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Edexcel A LEvel economics
Calculation
practice Book
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suggested answers to the activities
in this Calculation Practice Book.
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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.
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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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