Edexcel A LEvel economics Calculation practice Book

SKU: 02-4130-30242

Edexcel A LEvel economics

Student Name:

Study Notes | Revision Videos | Exam Technique AdviceYou’ll find everything you need for Edexcel Economics A at:

Follow tutor2u Economics on Twitter:

www.tutor2u.net/economics

@tutor2uEcon

Calculation practice Book

Scan the QR code above to view suggested answers to the activities in this Calculation Practice Book.

NOT LICENSED FOR REPRODUCTION - PLEASE DO NOT COPY THIS BOOKLET www.tutor2u.net 32 EDEXCEL A Level Economics Calculation Practice Book

Chapter 1 RATIOS AND FRACTIONS Page 3

Chapter 2 PERCENTAGES, PERCENTAGE CHANGES AND PERCENTAGE POINTS Page 13

Chapter 3 AVERAGES – MEANS AND MEDIANS Page 22

Chapter 4 CHANGES AND RATES OF CHANGE Page 28

Chapter 5 QUANTILES Page 31

Chapter 6 REAL AND NOMINAL NUMBERS Page 37

Chapter 7 INDEX NUMBERS Page 42

Chapter 8 INTERPRETING DATA IN TABLES AND OTHER GRAPHICAL FORMS Page 45

Chapter 9 Seasonally Adjusted Data Page 51

Chapter 10 Measuring Macro Performance Page 54

Chapter 11 Composite Measures of Economic Performance Page 65

Chapter 12 CALCULATIONS IN MICROECONOMICS Page 70

CONTENTS CHAPTER 1 RATIOS AND FRACTIONS

QUANTITATIVE SKILL 1Calculate, use and understand ratios and fractions.

EssentialsA ratio is a way of comparing two numbers. In economics, ratios can be represented in different ways, including as a fraction or as a percentage. Economists use a number of different ratios, for example: • Concentration ratios – these are used to help measure the concentration of a particular market, for example, if the largest three firms have 65% of the market share between them then we would say that the three-firm concentration ratio (C3) is 65% • Productivity – the ratio of output to inputs (e.g. output per person per hour or per hour worked) • Demography – such as the dependency ratio for younger and older people in a population • Labour market – the labour force participation ratio as a proportion of population of working age • Elasticity – all of PED, YED, XED and PES are types of ratio, as they express the change in one variable to the change in another • Terms of trade – a ratio of the (weighted) index of export prices to the index of import prices • GDP per capita – total GDP divided by the total population to give a measure of income per head

That said, it is possible to use ratios for all manner of economic data. Some examples are provided below.

Example 1The GDP of the USA in 2016 was approximately $18 trillion and the GDP of the UK was approximately $3 trillion. To express this as a ratio we could write 18:3 or 18 to 3. This can also be simplified to 6:1 or 6 to 1. In other words, the annual GDP of the USA is approximately 6 times larger than that of the UK.

Example 2A café owner knows that for one unit of labour she needs 4 units of capital. If she expands her café so that she has 3 units of labour, then she will need 12 units of capital (assuming constant returns to scale).

Question 1

The Largest Companies in the WorldThe table below provides data on the largest companies in the world by market value in May 2019 (in billion U.S. dollars). With a market value of 961.3 billion U.S. dollars, Apple led the ranking of the world’s largest companies in May 2019. (Note: Market value is determined by the market price of shares x number of shares issued.)

Complete the right-hand column in the table by calculating the ratio of Apple’s market capitalisation to each of the other businesses shown in the table.

961

946

916

863

512

481

1.0Apple

Microsoft

Amazon

Alphabet

Facebook

Alibaba

Market value in billion U.S. dollars Ratio of to Apple’s market capitalisation (to 1 decimal place)

Sour

ce: S

tatis

ta


Question 2

House Prices to Income Ratio and Regional Unemployment RatesThe table below shows the ratio of house prices to incomes in England in 2017, by region and also the average unemployment rate for each region in the same year.

Question 3

Market share in athletic footwearThe chart below provides data on the global market for athletic footwear in 2015.

16.4

11.7

10.7

10.6

8.0

7.7

7.3

7.1

6.3

5.3

3.2

3.6

3.3

5.3

4.4

5.0

4.5

6.2

London

South East

East of England

South West

West Midlands

East Midlands

Yorkshire and the Humber

North West

North East

Ratio of house prices to incomes Unemployment rate (percent) in 2017

a If the average house price in London is found to be £550,000, calculate average income in London in £s.

b Average incomes in the East of England are estimated to be £32,000. Using this data, calculate the average house price in the East of England in £s.

c Is there a relationship apparent between regional unemployment rates and the ratio of house prices to incomes? Use some of the data in your answer.

