Population
M Multiplier 1 1
or
1-MPC 1-MPW*
*marginal propensity of leakages = marginal propensity to
save + marginal propensity to import + marginal propensity
to tax
UR Unemployment Rate Unemployed* *Actively searching for a job but don't
have one (definition of unemployment)
Labor Force**
**Employed + Unemployed*
IB World Econ
ibworldecon.com 4
IDX Index Number
Current Value
×100
Raw Value (In Base Year)
%∆ Percentage Change Actual - Original
×100
Original
Topics 3 & 4— International & Development Economics
Gini Coefficient Area Between Lorenz Curve and Line of
Perfect Equality (A)
Area Beneath Line of Perfect Equality (A+B)
Martial Learner Condition PED(exports) + PED(imports) > 1
Terms of Trade Average Index Price of Exports
×100
Average Index Price of Imports
Taxable Income Total Income Earned - Tax Free Allowance
Total Income Tax Payed
Average Rate of Tax ×100
Total Income
Marginal Rate of Tax
∆ Total Income Tax Payed
×100
∆ Total Income
IB World Econ
ibworldecon.com 5
