About this course
Who it's for
All ALevel Economics students.
Course series
Course outline

Ratios can come up in many situations in economics. The most obvious example is the topic of Comparative Advantage and the calculation of opportunity cost ratios. Other examples include productivity ratios, savings ratios and the terms of trade. This is not an exhaustive list, however, and you should be able to interpret any ratio that a data response casestudy might give you and be able to calculate a ratio from data. Fractions are less common in economics and, as a general rule, you should try to work in decimals rather than in fractions. Firstly, it makes the maths easier but, secondly, most economic data is presented in decimals rather than fractions. Nevertheless, you should be confident in using fractions because subdivisions of a whole such as firms’ market share, unemployment rates and components of AD could be described as fractions.

Ratios

Fractions

Game of Fractions  Calculation Activity

Calculate Comparative Advantage  Calculation Activity

Calculate the Mulitplier  Calculation Activity


You are virtually guaranteed to meet percentages in your ALevel Economics exams. This could be in the form of calculation or interpretation of percentages, percentage change and/or percentage points.

Percentages

Percentage Change

Percentage Points

Percentages and Percentage Points  True or False Activity

Calculate Interest Rates  Calculation Activity

Inflation Rate Targets  Higher or Lower Activity

Fractions, Percentages and Decimals  Match Up Activity


Averages: in economics we use both means and medians regularly. They allow us to compare values over time and between countries, such as average GDP growth or average propensity to consume. They allow us to review trends, such as rising average costs or falling average prices. Averages allow us to comment on the distribution of values when comparing mean and median values for the same data e.g. high values ‘skewing’ data. Quantiles: these are used when we want split up a population group so that we can assess equality. They are best known in relation to Lorenz curves but it is also vitally important that you are confident with data that is presented in quantiles. In economics, we tend to use four types of quantile: percentile, decile, quintile and quartile.

Means and Medians

Quantiles

Mean and Medians  Calculation Activity


Economists have to interpret, analyse and compare large numbers very frequently. For example, the value of German GDP runs into 13 figures: $3,940,000,000,000. Index numbers are a useful way of expressing economic data like this (whether it is time series or comparing / contrasting information). An index number is a figure reflecting price or quantity compared with a base value. The base value always has an index number of 100. The index number is then expressed as 100 times the ratio to the base value. Note that index numbers have no units e.g. £, Euros or $. A weighted index is an ‘average’ index, made up of a combination of other indices. You are likely to come across weighted indices when calculating (or interpreting) data on price indices or when using composite indicators such as the HDI.

Index Numbers

Weighted Index Numbers

Calculate Index Numbers  Calculation Activity

Calculating Index Numbers (Part 2)  Calculation Activity


Along with the concepts of ‘revenue and profit’, the topic of ‘costs’ underpins almost everything to do with the topic of "Theory of the Firm". We study Theory of the Firm in order to understand and predict the behaviour of firms. Being able to calculate all of a firm’s costs means that you will be able to analyse their behaviour confidently. In this topic we will not only look at how to perform the calculations but also how to construct the various curves and look at how the relate to one another

Short Run Costs

Long Run Costs

Marginal Costs

Calculate Costs  Calculation Activity

Costs  MCQ Activity


Along with the topic of ‘costs’, the concepts of revenue and profit help to underpin almost everything to do with the topic of Theory of the Firm. We study Theory of the Firm in order to understand and predict the behaviour of firms. Being able to calculate all of the firm’s revenues means that you will be able to analyse their behaviour confidently. You should also know the different types of profit that you may encounter in the specification and be able to identify the profitmaximising level of output. In this topic we will not only look at how to perform the calculations but also how to construct the various curves and look at how the relate to one another

Revenue

Profit

Calculate Revenues  Calculation Activity


Nominal numbers are current prices or unadjusted rates, without taking inflation or other factors into account. Real numbers, by contrast, refer to data that is adjusted for general price level changes over time. Economists convert nominal data into real data in order to remove the influence of inflation. Without doing so, comparisons of prices, GDP or wages over time would be very difficult. For example, if GDP increases from £1trn to $1.trn an economist would want to know how much of this increase in value is down to the general increase in the price level (inflation) and how much is down to the increases in output (the real GDP).

Converting between Real and Nominal data

Interpreting Real and Nominal Data

Calculate Real and Nominal Prices  Calculation Activity


In economics, elasticity is the responsiveness of one economic variable to a change in another. There are four important elasticities that you need to be aware of:  Price elasticity of demand (PED)  Income elasticity of demand (YED)  Crossprice elasticity of demand (XED)  Price elasticity of supply (PES)

Price Elasticity of Demand

PES, YED and XED

Calculate Price Elasticity of Demand  Calculation Activity

Price and Income Elasticity of Demand  Categorise Activity

Cross Elasticity of Demand and Price Elasticity of Supply  Categorise Activity


In economics, it is really important that you are confident in dealing with quantitative data that can be presented in a number of different formats. There may be no direct calculations involved, but understanding the message conveyed will be critical to being able to answer subsequent questions, which are often directly linked to the data source. Regardless of how it is presented, you should be able to draw reasonable conclusions from that data about correlations, proportions, significance, causation and so on. You also need the underlying arithmetical skills to be able to manipulate the data.

Graphical Forms 1

Graphical Forms 2


In this topic, we look at how to use numerical data in writing tasks. In particular, we look at comparative language (peaks/troughs, faster/slower, greater/less than, identifying anomalies and outliers etc…) as well looking at difference between describing data and explaining data. We also consider some tricky economic areas such as rates of change and the issue of correlation v causation. We also show you soe of the most common errors made by students in exams. We show how to look for these and provides ways to avoid getting those questions wrong.

Numerical Errors

Talking about Numbers

Hosts

Nik Georgiadis
Nik is the Head of Economics at a highly competitive independent school, teaching IB and A level. He is a former Principal Examiner with a leading exam board, and has been a tutor2u Economics contributor for the last 3 years.

Ruth Tarrant
Ruth is Subject Lead for Economics at tutor2u and is also a higher experienced teacher, presenter, author and senior examiner.