Under Armour

Puma

Asics

Skechers

New Balance

adidas

Nike

0.0 5.0 10.0 15.0 20.0 25.0

0.8

2.1

2.7

3.0

4.4

9.7

22.9

Athletic footwear market share worldwide by company in 2015 (percent)

Using the data, calculate the:

a Three-firm concentration ratio.

Using the data above:

What is the maximum market share that the 8th largest firm could have?

b Five-firm concentration ratio.

c Seven-firm concentration ratio.

Source: CantorSour

ce: H

alifa

x, O

NS


Question 4

Market share in the UK commercial banking industryThe table below shows the percentage market share of total assets for leading commercial banks in the United Kingdom in 2017.

Question 5

Mean and Median Disposable incomeAn Office for National Statistics report published in July 2019 said the following:

Source: Statista

24.82

14.37

10.3

9.36

6.22

3.99

3.35

2.91

0.55

0.54

0.52

0.31

0.19

0.21

22.37

HSBC Bank plc

Barclays Bank plc

Lloyds Bank

The Royal Bank of Scotland (RBS)

Standard Chartered Bank

Santander UK

National Westminster Bank

Nationwide Building Society (NBS)

Clydesdale Bank, Yorkshire Bank

TSB Bank

Virgin Money Bank

The Co-operative Bank

Tesco Bank

Metro Bank

Other Banks

Market share (percent)

Calculate the three, five and seven-firm concentration ratios for this market:

a Three-firm concentration ratio.

b Five-firm concentration ratio.

c Seven-firm concentration ratio.

“The distribution of people’s household disposable income in the UK is skewed towards higher income people; mean income in 2018 (£35,300) is larger than median income (£29,400).”

a Calculate the difference in £s between mean and median disposable income.

b Calculate the ratio of mean to median disposable income.

c Explain briefly why there is such a wide gap between mean and median disposable income in the UK.


Question 2

The data below shows the price of a commodity over a 10-year period with Year 1 as the base year.

Question 3

Black Friday is a one-day discount shopping event tied in with people in the US enjoying a holiday for Thanksgiving. On Black Friday in 2017 online sales in the UK reached £1.15bn, a 15% increase on the 2016 Black Friday shopping event, and High Street sales reached £1.45bn, a 4% increase on 2016.

100

112

118

123

130

140

150

125

115

110

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year 10

a What was the % rise in price of the commodity between Year 1 and Year 8?

b What was the % rise in price between Year 4 and Year 6?

c In which year was the price of the commodity at its lowest? Explain your answer.

c Calculate the value of online sales on Black Friday in 2017 as a proportion of all sales (i.e. online & High Street combined).

b Calculate the value of High Street sales on Black Friday in 2016.

a Calculate the value of online sales on Black Friday in 2016.

Knowing that total government spending is equal to £814bn, calculate the amount spent on the following:

Question 4

The pie chart below shows the proportion of UK government spending allocated to different uses for 2018.

Source: www.ukpublicspending.co.uk/uk_budget_pie_chart

Category of government spending

Amount spent in 2018 (£bn)

Pensions

Education

Welfare

£

£

£

Protection 4% Transport 4%General Government 2%

Other Spending 14%

Interest 6%

Pensions 19%

Welfare 15%

Defence 6%

Education 11%

Health Care 19%


a Calculate the percentage difference in level of average weekly spending between the low-income decile and the highest.

b Using the data in both charts, comment on the likely income elasticity of demand (YED) of food and non- alcoholic drinks.

Question 2

Spending on transportThe graph below shows average weekly household expenditure on transport services in the United Kingdom in 2018, by gross income decile group (in £s).

a Calculate the percentage difference in level of average weekly spending between the low-income decile and the highest.

a Calculate the percentage difference in disposable income between the 9th income decile group and the 2nd income decile group.

b Using the data, comment on the likely income elasticity of demand (YED) of transport services.

b Calculate the ratio of the income of the top income decile to the bottom income decile.

Question 3

The chart below shows average disposable income per household in the United Kingdom in 2017/18, by decile group (in £s).

Sour

ce: O

NS


Question 12

Calculating mutually beneficial terms of tradeIn each the following situations, work out whether mutually beneficial trade between two countries is possible. And, if it is, what would a mutually beneficial exchange ratio be?

