Enter the total direct impact, indirect impact, and induced impact into the calculator to determine the economic impact.
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Economic Impact Formula
The following formula is used to calculate a total economic impact of a project.
EI = DI + INDI +INDU
- Where EI is the economic impact ($)
- DI are direct impacts ($)
- INDI are indirect impacts ($)
- INDU are induced impacts ($)
To calculate the economic impact of a project, simply sum the direct impacts, indirect impacts, and induced impacts together.
Direct impacts would be employment and income generated directly as a result of the project or proposal. For example, if there was a project to build a new stadium, labor would need to be hired to build it and the materials would need to be bought for the construction. The companies that directly generated income from that would be considered direct impact income.
The indirect impact is all income generated as a secondary process. For example, if the supplier that was used for the material to build the construction then purchased sub-components from one of their suppliers, then the secondary supplier income would be considered indirect impact.
Induced Impacts would be considered things that occur as a result of the direct and indirect impacts. For example, if the labor hired to build the stadium had more income now than before because of this new job, and spent more on food, entertainment, etc, then that would be an induced impact.
Economic Impact Definition
An economic impact is defined as the total analysis of a project, event, or program as it pertains to its effect on the surrounding economy.
Example Problem
How to calculate an economic impact?
First, determine the direct impact. For this example, $100,000.00 was spent on direct impact. For more information on each impact, factor read the sections above.
Next, determine the indirect impact. For this example, the indirect impact is found to be $50,000.00.
Next, determine the induced impact. This is found to be $25,000.00.
Finally, calculate the total economic impact using the formula above.
EI = $100,000.00 + $50,000.00 + $25,000.00
= $175,000.00.
