Suppose you live in a community of 200 people where everyone is able and seeks to work. If 140 people are 16 years and older and 120 of them are employed, what is the unemployment rate in this community?

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The unemployment rate for this community would be 14.3%.  Let us see how we arrive at this figure.

As you can see in the link below, an economy’s unemployment rate is generally defined as the percentage of people who are at or above the age of 16 and who do not have work even though they would like to have it.  People who are below the age of 16 are not counted, even if they would prefer to work rather than going to school. 

In the scenario that you have given us, only two numbers matter.  These are the number of people who are 16 or older and the number of people who have jobs.  The total population of the community does not matter here because unemployment rates only look at people who are at least 16.  In your question, you say that there are 140 people who are 16 or older in this community and 120 of them have work.  This means that 20 of them are unemployed.  We take 20 and divide it by 140 since 140 is the total number of people 16 or over who want to work.  That gives us a figure of .1428.  Expressed in terms of percentages, this is 14.3%, which means that the unemployment rate in this community is 14.3%.

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