Notation: Δ means change; Q is quantity; P is price; subscripts distinguish cases. Use the stated period and units, retain useful working precision, and interpret the sign and size of the result. A formula calculation is evidence for an explanation, not a judgement by itself.
Use the formula that matches the variables in the question. Keep units and periods consistent; interpret the result in its context. Δ means change. These are core revision formulas; chapter explanations give the assumptions.
| Formula | Meaning and checks | Read more |
|---|---|---|
| Opportunity cost of X units of Y forgone / extra units of X | Units of Y per unit of X; lower opportunity cost gives comparative advantage. Check: Use the same resource period for both goods. Absolute productivity alone does not identify comparative advantage. | p. 12 |
| Terms of trade export price index / import price index × 100 | Index; a rise is an improvement in relative prices, not necessarily the trade balance. Check: Use indices with a common base. A value above 100 compares relative prices with the base period; it does not mean a trade surplus. | p. 14 |
| Post-tariff imports domestic Qd − domestic Qs at tariff price | Quantity; tariff revenue = tariff per unit × these imports. Check: Qd and Qs are read at the same post-tariff price. Multiply by the specific tariff, not by the full buyer price, for revenue. | p. 25 |
| Marshall–Lerner condition absolute export PED + absolute import PED > 1 | Condition, not a forecast; state initial balance, supply and pass-through assumptions. Check: Use absolute elasticities. This standard condition assumes an initially balanced trade position and suitable supply and price pass-through conditions. | p. 35 |
| Unit labour cost total labour cost / real output | Money per unit; equivalently pay per worker / output per worker for consistent periods. Check: Use total labour compensation and output consistently. Low pay alone need not imply low unit labour cost. | p. 42 |
| Gini coefficient A / (A + B) | No unit; 0 = equality and 1 = maximum inequality on this scale. Check: A is the area between equality and the Lorenz curve; B is the area below the Lorenz curve. Identify the diagram’s labels before calculating. | p. 47 |
| Debt-to-GDP ratio public debt / annual nominal GDP × 100 | Percent; the ratio can fall while nominal debt rises if GDP grows faster. Check: Debt is a stock and GDP an annual flow; this conventional ratio compares their scale, not an annual repayment bill. | p. 61 |
| Harrod–Domar model growth rate = saving ratio / capital-output ratio | Use consistent decimal or percentage conventions; the model assumes saving becomes productive investment. Check: The capital-output ratio is capital required per unit of output in the simple model. Consistent units and productive use of investment are essential. | p. 74 |