Ib Economics Hl Formula Booklet [2021]
Unlike subjects such as Mathematics or Physics, the International Baccalaureate does not provide an official formula booklet for the Economics HL exam. Students are expected to memorize all quantitative models and equations for use in Paper 2 (data response) and Paper 3 (quantitative methods).
Below is a consolidated reference of the essential Higher Level formulas categorized by the core syllabus units. 1. Microeconomics: Theory of the Firm & Elasticities
These formulas are critical for calculating firm behavior, market efficiency, and consumer responsiveness. Elasticities: Price Elasticity of Demand (PED):
%ΔQd%ΔPthe fraction with numerator % cap delta cap Q sub d and denominator % cap delta cap P end-fraction Income Elasticity of Demand (YED):
%ΔQd%ΔIncomethe fraction with numerator % cap delta cap Q sub d and denominator % cap delta Income end-fraction Cross Price Elasticity (XED):
%ΔQa%ΔPbthe fraction with numerator % cap delta cap Q sub a and denominator % cap delta cap P sub b end-fraction Price Elasticity of Supply (PES):
%ΔQs%ΔPthe fraction with numerator % cap delta cap Q sub s and denominator % cap delta cap P end-fraction Costs and Revenues: Total Cost (TC): Marginal Cost (MC):
ΔTCΔQthe fraction with numerator cap delta cap T cap C and denominator cap delta cap Q end-fraction Total Revenue (TR): Profit: Efficiency & Objectives: Profit Maximization: Revenue Maximization: Allocative Efficiency: Productive Efficiency: ib economics hl formula booklet
Production at the minimum point of Average Cost (AC)Production at the minimum point of Average Cost (AC) 2. Macroeconomics: National Income & Indicators
Quantitative analysis in macroeconomics often involves measuring growth, inflation, and the impact of government policy. Gross Domestic Product (GDP): Expenditure Method: Real GDP: GDP Deflator: Inflation & Unemployment: Inflation Rate: Unemployment Rate: The Keynesian Multiplier: Multiplier ( ):
11−MPCthe fraction with numerator 1 and denominator 1 minus cap M cap P cap C end-fraction
1MPWthe fraction with numerator 1 and denominator cap M cap P cap W end-fraction 3. The Global Economy: Trade & Development
Calculations here focus on international competitiveness and income distribution. Terms of Trade (ToT):
Marshall-Learner Condition: Devaluation/depreciation will improve the trade balance if Taxation: Average Tax Rate: Marginal Tax Rate: Exam Performance Tips
Show All Workings: In Paper 3, you must show the formula used and the numerical substitution to earn full marks. Unlike subjects such as Mathematics or Physics, the
Units and Rounding: Always include the correct currency or percentage symbol. Results should typically be rounded to two decimal places unless otherwise specified.
Linear Functions: Be prepared to solve for equilibrium using linear demand ( ) and supply ( ) equations. IB Economics HL Formula Booklet | PDF - Scribd
Part 6: How to Memorize (Without Actually Memorizing)
The IBO gives you the booklet so you don't have to memorize. However, you cannot afford to spend 5 minutes searching for the multiplier formula. Here is a mnemonic device to locate formulas instantly:
- "PED YED XED PES" (Sing it like a beat: Ped-Yed-Zed-Pez)
- "TR AR MR" (TAR-MAR)
- "TVC + TFC = TC" (TV Café serves Total Coffee)
- "1 over 1 minus MPC" (Think: "One won't miss the MPC")
Practice using the digital booklet in class, but the week before the exam, switch to the physical booklet. Tab it with sticky notes (if allowed) so you can flip to Costs or Macro instantly.
1. What Is the Formula Booklet?
The IB Economics HL Formula Booklet (officially the Economics formula sheet) is provided during Paper 2 (Quantitative) and Paper 3 (HL only).
- DP HL students use it extensively in Paper 3 (policy & calculation paper).
- SL students receive a shorter version (no HL extension formulas).
⚠️ The booklet contains no theory, no definitions, no diagrams — only formulas, multipliers, and some tax/Math rules.
A. GDP and Economic Growth
Formulas:
- GDP Deflator: $\left( \frac\textNominal GDP\textReal GDP \right) \times 100$
- Real GDP: $\frac\textNominal GDP\textGDP Deflator \times 100$
Deep Dive:
- This is the "inflation adjustment" formula.
- Nominal GDP is GDP at current prices.
- Real GDP is GDP at constant prices (adjusted for inflation).
- Calculation Trap: If you are given Nominal GDP and the inflation rate, do not just divide by the inflation rate (e.g., 5%). You must divide by the Deflator index (1.05 or 105 depending on the base year setup).
Family 4: International Economics
HL students often find these formulas tricky because they involve exchange rates.
11. Elasticities and the Marshall-Lerner Condition
- Condition: Devaluation improves current account if
PEDx + PEDm > 1 (Exports + Imports).
- The booklet gives you the formula for the Marshall-Lerner condition, but you must calculate the sum of the two elasticities. A common error is using absolute values when you shouldn't.
12. Purchasing Power Parity (PPP)
Implied PPP Exchange Rate = (Price of Basket in Domestic Currency) / (Price of Basket in Foreign Currency)
13. Terms of Trade (ToT)
ToT = (Average Export Price Index / Average Import Price Index) × 100- Interpretation: ToT > 100 indicates you are getting richer per unit of export; ToT < 100 suggests you are getting poorer.
1.4 Perfect Competition & Monopoly (HL Only)
The booklet helps you locate:
- Profit: $\pi = TR - TC$ or $\pi = (AR - ATC) \times Q$
- Shut-down price: Equal to minimum AVC (the booklet reminds you via formula, but you must identify it on a graph).
