Revision resources
Important calculations
Every calculation in the specification, with exam-style examples
All the calculations in the specification, in specification order. Each one has its formula and a short exam-style example, with the working and the answer set out the way the mark scheme gives them. Each section also links to its full notes.
Setting out your answer:
- Show your working: the working and the answer usually earn a mark each, so write down both.
- Give the unit: put $, €, % or the item, e.g. units of capital goods, with the answer. An answer without its unit loses a mark.
- Elasticities have no units: PED, PES and YED are just numbers, so do not add % or $.
- Round when asked: if the question says “to two decimal places”, give two, e.g. 5.88%.
- Keep the minus sign: e.g. a PED of –0.38 or a fiscal deficit of –$25.3bn.
- Use the formula: writing a formula on its own earns no marks.
1.1 The market system
1.1.1 The economic problem
Opportunity cost on a PPC
Formula:
Opportunity cost = Amount of the other good given up
Example: On a PPC, point A is 300 consumer goods and 600 capital goods, and point B is 360 consumer goods and 450 capital goods. Calculate the opportunity cost of moving from A to B. (2)
Working: 600 – 450 (1)
Answer: 150 units of capital goods (1)
1.1.3 Demand, supply and market equilibrium
Excess demand and excess supply
Formula:
Excess demand = Quantity demanded – Quantity supplied
Excess supply = Quantity supplied – Quantity demanded
Example: Demand for a theme park’s fast-track passes is 4 200, 5 600 and 7 300 over three months, but it can supply only 15 000. Calculate the excess demand. (2)
Working: (4 200 + 5 600 + 7 300) – 15 000 (1)
Answer: 2 100 passes (1)
1.1.4 Elasticity
Price elasticity of demand (PED)
Formula:
PED = % change in quantity demanded ÷ % change in price
PED is negative. Between 0 and –1, demand is price inelastic. Below –1, e.g. –1.50, it is price elastic.
Example: The price of a bus pass rises by 8.0% and the number sold falls by 2.4%. Calculate, to two decimal places, the PED for bus passes. (2)
Working: –2.4% ÷ 8.0% (1)
Answer: –0.30 (1)
Total revenue and PED
Formula:
Total revenue = Price × Quantity sold
Work out total revenue before and after a price change. If price and total revenue move in opposite directions, demand is price elastic. If they move in the same direction, it is price inelastic.
Example: A bike hire firm raises its price from $15 to $18, and weekly rentals fall from 400 to 300. Calculate the new total revenue. (2)
Working: $18 × 300 (1)
Answer: $5 400 (1)
Price elasticity of supply (PES)
Formula:
PES = % change in quantity supplied ÷ % change in price
PES is positive. Between 0 and 1, supply is price inelastic. Above 1, it is price elastic.
Example: The price of olive oil rises by 6.4% and the quantity supplied rises by 2.9%. Calculate, to two decimal places, the PES for olive oil. (2)
Working: 2.9% ÷ 6.4% (1)
Answer: 0.45 (1)
Using PED or PES to find the change in quantity
Formula:
% change in quantity demanded = PED × % change in price
% change in quantity supplied = PES × % change in price
Example: The PED for a café’s sandwiches is –1.4, and the café cuts its prices by 5%. Calculate the percentage change in quantity demanded. (2)
Working: –1.4 × –5% (1)
Answer: 7% (1)
Income elasticity of demand (YED)
Formula:
YED = % change in quantity demanded ÷ % change in income
A YED greater than 1 shows a luxury good, a positive YED shows a normal good, and a negative YED shows an inferior good.
