Blue = IB Headings (Partly Modified at Times)

Blue = IB Headings (Partly Modified at Times)

1/53

Section 1: MicroeconomicsChapters 1 – 35
Intro: Chapters 1 – 3 (not part of syllabus!)
1.1.Competitive markets: demand and supply (some topics HL only)Chapters 4-8
1.2.Elasticity Chapters 9 - 12
1.3.Government intervention (some topics HL only)Chapters 13 - 15
1.4.Market failure (some topics HL only)Chapters 16 – 21
1.5.Theory of the firm and market structures (HL only) Chapters 22 – 25
Section 2: MacroeconomicsChapters 36 - 62
2.1.The level of overall economic activity (some topics HL only)Chapters 36 - 39
2.2.Aggregate demand and aggregate supply (some topics HL only)Chapters 40 - 47
2.3.Macroeconomic objectives (some topics HL only) vChapters 48 - 55
2.4.Fiscal policy Chapters 56 - 57
2.5.Monetary policyChapters 58 - 59
2.6.Supply-side policiesChapters60 - 62
Section 3: International economicsChapters 63 - 77
3.1.International trade (some topics HL only)Chapters 63 - 66
3.2.Exchange rates (some topics HL only)Chapters 67 – 69
3.3.The balance of payments (some topics HL only)Chapters 70 – 73
3.4.Economic integration (some topics HL only)Chapters 74 – 75
3.5.Terms of trade (HL only) Chapters 76 - 77
Section 4: Development economicsChapters 78 – 97
4.1 Economic development Chapters78 - 80
4.2 Measuring developmentChapters81 - 82
4.3 The role of domestic factorsChapters83
4.4 The role of international trade (one topic HL only)Chapters84 – 88
4.5 The role of foreign direct investment (FDI)Chapters89 – 90
4.6 The roles of foreign aid and multilateral development assistanceChapters91 – 93
4.7 The role of international debtChapters94
4.8 The balance between markets and interventionChapters 95 - 97
30 / 30
Internal assessment (SL/HL)
Portfolio of three commentaries / 20 / 20

Red = chapter headings

Blue = IB headings (partly modified at times)

Green = Matt’s own notes

Section 1: Microeconomics (1 – 35)

Sub-topic / SL/HL Core / HL
1.Intro to economics – the good…etc (NPOS!)
2.Basic economic concepts – basic economic problem, scarcity and wants, choices, free and economic goods, opportunity costs, utility, positive and normative (NPOS!)
3.Basic concepts use in data – correlation/causality (NPOS!)
1.1 Competitive markets: demand and supply (4 – 8)
4.Markets and demand
The nature of markets / •Outline the meaning of the term market /
  1. Define: markets and breadth of definition (‘situation where potential buyers and sellers are in contact’)

Demand
The law of demand / •Explain the negative causal relationship between price and quantity demanded
•Describe the relationship between an individual consumer’s demand and market demand /
  1. Define: demand function, law of demand, correlation and causality
  2. Describe/outline: why the D-curve is downward sloping (income and wealth effect)
  3. Explain/distinguish/draw: individual demand and the aggregate (= mkt D)

The demand curve / •Explain that a demand curve represents the relationship between the price and the quantity demanded of a product, ceteris paribus
•Draw a demand curve /
  1. Define: movement along and ceteris paribus
  2. Describe/outline: why the D-curve is downward sloping
  3. Explain/distinguish/draw: negative correlation

The non-price determinants of demand (factors that change demand / shift the demand curve) / •Explain how factors including changes in income (in the cases of normal and inferior goods), preferences, prices of related goods (in the cases of substitutes and complements) and demographic changes may change demand /
  1. Define: non-price determinants of demand
  2. Describe/outline: why the D-curve shifts due to changes in non-price variables
  3. Explain/distinguish/draw: shifting demand curve due to changes in the price of complements/substitutes, changes in income…etc.

Movements along and shifts of the demand curve / •Distinguish between movements along the demand curve and shifts of the demand curve
•Draw diagrams to show the difference between movements along the demand curve and shifts of the demand curve /
  1. Explain/distinguish/draw: movement along and shift in D-curves (use real life examples!)

