Price Elasticity of Demand & Supply
Qd quantity demanded, Qs quantity supplied, P price. Use midpoint formula for accuracy: % Δ = (New − Old) / [(New + Old)/2] × 100%.
PED
PED = (% ΔQd) / (% ΔP) PES
PES = (% ΔQs) / (% ΔP) Cambridge International A Level 9708
🌐 International A Level Economics Formula Sheet 2025
Elasticities, market structures, national income, balance of payments and development metrics compiled for Cambridge A Level exam success.
Advanced Micro Macroeconomics International Trade Development
Raise Your Economics Calculations to A* Level
Cambridge examiners expect clear numerical evidence to support micro and macro analysis. Use this formula sheet to keep advanced elasticity, cost/revenue, income and trade calculations on standby while you write high-level essays.
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Elasticities with interpretation tips
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National income and multiplier applications
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Trade, exchange rate and balance indicators
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Development indexes and inequality metrics
Advanced Elasticities & Welfare
Cross & Income Elasticity
Qd quantity demanded, P price, income measured for YED. Sign indicates relationship: XED > 0 substitutes, XED < 0 complements; YED > 1 luxury.
XED
XED = (% ΔQd of X) / (% ΔP of Y) YED
YED = (% ΔQd) / (% ΔIncome) Consumer & Producer Surplus
Calculate as area of relevant triangles/trapezia on market diagram: ½ × base × height.
Marginal vs Average
TC total cost, TR total revenue, Q output. Marginal measures change per extra unit; average divides totals. Profit maximisation where MR = MC (with MC rising).
Marginal Cost
MC = ΔTC / ΔQ Average Cost
AC = TC / Q Marginal Revenue
MR = ΔTR / ΔQ Average Revenue
AR = TR / Q Lerner Index (Market Power)
Range 0–1; higher values indicate more monopoly power.
L = (P − MC) / P Cost, Revenue & Market Structure Metrics
Economies of Scale
Minimum Efficient Scale occurs at lowest point on LRAC. Use cost data to calculate average costs at different output levels.
Contestability Indicators
Sunk cost ratio = Sunk costs / Total costs Hit-and-run profit viability: Profit = TR − (TC + Entry costs) Concentration Ratios
Often CR₄. Express as percentage.
CRₙ = Sum of market shares of top n firms Herfindahl-Hirschman Index (HHI)
Use decimal form (0–1) or 0–10,000 if using percentage shares.
HHI = Σ (market share)² National Income, Multiplier & Welfare
Aggregate Demand & Supply
AD
AD = C + I + G + (X − M) AS (short run)
Dependent on cost conditions and capacity National Income Identities
Y = C + S + T Y = C + I + G + (X − M) S + T + M = I + G + X Multiplier Variants
MPS = marginal propensity to save, MPT = to tax, MPM = to import.
Simple multiplier
k = 1 / (1 − MPC) Open economy
k = 1 / (MPS + MPT + MPM) Output Gap
Positive value indicates inflationary gap; negative value indicates spare capacity.
Output gap (%) = ((Actual GDP − Potential GDP) / Potential GDP) × 100 Phillips Curve Trade-off
Plot inflation vs unemployment; use gradient to discuss short-run trade-offs.
Monetary, Fiscal & External Sector
Money Supply Indicators
Velocity of circulation: MV = PY (Quantity theory) where M = money supply, V = velocity, P = price level, Y = real output.
Government Budget Metrics
Budget balance = Government revenue − Government expenditure Primary balance excludes interest payments Debt Sustainability
National debt measured in same currency as GDP; ratio indicates burden relative to output.
Debt-to-GDP (%) = (National debt / GDP) × 100 Exchange Rate & Marshall-Lerner
Condition for currency depreciation to improve current account: |PED_X| + |PED_M| > 1. J-curve explains time lag.
Balance of Payments
Current account = Trade in goods + Trade in services + Net income + Net transfers Capital and financial account = Capital transfers + Direct investment + Portfolio flows + Other investments Development & Inequality Indicators
Human Development Index (HDI)
HDI = (I_life expectancy × I_education × I_GNI)^{1/3}. Each component scaled 0–1.
Gini Coefficient
A = area between line of equality and Lorenz curve. Expressed 0 (perfect equality) to 1 (perfect inequality).
Gini = A / (A + B) Kuznets Ratio
Common: top 20% vs bottom 40%.
Kuznets ratio = Income share of richest x% / Income share of poorest y% Terms of Trade
Use price indices (base year = 100). TOT > 100 implies export prices relatively higher; rising TOT indicates improvement.
TOT index = (Export price index / Import price index) × 100 Real Income per Capita (PPP)
PPP adjustment reflects relative price levels; divide by population to compare living standards.
Real GDP per capita (PPP) = (Nominal GDP × PPP adjustment) / Population International Finance & Investment
Interest Rate Parity (qualitative)
Higher domestic interest attracts short-term capital inflows; consider uncovered interest parity: E = (1 + i_domestic)/(1 + i_foreign) × expected ER.
Foreign Direct Investment Multiplier
Apply open-economy multiplier to FDI inflow to estimate impact on GDP.
Purchasing Power Parity (PPP)
Use price indices to compare competitiveness.
Exchange rate_PPP = Domestic price level / Foreign price level Capital Flight Measurement
Capital flight = Recorded capital outflows − Expected capital flows (based on fundamentals) How to Use This Formula Sheet
Boost your Cambridge exam confidence with these proven study strategies from our tutoring experts.
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Explain What the Number Means
Pair every calculation with a sentence linking back to efficiency, welfare or macro objectives to earn analysis marks.
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Draw Diagrams beside Formulas
Use elasticity and multiplier formulas alongside diagrams to show both numerical and graphical reasoning.
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State Assumptions Clearly
Mention ceteris paribus conditions, time lags and data limitations when using ratios or multipliers.
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Compare Across Economies
Quote relative metrics (e.g., TOT, Gini) to build stronger evaluation in globalisation or development essays.
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Aligned with the Cambridge International AS & A Level Economics (9708) syllabus for 2025 examinations.
Always comment on data limitations, time period and structural factors when interpreting calculated values.