Business Economics — Formula Sheet
P4 · CA Foundation · Free and exam-ready
Theory of Demand & Supply
Full cheatsheet →Price elasticity (percentage method)
Ed = (ΔQ/Q) ÷ (ΔP/P)
Price elasticity (point method)
Ed = (ΔQ/ΔP) × (P/Q)
Price elasticity (arc method)
Ed = ((Q₁ − Q₀) ÷ ((Q₁ + Q₀)/2)) ÷ ((P₁ − P₀) ÷ ((P₁ + P₀)/2))
Cross elasticity
Exy = (%ΔQx) / (%ΔPy)
Income elasticity
Ey = (%ΔQ) / (%ΔIncome)
Perfect Competition, Monopoly, Monopolistic Competition & Oligopoly
Full cheatsheet →MR from AR (linear demand)
If AR = a − bQ, then MR = a − 2bQ
MR has the same intercept but twice the slope.
Monopoly price-output rule
Set MC = MR, then read price from the demand curve above that Q.
Lerner index (monopoly power)
L = (P − MC) / P = 1 / |Ed|
Higher Lerner index → more monopoly power.