HL extension - Linear demand functions
HL extension - Linear demand functions (equations), demand schedules and graphs
/ •Explain a demand function (equation) of the form Qd = a – bP
•Plot a demand curve from a linear function (e.g. Qd = 60 - 5P)
•Identify the slope of the demand curve as the slope of the demand function Qd = a-bP, that is –b (the coefficient of P)
•Outline why, if the “a” term changes, there will be a shift of the demand curve
•Outline why, if the “b” term changes, the slope of the demand curve will change /
  1. Define: linear demand function, ‘a’ and ‘b’
  2. Describe/outline:a constant slope based on the linear demand function, ‘a’ is autonomous and ‘b’ is slope, P and Q intercepts,
  3. Explain/distinguish/draw: shift due to ∆’a’ and slope change due to ∆’b’
•
5.Markets and supply
The law of supply / •Explain the positive causal relationship between price and quantity supplied
•Describe the relationship between an individual producer’s supply and market supply /
  1. Define: supply function, law of supply
  2. Describe/outline:why the S-curve is upward sloping
  3. Explain/distinguish/draw: positive correlation and ‘incentives’ plus ‘covering MC’, individual firm (MC curve for HL) and aggregate = mkt supply curve

The supply curve / •Explain that a supply curve represents the relationship between the price and the quantity supplied of a product, ceteris paribus
•Draw a supply curve /
  1. Define: upward slope, ceteris paribus, ∆P causes a change in Q
  2. Describe/outline: effective supply (able and willing), importance of ‘Q per unit of time’ and link to PES
Explain/distinguish/draw: different supply curves and link to PES
The non-price determinants of supply (factors that change supply/shift the supply curve) / •Explain how factors including changes in costs of factors of production (land, labour, capital and entrepreneurship), technology, prices of related goods (joint/competitive supply), expectations, indirect taxes and subsidies and the number of firms in the market can change supply /
  1. Define: non-price variables affecting supply,
  2. Describe/outline:real life examples and diagrams of non-price variables affecting supply (shifting S-curve)
  3. Explain/distinguish/draw: how “Qs changes at all price levels due to shift in S-curve”
  4. Evaluate/analyse: link ahead to PES and how the S-curve might become more elastic over time

Movements along and shifts of the supply curve / •Distinguish between movements along the supply curve and shifts of the supply curve
•Construct diagrams to show the difference between movements along the supply curve and shifts of the supply curve /
  1. Describe/outline:shift as opposed to movement along
  2. Explain/distinguish/draw: use diagrams to support explanation of ‘change in Qs’ versus ‘change in S’

HL extension - Linear supply functions
HL extension - Linear supply functions, equations and graphs / •Explain a supply function (equation) of the form Qs = c + dP
•Plot a supply curve from a linear function (e.g. Qs = -30 + 20 P)
•Outline why, if the “c” term changes, there will be a shift of the supply curve
•Outline why, if the “d” term changes, the slope of the supply curve will change /
  1. Define: supply function, price and quantity intercepts
  2. Describe/outline/calculate:How a change in ‘c’ and ‘d’ affect the S-curve
  3. Explain/distinguish/draw: why the slope changes due to ∆’d’ and shift due to ∆’c’
  4. Evaluate/analyse: link slope to PES (but they are NOT the same!)

6.Market equilibrium
Equilibrium and changes to equilibrium / •Explain, using diagrams, how demand and supply interact to produce market equilibrium
•Analyse, using diagrams, and with reference to excess demand or excess supply, how changes in the determinants of demand and/or supply result in a new market equilibrium /
  1. Define: equilibrium as in “market clears”,
  2. Describe/outline: changing D….and thus Qs…or changing S and thus Qd, market forces due to XS demand or XS supply
  3. Explain/distinguish/draw: how a change in D causes a change in Qd and vice versa
  4. Evaluate/analyse: Do markets clear?! (This is highly debated and deals with ‘mkts tend towards equilibrium but there are always administered prices and govt intervention…”

HL:
Calculating and illustrating equilibrium using linear equations / •Calculatethe equilibrium price and equilibrium quantity from linear demand and supply functions
•Plotdemand and supply curves from linear functions and identify the equilibrium price and equilibrium quantity
•State the quantity of excess demand or excess supply in the above diagrams /
  1. Define: How the S and D functions create equil,
  2. Describe/outline/calculate:New equilibrium due to shift in S or D curve
  3. Explain/distinguish/draw: why a change in S or D does not result in an equal change in Qd or Qs (due to slope of the other curve),

7.The role of the price mechanism
Resource allocation / •Explain why scarcity necessitates choices that answer the “what to produce” question
•Explain why choice results in an opportunity cost
•Explain, using diagrams, that price has a signalling function and an incentive function, which result in a reallocation of resources when prices change as a result of a change in demand or supply conditions /
  1. Define: price mech, basic economic problem, choice and opp costs, reallocation,
  2. Describe/outline: signalling and incentives function,
  3. Explain/distinguish/draw: use PPF plus two SD diags to illustrate re-all,
  4. Evaluate/ analyse: xx