Example: Incomes rise by 4.5% and the quantity of restaurant meals demanded rises by 7.2%. Calculate, to two decimal places, the YED for restaurant meals. (2)
Working: 7.2% ÷ 4.5% (1)
Answer: 1.60 (1)
1.1.6 Externalities
Social costs and social benefits
Formula:
Social costs = Private costs + External costs
Social benefits = Private benefits + External benefits
Example: A factory’s private costs are $4.5m a year, and its pollution causes external costs of $1.2m. Calculate the social costs. (2)
Working: $4.5m + $1.2m (1)
Answer: $5.7m (1)
1.2 Business economics
1.2.2 Productivity and division of labour
Labour productivity
Formula:
Labour productivity = Total output ÷ Number of workers
Example: A firm with 60 workers produces 4 800 units a month. What is its monthly labour productivity? (1)
A $80
B 80 units
C 4 860 units
D 288 000 units
Answer: B, 80 units (1)
1.2.3 Business costs, revenues and profit
Total revenue
Formula:
Total revenue = Price × Quantity sold
To find the quantity sold from total revenue, divide total revenue by the price.
Example: A firm sells 1 200 phone cases a month at $15 each. Calculate its monthly total revenue. (2)
Working: $15 × 1 200 (1)
Answer: $18 000 (1)
Fixed, variable and total costs
Formula:
Total costs = Total fixed costs + Total variable costs
Total variable costs = Variable cost per unit × Quantity produced
Total fixed costs = Total costs – Total variable costs
Example: A bakery has fixed costs of $3 250 a month and variable costs of $0.50 a loaf. It makes 5 000 loaves a month. Calculate its total costs each month. (2)
Working: $3 250 + ($0.50 × 5 000) (1)
Answer: $5 750 (1)
Average cost
Formula:
Average cost = Total costs ÷ Quantity produced
Example: The bakery’s total costs are $5 750 a month for 5 000 loaves. Calculate the average cost of a loaf. (2)
Working: $5 750 ÷ 5 000 (1)
Answer: $1.15 (1)
Profit or loss
Formula:
Profit = Total revenue – Total costs
If the answer is negative, the firm has made a loss.
Example: Trainers sell for $64 a pair. Each pair costs $22 in materials and $47 in other costs. Calculate the profit or loss on each pair. (2)
Working: $64 – ($22 + $47) (1)
Answer: –$5, a loss of $5 a pair (1)
Percentage change
Formula:
% change = (New figure – Original figure) ÷ Original figure × 100
The same method works for any figure, e.g. profit, population, GDP or an interest rate.
Example: A firm’s profit rose from $184 000 in 2023 to $196 600 in 2025. Calculate, to two decimal places, the percentage change in profit. (2)
Working: ($196 600 – $184 000) ÷ $184 000 × 100 (1)
Answer: 6.85% (1)
1.2.6 Government intervention
Gross pay
Formula:
Gross pay = Hourly wage rate × Hours worked
Example: A worker earns the minimum wage of $6.85 an hour and works 160 hours a month. Calculate the worker’s monthly gross pay. (2)
Working: $6.85 × 160 (1)
Answer: $1 096.00 (1)
2.1 Government and the economy
2.1.1 Economic growth
Economic growth
Formula:
% change in GDP = (GDP this year – GDP last year) ÷ GDP last year × 100
Example: A country’s GDP rose from $845bn in 2024 to $871bn in 2025. Calculate, to two decimal places, the rate of economic growth. (2)
Working: ($871bn – $845bn) ÷ $845bn × 100 (1)
Answer: 3.08% (1)
GDP per capita
Formula:
GDP per capita = GDP ÷ Population
Example: A country has a GDP of $96 400 million and a population of 31.6 million. Calculate, to two decimal places, its GDP per capita. (2)
Working: $96 400m ÷ 31.6m (1)
Answer: $3 050.63 (1)
2.1.1 Low and stable inflation
Rate of inflation
Formula:
Rate of inflation = (CPI this year – CPI last year) ÷ CPI last year × 100
If the CPI starts at 100 in the base year, the rise in prices since then is simply the CPI minus 100.
Example: A country’s CPI rose from 112.6 in 2024 to 117.3 in 2025. Calculate, to two decimal places, the rate of inflation in 2025. (2)
Working: (117.3 – 112.6) ÷ 112.6 × 100 (1)
Answer: 4.17% (1)
2.1.1 Low unemployment
Unemployment rate
Formula:
Unemployment rate = Number of unemployed ÷ Total labour force × 100
If you are given the number employed, take it away from the labour force first to find the number unemployed.
