Need an all-in-one list with the **Economics** formulas included in the CFA® Level 1 Exam? We have compiled them for you here. The relevant formulas have been organized and presented by chapter. In this section, we will cover the following topics — **Demand and Supply Analysis, Firm and Market Structures, Aggregate Output, Prices, and Economic Growth, Business Cycles, Monetary and Fiscal Policy, International Trade, Capital Flows, and Currency Exchange Rates.**

**1. Topics in Demand and Supply Analysis**

*Price Elasticity*

Price~elasticity = \frac {\%\Delta~Quantity~demanded~(Qx)}{\%\Delta~Price~(Px)}

0 > e > -1 \rightarrow inelastic demand

-1 > e > -∞ \rightarrow elastic demand

e = -1 \rightarrow unit elastic demand

e = 0 \rightarrow perfectly inelastic demand

e = -∞ \rightarrow perfectly elastic demand

*Income Elasticity*

Income~elasticity = \frac {\%\Delta~Quantity~demanded~(Qx)}{\%\Delta~Income~(Ix)}

e > 0 \rightarrow normal goods

e < 0 \rightarrow inferior goods

ε{_Y} = Income elasticity

*Cross-price Elasticity*

Cross-price~elasticity = \frac {\%\Delta~Quantity~demanded~(Qx)}{\%\Delta~Price~of~a~related~good~(Py)}

e > 0 \rightarrow the related product is a substitute

e < 0 \rightarrow the related product is a complement

y = Related product

ε{_{py}} = Cross-price elasticity

**2. The Firm and Market Structures**

For all market structures, **Max Profit** \longrightarrow **when **MC = MR

MC = Marginal cost

MR = Marginal revenue

**Breakeven points**:

AR = ATC (perfect competition)

TR = TC (imperfect competition)

ATC = Average Total Cost

AR = Average Revenue

TR = Total Revenue

TC = Total Cost

AR = ATC holds true in imperfect competition

**Short-run shutdown points:**AR < AVC (perfect competition)

TR < TVC (imperfect competition)

**Market structures:**Perfect Competition

Monopolistic Competition

Oligopoly

Monopoly

**3. Aggregate Output, Prices, and Economic Growth**

**Total GDP** = final value of goods and services produced (market value)

+ government services (at cost)

+ rental value of owner-occupied housing (an estimate)

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

Nominal~GDP{_t} = P{_t} \times Q{_t}

Real~GDP{_t} = P{_{b}} \times Q{_t}

t = Current year

b = Base year

P{_t} = Prices in year {_t}

P{_b} = Prices in base year

Q{_t} = Quantity produced in year {_t}

*Expenditure Approach*

Real~GDP = Consumption~spending~(C) + Investment~(I) + Government~spending~(G) + Net~exports~(X-M)

X = Exports

M = Imports

*Income Approach*

Real~GDP = National~income + Capital~consumption~allowance + Statistical~discrepancy

Real~GDP = Consumption~spending~(C) + Savings~(S) + Taxes~(T)

Savings~(S) = Investments~(I) + Fiscal~Balance~(G-T) + Trade~Balance~(X-M)

S – I = Fiscal~Balance~(G-T) + Trade~Balance~(X-M)

**National Income** = Employees’ compensation

+ Corporate and government profits before taxes

+ Interest income

+ Unincorporated business net income (business owners’ incomes)

+ Rent

+ Indirect business taxes

− Subsidies

**Personal Income** = National income

+ Transfer payments (social insurance, unemployment or disability payments)

− Indirect business taxes

− Corporate income taxes

− Undistributed corporate profits

**Personal Disposable Income** = Personal income – Personal taxes

**Potential GDP** = Aggregate hours worked × Labor productivity

\longrightarrow **Aggregate hours worked** = Labor force × Average hours worked per week

\longrightarrow **Growth in Potential GDP** = Growth in labor force + Growth in labor productivity

*The Production Function*

Y = A \times f (K, L)

Y = Aggregate output

A = Total Factor Productivity (TFP)

K = Capital

L = Labor

**Growth in Potential GDP** = Growth in technology + WL × (growth in labor) + WC × (growth in capital)**WL **= Labor’s percentage share of national income**WC **= Capital’s percentage share of national income

**3. Understanding Business Cycles**

Unemployment~Rate = \frac {Number~of~unemployed~people}{Total~labor~force}

Participation~Rate~(Activity~Ratio) = \frac {Total~labor~force}{Total~working–age~population}

Labor~Force = Unemployed~people + Employed~people

**Unemployed** = Looking for job

Consumer~Price~Index = \frac {Cost~of~basket~at~current–year~prices}{Cost~of~basket~at~base–year~prices} \times 100

Laspeyres’ Index = \frac {\Sigma~(Current–year~price \times Base–year~quantity)}{\Sigma~(Base–year~price \times Base–year~quantity)}

Fisher’s~Index = \sqrt {(Laspeyres’~Index) \times (Paashe~Price~Index)}

Paashe~Price~Index = \frac {\Sigma~(Current–year~price \times Current–year~quantity)}{\Sigma~(Base–year~price \times Base–year~quantity)}

**4. Monetary and Fiscal Policy**

Money~Multiplier = \frac {1}{Reserve~requirement}

Fiscal~Multiplier = \frac {1}{1- MPC \times (1- t)}

MPC = Marginal propensity to consume

t = Tax rate

*Equation of Exchange*

MV = PY~(Money~supply \times Velocity = Price \times Real~output)

*Fisher Effect*

Nominal~Interest~Rate = Real~interest~rate + Expected~inflation~rate

*Neutral Interest Rate*

Neutral~interest~rate = Real~trend~rate~of~economic~growth + inflation~target

**5. International Trade and Capital Flows**

*GDP*

GDP = C + I + G + X - M

C = Consumption

I = Investments

G = Government Spending

X = Export

M = Import

*Balance of Payments*

Current~Account + Capital~Account + Financial~ Account = 0

*Trade Balance*

X - M = Private~Savings + Government~Savings - Investments~in~domestic~capital

**6. Currency Exchange Rates**

Real~Exchange~Rate = Nominal~exchange~rate \times \frac {CPI~base~currency}{CPI~price~currency}

**Follow the links to find more formulas on Quantitative Methods, Corporate Finance, Alternative Investments, Financial Reporting and Analysis, Portfolio Management, Equity Investments, Fixed-Income Investments, and Derivatives, included in the CFA® Level 1 Exam.**