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The Ultimate Formula Sheet

Every single formula you need for CA Foundation Business Economics 2026. Don't lose marks on numericals.

Price Elasticity of Demand (Percentage Method)

Supply
Ep = (% Change in Quantity Demanded) / (% Change in Price)

Variables

  • Ep=Price Elasticity
  • %ΔQ=Percentage change in quantity
  • %ΔP=Percentage change in price
Used when percentage changes are given directly.

Arc Elasticity of Demand

Supply
Ep = [(Q1 - Q2) / (Q1 + Q2)] * [(P1 + P2) / (P1 - P2)]

Variables

  • Q1, Q2=Initial and New Quantities
  • P1, P2=Initial and New Prices
Used when measuring elasticity over a range (large changes).

Cross Elasticity of Demand

Supply
Ec = (% Change in Qty of Good X) / (% Change in Price of Good Y)

Variables

  • Ec=Cross Elasticity
  • Good X=The good being analyzed
  • Good Y=Substitute or Complementary good
Determines if goods are substitutes (+ve) or complements (-ve).

Consumer Surplus

Behavior
Consumer Surplus = Total Utility - (Price × Quantity)

Variables

  • TU=Total Utility derived from consumption
  • P=Price per unit
  • Q=Quantity units purchased
Measures the net welfare gain to the consumer.

Cobb-Douglas Production Function

Production
Q = K * L^a * C^(1-a)

Variables

  • Q=Output
  • L=Labor
  • C=Capital
  • K, a=Positive Constants
Shows relationship between inputs and output with constant returns to scale.

Total Revenue

Markets
TR = Price × Quantity

Variables

  • TR=Total Revenue
  • P=Price per unit
  • Q=Quantity sold
Basic calculation of firm's income.

Marginal Revenue

Markets
MR = ΔTR / ΔQ

Variables

  • MR=Marginal Revenue
  • ΔTR=Change in Total Revenue
  • ΔQ=Change in Quantity
Revenue from selling one additional unit.

Profit Maximization Condition

Markets
MR = MC (and MC cuts MR from below)

Variables

  • MR=Marginal Revenue
  • MC=Marginal Cost
The golden rule for finding equilibrium output level.

GDP (Expenditure Method)

Income
GDP(MP) = C + I + G + (X - M)

Variables

  • C=Consumption Expenditure
  • I=Investment Expenditure
  • G=Government Spending
  • X-M=Net Exports
Calculates total value of finished goods/services.

GNP vs GDP

Income
GNP = GDP + Net Factor Income from Abroad (NFIA)

Variables

  • GNP=Gross National Product
  • NFIA=Income from abroad - Income to abroad
Adjusts GDP for international factor income flows.

National Income (NNP at FC)

Income
NNP(FC) = NNP(MP) - Net Indirect Taxes

Variables

  • NNP(FC)=Net National Product at Factor Cost
  • Net Indirect Taxes=Indirect Taxes - Subsidies
The official measure of a country's National Income.

GDP Deflator

Income
Deflator = (Nominal GDP / Real GDP) * 100

Variables

  • Nominal=GDP at Current Prices
  • Real=GDP at Constant (Base Year) Prices
Measures the impact of inflation on GDP.

Investment Multiplier (k)

Income
k = 1 / (1 - MPC) = 1 / MPS

Variables

  • k=Multiplier
  • MPC=Marginal Propensity to Consume
  • MPS=Marginal Propensity to Save
Shows how initial investment magnifies total income.

Propensity Relations

Income
APC + APS = 1 AND MPC + MPS = 1

Variables

  • APC/MPC=Average/Marginal Propensity to Consume
  • APS/MPS=Average/Marginal Propensity to Save
Fundamental relationship between saving and consumption.

Fisher's Quantity Theory of Money

Market
MV = PT

Variables

  • M=Money Supply
  • V=Velocity of Circulation
  • P=Price Level
  • T=Transactions (Volume of Trade)
Relates money supply to price levels (Monetarism).

Money Multiplier

Market
m = Money Supply / Monetary Base

Variables

  • m=Money Multiplier
  • Money Supply=Broad Money (M3)
  • Base=High Powered Money (Reserve Money)
Shows credit creation capacity of banks.