8.Market efficiency
Consumer surplus / •Explain the concept of consumer surplus
•Identify consumer surplus on a demand and supply diagram /
  1. Define: consumer surplus
  2. Describe/outline:CS is area above Peq but below D-curve

Producer surplus / •Explain the concept of producer surplus
•Identify producer surplus on a demand and supply diagram /
  1. Define: producer surplus (PS)
  2. Describe/outline:producer surplus (PS), above S-curve…but below mkt price

Allocative efficiency / •Explain that the best allocation of resources from society’s point of view is at competitive market equilibrium, where social (community) surplus (consumer surplus and producer surplus) is maximized (marginal benefit = marginal cost) /
  1. Describe/outline:How the S and D functions create equil, societal surplus (SS)
  2. Explain/distinguish/draw: cons and supplier surplus…”…above and beyond…” , different areas due to PED and PES,
  3. Evaluate/ analyse: effects on CS and SS due to tax…subsidy…min P and max P, allocative efficiency issues

1.2 Elasticity (9 – 12)
Sub-topic / SL/HL Core / HL
9.Price elasticity of demand (PED)
Price elasticity of demand and its determinants / •Explain the concept of price elasticity of demand, understanding that it involves responsiveness of quantity demanded to a change in price, along a given demand curve
•Calculate PED using the equation:

•State that the PED value is treated as if it were positive although its mathematical value is usually negative
•Explain, using diagrams and PED values, the concepts of price elastic demand, price inelastic demand, unit elastic demand, perfectly elastic demand and perfectly inelastic demand
•Explain the determinants of PED, including the number and closeness of substitutes, the degree of necessity, time and the proportion of income spent on the good
•Calculate PED between two designated points on a demand curve using the PED equation above
•Explain why PED varies along a straight line demand curve and is not represented by the slope of the demand curve /
  1. Define: xx
  2. Describe/outline:xx
  3. Explain/distinguish/draw: xx
  4. Evaluate/ analyse: xx

Applications of price elasticity of demand / •Examine the role of PED for firms in making decisions regarding price changes and their effect on total revenue
•Explain why the PED for many primary commodities is relatively low and the PED for manufactured products is relatively high
•Examine the significance of PED for government in relation to indirect taxes /
  1. Define: xx
  2. Describe/outline:xx
  3. Explain/distinguish/draw: xx
  4. Evaluate/ analyse: xx

10.Cross price elasticity of demand (CPED pr XED)
Cross price elasticity of demand and its determinants / •Outline the concept of cross price elasticity of demand, understanding that it involves responsiveness of demand for one good (and hence a shifting demand curve) to a change in the price of another good
•Calculate XED using the equation:

•Show that substitute goods have a positive value of XED and complementary goods have a negative value of XED
•Explain that the (absolute) value of XED depends on the closeness of the relationship between two goods /
  1. Define: xx
  2. Describe/outline:xx
  3. Explain/distinguish/draw: xx
  4. Evaluate/ analyse: xx

Applications of cross price elasticity of demand / •Examine the implications of XED for businesses if prices of substitutes or complements change /
  1. Define: xx
  2. Describe/outline:xx
  3. Explain/distinguish/draw: xx
  4. Evaluate/ analyse: xx

11.Income elasticity of demand (yED)
Income elasticity of demand and its determinants / •Outline the concept of income elasticity of demand, understanding that it involves responsiveness of demand (and hence a shifting demand curve) to a change in income
•Calculate YED using the equation:

•Show that normal goods have a positive value of YED and inferior goods have a negative value of YED
•Distinguish, with reference to YED, between necessity (income inelastic) goods and luxury (income inelastic) goods /
  1. Define: xx
  2. Describe/outline:xx
  3. Explain/distinguish/draw: xx
  4. Evaluate/ analyse: xx

Applications of income elasticity of demand / •Examine the implications for producers and for the economy of a relatively low YED for primary products, a relatively higher YED for manufactured products and an even higher YED for services /
  1. Define: xx
  2. Describe/outline:xx
  3. Explain/distinguish/draw: xx
  4. Evaluate/ analyse: xx

12.Price elasticity of supply (PES)
Price elasticity of supply and its determinants / •Explain the concept of price elasticity of supply, understanding that it involves responsiveness of quantity supplied to a change in price along a given supply curve
•Calculate PES using the equation:

