IB Economics Notes & Questions

IB Economics Notes & Questions

We have summarised the Economic concepts from the IB Economics syllabus, and linked our IB Economics notes and questions to key topics on this page. We hope this will serve as a directory of our Economics resources for IB Economics students in Year 1 and Year 2. Concepts only applicable to HL is noted in italics, and those not applicable to the specification are in brackets. Topics without links are either coming soon or not available, but a close substitute for these resources will be provided to students receiving mentoring or tuition from us. Please do bookmark this page and share it if you find our IB Economics notes and questions helpful.

Year 1 – Microeconomics & Macroeconomics

Section 1: Microeconomics
1.1 Competitive Markets: Demand and Supply
– Demand & Supply: Law of Demand/Supply, Factors, Shifts, Price Determination
HL Only: The Equation of Demand/Supply, Equilibrium Price/Quantity Calculation
– Excess Supply and Excess Demand
Producer & Consumer Surplus and Allocative Efficiency

1.2 Elasticity
Price, Income & Cross Elasticity of Demand; Price Elasticity of Supply
– Applications for Different Types of Elasticity

1.3 Government Intervention
– Indirect Taxes: Specific, Ad Valorem
HL Only: Effects of Elasticity on Taxes, Revenue/Expenditure/Surplus Calculation
HL Only: Revenue/Expenditure/Surplus Calculation for Subsidies
Price Ceilings/Floors: Maximum & Minimum Prices (Price Controls)
HL Only: Revenue/Expenditure/Surplus Calculation for Price Ceilings/Floors

1.4 Market Failure
Public Goods and the Free-Rider Problem
Private, External & Social Costs/Benefits
– Merit & Demerit Goods
Negative Production & Consumption Externalities
Positive Production & Consumption Externalities
– Government Responses: Regulation, Taxation, Tradable Permits (Negative Externalities); Subsidies, Legislation, Advertising (Positive Externalities)
Common Access Resources
– Threats to Sustainability, Real-World Examples, and Relevance to Negative Externalities
– Government Responses: Legislation, Carbon Taxes, Cap and Trade Schemes, and Funding for Clean Technologies
HL Only: Asymmetric Information, Abuse of Monopoly Power & Related Government Responses

HL Only: 1.5 Theory of the Firm and Market Structures
– Production: Marginal, Total and Average Product; Law of Diminishing Marginal Returns; Short-Run vs Long-Run; Returns to Scale
– Costs: Total Cost (TC), Average Cost (AC), Marginal Cost (MC), Fixed Cost (FC), Variable Cost (VC), Diminishing Marginal Returns
Long-Run Average Costs (LRAC), Economies of Scale & Diseconomies of Scale
Profit Maximisation: Normal Profits, Supernormal Profits and Loss; Shut-down Price
Goals of Firms (Business Objectives)
Perfect Competition: Short-Run & Long-Run Equilibrium
Monopoly: Advantages & Disadvantages, Natural Monopoly, Regulation
Monopolistic Competition: Short-Run & Long-Run Equilibrium
Oligopoly: Price Rigidity, Game Theory, Collusion
Market Efficiency
Price Discrimination

Section 2: Macroeconomics
2.1 The Level of Overall Economic Activity
– Factors of Production & The Circular Flow of Income
– Measures of Economic Activity: GDP, GNP, GNI Real GDP, green GDP; Income/Expenditure/Output Approaches to Measurement
HL Only: Calculate GDP, GNP/GNI, Real GDP using Price Deflator
– Business Cycle

2.2 Aggregate Demand and Aggregate Supply
– Aggregate demand (AD) & Aggregate Supply (AS): Factors, Shifts, Equilibrium Price Level/Output
– Keynesian & Classical Long-Run Aggregate Supply (LRAS)
The Keynesian Multiplier

2.3 Macroeconomic Objectives
HL Only: Calculate Unemployment, Inflation, Economic Growth from a Set of Data
Unemployment: Measures, Types/Causes, Economic Consequences
Inflation/Deflation: Cost Push & Demand Pull Inflation
HL Only: Short-Run Phillips Curve (SRPC), Long-Run Phillips Curve (LRPC)
– Economic Growth: Investment, Productivity, Production Possibilities Curve (PPC) & Long-Run Aggregate Supply (LRAS)
– Equity vs Equality, Equity vs Efficiency
– Distribution of Income, Lorenz Curve & Gini Coefficient
– Absolute/Relative poverty
– Taxation & Equity; Types of Taxes; Government Redistribution Policies
2.4 Fiscal Policy: Taxes & Spending, Government Budget, Automatic Stabilisers
2.5 Monetary Policy: Money Supply, Interest Rates, Central Banks
2.6 Supply-Side Policies: Market-Based & Interventionist Policies

Year 2 – Development & International Economics

Section 3: International Economics
3.1 International Trade
HL Only: Absolute & Comparative Advantage: Diagram, Calculation & Limitations
Trade Protection: Tariffs, Quotas, Domestic Subsidies, Administrative Barriers
HL Only: Calculate Effects of Tariffs/Quotas/Subsidies in a Diagram

3.2 Exchange Rates
Exchange Rates: Floating, Fixed Exchange Rate Systems; Factors & Effects of Over/Undervaluation
HL Only: Calculate Value of Currencies/Goods with Exchange Rates & Diagrams

3.3 The Balance of Payments
– Balance of Payments: Current, Capital & Financial Accounts; Current Account & Exchange Rates
HL Only: Calculate Balance of Payments Components
HL Only: Persistent Current Account Deficit/Surplus Issues & Corrections
HL Only: Marshall-Lerner Condition and J-Curve Effect

3.4 Economic Integration
– Preferential Trade Agreements, Trading Blocs, Monetary Union
HL Only: Trade Creation & Diversion; Economic Integration & Economies of Scale

HL Only: 3.5 Terms of Trade
– Terms of Trade Calculation, Equation, Factors, Relation to Current Account

Section 4: Development Economics
4.1 Economic Development
– Economic Growth vs Development; Less Developed Countries (LDC); International Development Goals

4.2 Measuring Development
– GDP & GNI per capita, Purchasing Power Parity (PPP), Human Development Index (HDI)

4.3 The Role of Domestic Factors
– Education/Health; Technology; Credit/Micro-credit; Empowerment of Women; Income Distribution

4.4 The Role of International Trade: Barriers, Factors & Strategies to Economic Development
HL Only: Terms of Trade Changes as a Development Barrier

4.5 The Role of Foreign Direct Investment (FDI): FDI, MNCs, Impact for LDCs

4.6 The Roles of Foreign Aid and Multilateral Development Assistance
– Types of Aid (ODA, NGOs, Humanitarian), Aid vs Trade, IMF & World Bank

4.7 The Role of International Debt: Reasons for Borrowing & Servicing Problems

4.8 The Balance Between Markets and Intervention
– Market-Oriented Development Policies: Trade Liberalisation, Capital Flows, Privatisation, Deregulation
– Interventionist Development Policies: Investment in Human Capital, Infrastructure, Stable Economy, Social Safety Net