Fiscal Deficit

Finance
FD = Total Exp - (Rev Receipts + Non-debt Cap Receipts)

Variables

  • FD=Fiscal Deficit
  • Total Exp=Revenue + Capital Expenditure
Indicates total borrowing requirements of the government.

Primary Deficit

Finance
PD = Fiscal Deficit - Interest Payments

Variables

  • PD=Primary Deficit
  • Interest=Interest on past loans
Real budget deficit excluding past debt burden.

Net Barter Terms of Trade

Trade
TOT = (Px / Pm) * 100

Variables

  • Px=Price Index of Exports
  • Pm=Price Index of Imports
Measures a country's export purchasing power.

Money Supply: M1 (Narrow Money)

Market
M1 = C + DD + OD

Variables

  • C=Currency with Public
  • DD=Demand Deposits with Banks
  • OD=Other Deposits with RBI
Most liquid measure of money supply.

Money Supply: M3 (Broad Money)

Market
M3 = M1 + Time Deposits with Banks

Variables

  • M1=Narrow Money
  • Time Deposits=Fixed/Recurring Deposits
Commonly used aggregate for monetary policy.

Money Multiplier (Reserve Ratio Approach)

Market
m = 1 / Reserve Ratio

Variables

  • m=Money Multiplier
  • Reserve Ratio=CRR + SLR (Statutory Reserves)
Max credit creation capacity = Initial Deposit × m.

Slope of Budget Line

Behavior
Slope = - (Px / Py)

Variables

  • Px=Price of Good X
  • Py=Price of Good Y
Shows the market rate of exchange between two goods.

Govt. Expenditure Multiplier

Finance
Kg = 1 / (1 - MPC)

Variables

  • Kg=Expenditure Multiplier
  • MPC=Marginal Propensity to Consume
Impact of Govt spending on National Income.

Tax Multiplier

Finance
Kt = - MPC / (1 - MPC)

Variables

  • Kt=Tax Multiplier
  • MPC=Marginal Propensity to Consume
Note it is negative. Tax cuts increase income, hikes reduce it.

Simple Interest

Money
SI = (P * R * T) / 100

Variables

  • P=Principal Amount
  • R=Rate of Interest per annum
  • T=Time in years
Basic interest calculation on principal only.

Compound Interest (Amount)

Money
A = P * (1 + i)^n

Variables

  • A=Amount (Principal + Interest)
  • P=Principal
  • i=Interest rate per period (R/100)
  • n=Number of conversion periods
Calculates future value with compounding.

Effective Rate of Interest

Money
E = (1 + i)^n - 1

Variables

  • E=Effective Rate
  • i=Nominal rate per period
  • n=Number of compounding periods in a year
True annual return when compounding occurs > once a year.

Future Value of Ordinary Annuity

Money
FV = A * [((1 + i)^n - 1) / i]

Variables

  • FV=Future Value
  • A=Annuity amount (Installment)
  • i=Interest rate per period
  • n=Number of periods
Savings, Recurring Deposits.

Present Value of Ordinary Annuity

Money
PV = A * [(1 - (1 + i)^-n) / i]

Variables

  • PV=Present Value
  • A=Annuity amount
  • i=Interest rate per period
  • n=Number of periods
Loan Repayments (EMI), Present Value of Cashflows.

Permutations (Arrangement)

Combinations
nPr = n! / (n - r)!

Variables

  • n=Total items
  • r=Items taken at a time
  • !=Factorial
Arranging items where order matters.

Combinations (Selection)

Combinations
nCr = n! / (r! * (n - r)!)

Variables

  • n=Total items
  • r=Items to select
Selecting items where order does not matter.

Sum of Arithmetic Progression (AP)

Series
Sn = n/2 * [2a + (n-1)d]

Variables

  • Sn=Sum of n terms
  • n=Number of terms
  • a=First term
  • d=Common difference
Summing a sequence with constant difference.

Sum of Geometric Progression (GP)

Series
Sn = a * (r^n - 1) / (r - 1)

Variables

  • Sn=Sum of n terms
  • a=First term
  • r=Common ratio (r > 1)
Summing a sequence with constant ratio.

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