•Explain, using diagrams and PES values, the concepts of elastic supply, inelastic supply, unit elastic supply, perfectly elastic supply and perfectly inelastic supply
•Explain the determinants of PES, including time, mobility of factors of production, unused capacity and ability to store stocks /
  1. Define: xx
  2. Describe/outline:xx
  3. Explain/distinguish/draw: xx
  4. Evaluate/ analyse: xx

Applications of price elasticity of supply / •Explain why the PES for primary commodities is relatively low and the PES for manufactured products is relatively high /
  1. Define: xx
  2. Describe/outline:xx
  3. Explain/distinguish/draw: xx
  4. Evaluate/ analyse: xx

1.3 Government intervention (13–15)
Sub-topic / SL/HL Core / HL
13.Indirect taxes
Specific (fixed amount) taxes and ad valorem (percentage) taxes and their impact on markets / •Explain why governments impose indirect taxes
•Distinguish between specific and ad valorem taxes
•Draw diagrams to show specific and ad valorem taxes, and analyse their impacts on market outcomes
•Discuss the consequences of imposing an indirect tax on the stakeholders in a market including consumers, producers and the government /
  1. Define: xx
  2. Describe/outline:xx
  3. Explain/distinguish/draw: xx
  4. Evaluate/ analyse: xx

HL: Tax incidence and price elasticity of demand and supply / •Explain, using diagrams, how the incidence of indirect taxes on consumers and firms differs, depending on the price elasticity of demand and on the price elasticity of supply
•Plot demand and supply curves for a product from linear functions and then illustrate and/or calculate the effects of the imposition of a specific tax on the market (on price, quantity, consumer expenditure, producer revenue, government revenue, consumer surplus and producer surplus)
Explain how indirect taxes impact on government revenue depending on the price elasticity of demand /
  1. Define: xx
  2. Describe/outline:xx
  3. Explain/distinguish/draw: xx
  4. Evaluate/ analyse: xx
•

14.Subsidies

Impact on markets / •Explain why governments provide subsidies and describe examples of subsidies
•Draw a diagram to show a subsidy and analyse the impacts of a subsidy on market outcomes
•Discuss the consequences of providing a subsidy on the stakeholders in a market, including consumers, producers and the government /
  1. Define: xx
  2. Describe/outline:xx
  3. Explain/distinguish/draw: xx
  4. Evaluate/ analyse: xx
•
HL: S and D functions / •Plot demand and supply curves for a product from linear functions and then illustrate and/or calculate the effects of the provision of a subsidy on the market (on price, quantity, consumer expenditure, producer revenue, government expenditure, consumer surplus and producer surplus) /
  1. Define: xx
  2. Describe/outline:xx
  3. Explain/distinguish/draw: xx
  4. Evaluate/ analyse: xx
•

15.Price controls

Price ceilings (maximum prices): rationale, consequences and examples / •Explain why governments impose price ceilings and describe examples of price ceilings, including food price controls and rent controls
•Draw a diagram to show a price ceiling and analyse the impacts of a price ceiling on market outcomes
•Examine the possible consequences of a price ceiling, including shortages, inefficient resource allocation, welfare impacts, underground parallel markets and non-price rationing mechanisms destruction of capital over time! (see Sowell, 24 ff)
•Discuss the consequences of imposing a price ceiling on the stakeholders in a market, including consumers, producers and the government /
  1. Define: xx
  2. Describe/outline:xx
  3. Explain/distinguish/draw: xx
  4. Evaluate/ analyse: xx
•
HL: calculate… / •Calculate possible effects from the price ceiling diagram, including the resulting shortage, change in expenditure and total expenditure /
  1. Define: xx
  2. Describe/outline:xx
  3. Explain/distinguish/draw: xx
  4. Evaluate/ analyse: xx
•
Price floors (minimum prices): rationale, consequences and examples / •Explain why governments impose price floors and describe examples of price floors, including price support for agricultural products and minimum wages
•Draw a diagram of a price floor and analyse the impacts of a price floor on market outcomes
•Examine the possible consequences of a price floor, including surpluses and government measures to dispose of the surpluses, inefficient resource allocation and welfare impacts
•Discuss the consequences of imposing a price floor on the stakeholders in a market, including consumers, producers and the government /
  1. Define: xx
  2. Describe/outline:xx
  3. Explain/distinguish/draw: xx
  4. Evaluate/ analyse: xx
•
HL: calculate… / •Calculate possible effects from the price floor diagram, including the resulting surplus, change in expenditure and total expenditure /
  1. Define: xx
  2. Describe/outline:xx
  3. Explain/distinguish/draw: xx
  4. Evaluate/ analyse: xx
•
1.4 Market failure (16 – 21)
Sub-topic / SL/HL Core / HL

16.The meaning of market failure

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