Edexcel A LEvel economics
                                                                            Calculation 
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             CONTENTS                                                                                                                                                                                                          CHAPTER 1  
             Chapter 1    RATIOS AND FRACTIONS                                                                                                                                 Page 3                                          RATIOS AND FRACTIONS
             Chapter 2    PERCENTAGES, PERCENTAGE CHANGES AND PERCENTAGE POINTS                                                                                              Page 13                                              QUANTITATIVE SKILL 1
                                                                                                                                                                                                                                  Calculate, use and understand ratios and fractions. 
             Chapter 3    AVERAGES – MEANS AND MEDIANS                                                                                                                       Page 22
                                                                                                                                                                                                                               Essentials
             Chapter 4    CHANGES AND RATES OF CHANGE                                                                                                                        Page 28                                           A 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:
             Chapter 5    QUANTILES                                                                                                                                          Page 31                                             •  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   
             Chapter 6    REAL AND NOMINAL NUMBERS                                                                                                                           Page 37                                                  concentration ratio (C3) is 65%
                                                                                                                                                                                                                                 •  Productivity – the ratio of output to inputs (e.g. output per person per hour or per hour worked)
             Chapter 7    INDEX NUMBERS                                                                                                                                      Page 42                                             •  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
             Chapter 8    INTERPRETING DATA IN TABLES AND OTHER GRAPHICAL FORMS                                                                                              Page 45                                            • 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
             Chapter 9  Seasonally Adjusted Data                                                                                                                             Page 51                                             •  Terms of trade – a ratio of the (weighted) index of export prices to the index of import prices
             Chapter 10  Measuring Macro Performance                                                                                                                         Page 54                                             •  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.
             Chapter 11  Composite Measures of Economic Performance                                                                                                          Page 65                                           Example 1
                                                                                                                                                                                                                               The GDP of the USA in 2016 was approximately $18 trillion and the GDP of the UK was approximately $3 trillion. 
             Chapter 12  CALCULATIONS IN MICROECONOMICS                                                                                                                      Page 70                                           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 2
                                                                                                                                                                                                                               A 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 World
                                                                                                                                                                                                                               The 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.)
                                                                                                                                                                                                                                                                Market value in billion U.S. dollars                      Ratio of to Apple’s market capitalisation (to 1 decimal place)
                                                                                                                                                                                                                                 Apple                                                961                                                                         1.0
                                                                                                                                                                                                                                 Microsoft                                            946
                                                                                                                                                                                                                                 Amazon                                               916
                                                                                                                                                                                                                                 Alphabet                                             863
                                                                                                                                                                                                                                 Facebook                                                                                                                                                                               tista
                                                                                                                                                                                                                                                                                      512                                                                                                                                Sta
                                                                                                                                                                                                                                 Alibaba                                              481                                                                                                                               Source:
                                                                                                                                                                                                                               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. 
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        Question 2                                                                                                                        Question 3
        House Prices to Income Ratio and Regional Unemployment Rates                                                                      Market share in athletic footwear
        The table below shows the ratio of house prices to incomes in England in 2017, by region and also the average                     The chart below provides data on the global market for athletic footwear in 2015.
        unemployment rate for each region in the same year.
                                                                                                                                                                    Athletic footwear market share worldwide by company in 2015 (percent)
                                        Ratio of house prices to incomes   Unemployment rate (percent) in 2017
         London                                     16.4                                  5.3                                                 Under Armour      0.8
         South East                                 11.7                                  3.2                                                        Puma        2.1
         East of England                            10.7                                  3.6                                                         Asics        2.7
         South West                                 10.6                                  3.3                                                     Skechers          3.0
         West Midlands                              8.0                                   5.3                                                  New Balance              4.4
         East Midlands                              7.7                                   4.4                                                        adidas                                9.7
         Yorkshire and the Humber                   7.3                                   5.0                     ONS                                  Nike                                                                            22.9
         North West                                 7.1                                   4.5                     Halifax,                                 0.0              5.0             10.0             15.0             20.0             25.0
         North East                                 6.3                                   6.2                    Source:                                                                                                                  Source: Cantor
        a  If the average house price in London is found to be £550,000, calculate average income in London in £s.                        Using the data above:
                                                                                                                                          What is the maximum market share that the 8th largest firm could have?
                                                                                                                                          Using the data, calculate the:
                                                                                                                                          a  Three-firm concentration ratio.
        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.
                                                                                                                                          b  Five-firm concentration ratio.
        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.
                                                                                                                                          c  Seven-firm concentration ratio.
        4  EDEXCEL A Level Economics Calculation Practice Book                                                                                                     NOT LICENSED FOR REPRODUCTION - PLEASE DO NOT COPY THIS BOOKLET   www.tutor2u.net  5
        Question 4                                                                                                                           Question 5
        Market share in the UK commercial banking industry                                                                                   Mean and Median Disposable income
        The table below shows the percentage market share of total assets for leading commercial banks in the United Kingdom                 An Office for National Statistics report published in July 2019 said the following:
        in 2017.                                                                                                                             “The distribution of people’s household disposable income in the 
                                                    Market share (percent)                                                                   UK is skewed towards higher income people; mean income in 2018 
         HSBC Bank plc                                     24.82                                                                             (£35,300) is larger than median income (£29,400).”
         Barclays Bank plc                                 14.37
         Lloyds Bank                                        10.3                                                                             a  Calculate the difference in £s between mean and median disposable income.
         The Royal Bank of Scotland (RBS)                   9.36
         Standard Chartered Bank                            6.22
         Santander UK                                       3.99
         National Westminster Bank                          3.35
         Nationwide Building Society (NBS)                  2.91
         Clydesdale Bank, Yorkshire Bank                    0.55
         TSB Bank                                           0.54
         Virgin Money Bank                                  0.52                                                                             b  Calculate the ratio of mean to median disposable income.
         The Co-operative Bank                              0.31
         Tesco Bank                                         0.19
         Metro Bank                                         0.21
         Other Banks                                       22.37                  Source: Statista
        Calculate the three, five and seven-firm concentration ratios for this market:
        a  Three-firm concentration ratio.
                                                                                                                                             c  Explain briefly why there is such a wide gap between mean and median disposable income in the UK.
        b  Five-firm concentration ratio.
        c  Seven-firm concentration ratio.
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