Weekly Lesson Three

Economics Basics  |  ACCF Batch 2

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Economics Glossary

Key Economics Formulas

1. Price Elasticity of Demand (PED)

PED = % Change in Quantity Demanded / % Change in Price

|PED| > 1 = elastic; |PED| < 1 = inelastic; |PED| = 1 = unit elastic.

2. GDP (Expenditure Approach)

GDP = C + I + G + (X − M)

C=Consumption, I=Investment, G=Government spending, X=Exports, M=Imports.

3. Inflation Rate

Inflation Rate (%) = ((CPI_current − CPI_base) / CPI_base) × 100

Measures the percentage change in the consumer price index from a base period.

4. Real GDP

Real GDP = (Nominal GDP / GDP Deflator) × 100

Adjusts nominal GDP for price-level changes to reflect true output growth.

5. Unemployment Rate

Unemployment Rate (%) = (Unemployed / Labour Force) × 100

Labour Force = Employed + Unemployed (those actively seeking work).

6. Carbon Tax Revenue

Tax Revenue = Carbon Tax Rate × Total Emissions

Estimates government revenue from a carbon tax at a given rate per tonne of CO₂.

Excel for Economics

Calculating GDP (Expenditure Method)

Assume C in B2, I in C2, G in D2, X in E2, M in F2:

=B2+C2+D2+(E2-F2)

Returns nominal GDP. Create a table for multiple years and use a line chart to show trend.

Inflation Rate from CPI

CPI values in column B (year in A). Year-on-year inflation in C3 onwards:

=((B3-B2)/B2)*100

Drag down to calculate for all years. Apply number format 0.00"%" for display.

Price Elasticity of Demand

Old price in A2, new price in A3, old quantity in B2, new quantity in B3:

=((B3-B2)/B2)/((A3-A2)/A2)

A result between -1 and 0 is inelastic; below -1 is elastic. Use ABS() to get the absolute value.

Real GDP Calculation

Nominal GDP in B2, GDP Deflator in C2:

=(B2/C2)*100

Paste across years to compare real output growth, then chart alongside nominal for context.

Carbon Tax Revenue Modelling

Emissions (Mt) in A2, tax rate (USD/t) in B2:

=A2*B2*1000000

Multiply by 1,000,000 to convert Mt to tonnes. Use a data table to model revenues across different tax rates (Data → What-If Analysis → Data Table).

Visualising Supply and Demand

Create two columns (Price, Qty Demanded) and two more (Price, Qty Supplied). Insert → Chart → XY Scatter → Smooth Lines. Right-click and add both series to show supply and demand curves on the same chart.

Price | Qty Demanded | Qty Supplied
  10  |    1000      |    200
  20  |     800      |    400
  30  |     600      |    600  ← equilibrium
  40  |     400      |    800

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