CFA Level 1 – Economics correctly answered to pass 2023
Price Elasticity of Demand Formula - correct answer (% Change in Quantity Demanded) / (%t Change in Price)
Cross Elasticity of Demand Formula - correct answer (% Change in Quantity Demanded) / (% Change in Price of Substitute or Compleme...
CFA Level 1 – Economics correctly
answered to pass 2023
Price Elasticity of Demand Formula - correct answer (% Change in Quantity Demanded) / (%t Change in
Price)
Cross Elasticity of Demand Formula - correct answer (% Change in Quantity Demanded) / (% Change in
Price of Substitute or Complement)
Income Elasticity of Demand Formula - correct answer (% Change in Quantity Demanded) / (% Change in
Income)
Price Elasticity of Supply Formula - correct answer (% Change in Quantity Supplied) / (% Change in Price)
Elasticity of Demand Factors - correct answer 1) Availability of Substitute; 2) Relative amount of income
spent on the good; 3) Time SINCE price change
Elasticity of Supply Factors - correct answer 1) Available substitutes for resources (inputs) used to
produce the goods; (2) the time that has elapsed since the price change
Income elasticity of an Inferior Good- Positive or Negative - correct answer Negative
Total Cost Formula - correct answer = Total Fixed Cost + Total Variable Cost
Average Fixed Cost Formula - correct answer Average Fixed Cost = TFC/Q
Average Variable Cost Formula - correct answer Average Variable Cost= TVC/Q
Average Total Cost Formula - correct answer = AFC + AVC
,Unemployment Rate Formula - correct answer (Number of Unemployed) / (Labor Force) x 100
Labor Force Participation Rate Formula - correct answer (Labor Force) / (Working-Age Population(16 or
older) ) x 100
Employment to Population Ratio Formula - correct answer (Number of Employed) / (Working-Age
Population) x 100
CPI Formula - correct answer (Cost of Basket of Current Prices) / (Cost of Basket at Base Period Prices) x
100
Inflation Rate Formula - correct answer % change in CPI
Potential Increase In Money Supply Formula - correct answer = (Potential Deposit Expansion Multiplier) x
(Increase in Excess Reserves)
Money Multiplier for a change in monetary base Formula - correct answer (1+c) / (d+c)
c = currency as a % of deposits
d = desired reserve ratio
Change in Quantity of Money Formula - correct answer (Change in Quantity of Money) = (Change in
Monetary Base) x (Money Multiplier)
Equation of Exchange Formula - correct answer = (Money supply) x (Velocity) = GDP = (Price) x (Real
Output)
Quantity Theory of Money Formula - correct answer Price = M (V/Y)
, What does it mean if Cross elasticity is positive - correct answer Two goods are reasonable substitutes
for each other
What does it mean if Price Elasticity of Demand is less than one in absolute value? - correct answer
Inelastic
What does it mean if Price Elasticity of Demand is greater than one in absolute value? - correct answer
Elastic
Normal Goods Elasticity - correct answer Positive Income Elasticity (greater than 1)
Total Revenue Test - correct answer Estimate elasticity of demand:
P Up-> R Up (Inelastic);
P Up -> D Down (Elastic)
Cross Elasticity of Substitutes- Positive or Negative - correct answer Positive
Income Elasticity for normal goods- Positive or Negative - correct answer Positive
Income Elasticity for inferior goods- Positive or Negative - correct answer Negative
Command System - correct answer A central authority determines resource allocation, is used in
centrally planned economies and is also used within firms and in the military
Majority Rule - correct answer Government policies such as taxation and transfer payments are an
example of this type of resource allocation
Efficient allocation of resources - correct answer Marginal Benefit to society (Demand) = Marginal Cost
for the "last" unit of each good and service to be produced (Supply). (MC = MB)
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