Question 1

The Human Development IndexThe table below provides information on aspects of human development for a selection of countries. The data is taken from the 2018 Human Development Report published by the United Nations.

Example 1

Example 2

Example 3

Example 4

Example 5

Honey

Gas

Fish

TV Screens

Cars

Yoghurt

Vodka

Meat

Watt Bikes

Cocoa

Possible mutually beneficial exchange ratio





12 tonnes

1500

70000

2500

5m

4 tonnes

500

35000

3500

10m

13 tonnes

1200

1700

4200

6m

39 tonnes

400

850

2100

50m

Country A

Country C

Country E

Country G

Country I

Country B

Country D

Country F

Country H

Country J

CHAPTER 11 COMPOSITE MEASURES OF ECONOMIC PERFORMANCE

QUANTITATIVE SKILL 11Understand composite indicators such as the Human Development Index.

37

56

73

88

98

101

104

113

141

Qatar

Kuwait

Cuba

Ukraine

Tonga

Botswana

Samoa

South Africa

Equatorial Guinea

0.856

0.803

0.777

0.751

0.726

0.717

0.713

0.699

0.591

78.3

74.8

79.9

72.1

73.2

67.6

75.2

63.4

57.9

13.4

13.6

14.0

15.0

14.3

12.6

12.5

13.3

9.3

9.8

7.3

11.8

11.3

11.2

9.3

10.3

10.1

5.5

116,818

70,524

7,524

8,130

5,547

15,534

5,909

11,923

19,513

-36

-51

43

24

37

-26

24

-23

-80

HDI Ranking(2018)

Country Human Development Index (HDI)

Life expectancy at birth

Expected years of schooling

Mean years of schooling

Gross national income (GNI) per capita (2011 PPP $)

GNI per capita rank minus HDI rank

Background notes on components of the HDI: • Human Development Index (HDI): A composite index measuring average achievement in three basic dimensions of human development—a long and healthy life, knowledge and a decent standard of living

• Life expectancy at birth: Number of years a new-born infant could expect to live if prevailing patterns of age-specific mortality rates at the time of birth stay the same throughout the infant’s life.

• Expected years of schooling: Number of years of schooling that a child of school entrance age can expect to receive if prevailing patterns of age-specific enrolment rates persist throughout the child’s life.

• Mean years of schooling: Average number of years of education received by people ages 25 and older, converted from education attainment levels using official durations of each level.

• Gross national income (GNI) per capita: Aggregate income of an economy generated by its production and its ownership of factors of production, less the incomes paid for the use of factors of production owned by the rest of the world, converted to international dollars using PPP rates, divided by midyear population.

• GNI per capita rank minus HDI rank: Difference in ranking by GNI per capita and by HDI value. A negative value means that the country is better ranked by their GNI level than by their HDI value.

Draw on the data in the table to help support your answer to each of the following questions.


d Consider two reasons why the price elasticity of demand of cocoa is estimated to be highly inelastic.

1

2

Question 9

Price elasticity of supplyFill in the gaps below:

The price of a product falls by 5% and PES is 0.5. The change in quantity supplied is ___________.

The quantity supplied of a product falls from 350 units to 300 and the PES is 0.8. The percentage change in price was __________________.

If the supply curve goes through the origin, the PES will be __________________ along the length of the curve.

The price of a good increases from £1.50 to 1.65. PES is 1.2. The original amount supplied was 50,000 units. The new quantity supplied is ________________.

Question 10

Calculating Marginal and Average ProductThe table below shows how output changes for a firm as extra employees are added. Complete the table.

Question 11

Calculating Business Costs in the Short RunBelow is cost and output information for a small firm: complete the table.

Question 12

Calculating Revenues and Profits from DiagramsThe diagram below shows cost and revenue curves for a firm.

Number of workers employed

Output

Total output

Total Cost

Total Fixed Cost

Total Variable Cost

Average Fixed Cost

Average Variable Cost

Average Total Cost

Marginal Cost

Marginal product Average Product

1

2

3

4

5

6

0

1

2

3

4

5

100

108

120

140

170

220

AC

MC

MR AR = D

Output (‘000s)100 120

Costs andRevenues

($)

10

8.50

7

a The value of supernormal profit earned by this firm when it aims to maximise its profit.

b The value of supernormal profit earned by this firm when it aims to maximise its revenue.

Using the diagram, calculate:

Documents

Edexcel A LEvel economics Calculation practice Book