Unlike subjects such as Mathematics or Physics, the International Baccalaureate does not provide an official formula booklet for the Economics HL exam. Students are expected to memorize all quantitative models and equations for use in Paper 2 (data response) and Paper 3 (quantitative methods).
Below is a consolidated reference of the essential Higher Level formulas categorized by the core syllabus units. 1. Microeconomics: Theory of the Firm & Elasticities
These formulas are critical for calculating firm behavior, market efficiency, and consumer responsiveness. Elasticities: Price Elasticity of Demand (PED):
%ΔQd%ΔPthe fraction with numerator % cap delta cap Q sub d and denominator % cap delta cap P end-fraction Income Elasticity of Demand (YED):
%ΔQd%ΔIncomethe fraction with numerator % cap delta cap Q sub d and denominator % cap delta Income end-fraction Cross Price Elasticity (XED):
%ΔQa%ΔPbthe fraction with numerator % cap delta cap Q sub a and denominator % cap delta cap P sub b end-fraction Price Elasticity of Supply (PES):
%ΔQs%ΔPthe fraction with numerator % cap delta cap Q sub s and denominator % cap delta cap P end-fraction Costs and Revenues: Total Cost (TC): Marginal Cost (MC):
ΔTCΔQthe fraction with numerator cap delta cap T cap C and denominator cap delta cap Q end-fraction Total Revenue (TR): Profit: Efficiency & Objectives: Profit Maximization: Revenue Maximization: Allocative Efficiency: Productive Efficiency:
Production at the minimum point of Average Cost (AC)Production at the minimum point of Average Cost (AC) 2. Macroeconomics: National Income & Indicators
Quantitative analysis in macroeconomics often involves measuring growth, inflation, and the impact of government policy. Gross Domestic Product (GDP): Expenditure Method: Real GDP: GDP Deflator: Inflation & Unemployment: Inflation Rate: Unemployment Rate: The Keynesian Multiplier: Multiplier ( ):
11−MPCthe fraction with numerator 1 and denominator 1 minus cap M cap P cap C end-fraction
1MPWthe fraction with numerator 1 and denominator cap M cap P cap W end-fraction 3. The Global Economy: Trade & Development
Calculations here focus on international competitiveness and income distribution. Terms of Trade (ToT):
Marshall-Learner Condition: Devaluation/depreciation will improve the trade balance if Taxation: Average Tax Rate: Marginal Tax Rate: Exam Performance Tips
Show All Workings: In Paper 3, you must show the formula used and the numerical substitution to earn full marks.
Units and Rounding: Always include the correct currency or percentage symbol. Results should typically be rounded to two decimal places unless otherwise specified.
Linear Functions: Be prepared to solve for equilibrium using linear demand ( ) and supply ( ) equations. IB Economics HL Formula Booklet | PDF - Scribd
Part 6: How to Memorize (Without Actually Memorizing)
The IBO gives you the booklet so you don't have to memorize. However, you cannot afford to spend 5 minutes searching for the multiplier formula. Here is a mnemonic device to locate formulas instantly:
- "PED YED XED PES" (Sing it like a beat: Ped-Yed-Zed-Pez)
- "TR AR MR" (TAR-MAR)
- "TVC + TFC = TC" (TV Café serves Total Coffee)
- "1 over 1 minus MPC" (Think: "One won't miss the MPC")
Practice using the digital booklet in class, but the week before the exam, switch to the physical booklet. Tab it with sticky notes (if allowed) so you can flip to Costs or Macro instantly.
1. What Is the Formula Booklet?
The IB Economics HL Formula Booklet (officially the Economics formula sheet) is provided during Paper 2 (Quantitative) and Paper 3 (HL only).
- DP HL students use it extensively in Paper 3 (policy & calculation paper).
- SL students receive a shorter version (no HL extension formulas).
⚠️ The booklet contains no theory, no definitions, no diagrams — only formulas, multipliers, and some tax/Math rules.
A. GDP and Economic Growth
Formulas:
- GDP Deflator: $\left( \frac\textNominal GDP\textReal GDP \right) \times 100$
- Real GDP: $\frac\textNominal GDP\textGDP Deflator \times 100$
Deep Dive:
- This is the "inflation adjustment" formula.
- Nominal GDP is GDP at current prices.
- Real GDP is GDP at constant prices (adjusted for inflation).
- Calculation Trap: If you are given Nominal GDP and the inflation rate, do not just divide by the inflation rate (e.g., 5%). You must divide by the Deflator index (1.05 or 105 depending on the base year setup).
Family 4: International Economics
HL students often find these formulas tricky because they involve exchange rates.
11. Elasticities and the Marshall-Lerner Condition
- Condition: Devaluation improves current account if
PEDx + PEDm > 1 (Exports + Imports).
- The booklet gives you the formula for the Marshall-Lerner condition, but you must calculate the sum of the two elasticities. A common error is using absolute values when you shouldn't.
12. Purchasing Power Parity (PPP)
Implied PPP Exchange Rate = (Price of Basket in Domestic Currency) / (Price of Basket in Foreign Currency)
13. Terms of Trade (ToT)
ToT = (Average Export Price Index / Average Import Price Index) × 100- Interpretation: ToT > 100 indicates you are getting richer per unit of export; ToT < 100 suggests you are getting poorer.
1.4 Perfect Competition & Monopoly (HL Only)
The booklet helps you locate:
- Profit: $\pi = TR - TC$ or $\pi = (AR - ATC) \times Q$
- Shut-down price: Equal to minimum AVC (the booklet reminds you via formula, but you must identify it on a graph).