Example: A country’s labour force is 18.4 million, and 17.25 million people are employed. Calculate, to two decimal places, the rate of unemployment. (2)
Working: (18.4m – 17.25m) ÷ 18.4m × 100 (1)
Answer: 6.25% (1)
2.1.1 Current account of the balance of payments
Current account balance
Formula:
Current account balance = Total exports – Total imports
A negative answer is a current account deficit, and a positive one is a surplus.
Example: A country exports $312.5bn of goods and services and imports $348.1bn. Calculate its current account balance. (2)
Working: $312.5bn – $348.1bn (1)
Answer: –$35.6bn (1)
2.1.1 Redistribution of income
Percentage of a total
Formula:
Percentage = Part ÷ Total × 100
Example: 2 418 000 of a country’s 15 300 000 people live in relative poverty. Calculate, to two decimal places, the percentage living in relative poverty. (2)
Working: 2 418 000 ÷ 15 300 000 × 100 (1)
Answer: 15.80% (1)
Income tax and net pay
Formula:
Net pay = Gross pay – Income tax
Income tax is only paid on the part of income in each tax band, at that band’s rate.
Example: Leila earns $38 000 a year and pays 20% income tax on $24 000 of it. Calculate her net pay. (2)
Working: $24 000 × 20% = $4 800 (1)
Answer: $38 000 – $4 800 = $33 200 (1)
2.1.2 Fiscal policy
Tax revenue
Formula:
Tax revenue = Total of the taxes the question asks for
Direct taxes are charged on what people and firms earn, e.g. income tax and corporation tax. Indirect taxes are charged when people spend, e.g. sales tax, excise duties and customs duties.
Example: In one month, a government collects income tax of $21.7bn, sales tax of $15.2bn, corporation tax of $8.1bn, excise duties of $4.6bn and customs duties of $0.9bn. Calculate the revenue from indirect taxes. (2)
Working: $15.2bn + $4.6bn + $0.9bn (1)
Answer: $20.7bn (1)
Fiscal deficit or surplus
Formula:
Fiscal balance = Government revenue – Government expenditure
A negative answer is a fiscal deficit, and a positive one is a fiscal surplus.
Example: A government’s revenue is $412.6bn and its expenditure is $437.9bn. Calculate the fiscal deficit or surplus. (2)
Working: $412.6bn – $437.9bn (1)
Answer: –$25.3bn (1)
2.1.2 Monetary policy
Interest
Formula:
Interest = (Amount saved or borrowed ÷ 100) × Interest rate
Example: Daniel keeps $6 500 in a savings account that pays 3.2% a year. Calculate how much interest he receives in one year. (2)
Working: ($6 500 ÷ 100) × 3.2 (1)
Answer: $208 (1)
2.2 The global economy
2.2.1 Multinational corporations
Averages
Formula:
Average = Total of all the figures ÷ Number of figures
Example: FDI into a country was $18.6bn, $21.4bn, $19.9bn and $24.3bn over four years. Calculate, to two decimal places, the annual average value of FDI. (2)
Working: ($18.6bn + $21.4bn + $19.9bn + $24.3bn) ÷ 4 (1)
Answer: $21.05bn (1)
2.2.2 Methods of protection
Price after a tariff
Formula:
Price after a tariff = Import price + (Import price × Tariff rate)
Example: A bicycle has an import price of $350, and a 12% tariff is added. Calculate its selling price. (2)
Working: $350 × 0.12 = $42 (1)
Answer: $350 + $42 = $392 (1)
2.2.3 Exchange rates
Converting currencies
Formula:
Amount in foreign currency = Amount in home currency × Exchange rate
Amount in home currency = Amount in foreign currency ÷ Exchange rate
Example: A UK firm sells a machine for £24 000. The exchange rate is £1 = €1.16. Calculate the price of the machine in euros. (2)
Working: £24 000 × €1.16 (1)
Answer: €27 840 (1)
