IB Economics SL Study Guide - Lecture Notes
Introduction to the Study Guide
- Purpose: To provide revision material for IB students and teachers.
- Approach: Step-by-step to help absorb dense information efficiently.
- Importance of skill and understanding: Skill through practice leads to understanding.
- Encourages group study for better retention and formulation of answers.
- Collaboration with students and teachers for feedback and improvement.
Paper Guide
Overview of IB Economics Papers
- Paper 1: Extended response (25 marks, 1h 15m)
- Choose 1 question from 3 (Micro, Macro, Global Economy)
- Part A: Theoretical (10 marks), Part B: Real-life example (15 marks)
- Paper 2: Data response (40 marks, 1h 45m)
- Covers entire syllabus
- Includes definition, math, diagram explanation, and evaluation questions
Foundations of Economics
Key Concepts
- Scarcity
- Choice
- Efficiency
- Equity
- Economic well-being
- Sustainability
- Change
- Interdependence
- Intervention
Solving the Economic Problem
- Questions: What to produce? How to produce? For whom to produce?
- Factors of Production: Land, Labor, Capital, Entrepreneurship
Opportunity Cost
- Defined as the value of the next best alternative forfeited.
- Illustrated using the Production Possibilities Curve (PPC).
Circular Flow of Income Model
- Illustrates exchange between households and firms.
- Closed vs. Open economy dynamics.
Economic Approaches
Positive vs. Normative Economics
- Positive: Objective, factual, testable statements.
- Normative: Value-based, subjective statements on what ought to be.
History of Economic Ideas
- Classical Economics: Adam Smith, Ricardo's comparative advantage.
- Neoclassical Economics: Marginal revolution, supply-demand diagrams.
- Keynesian Economics: Government intervention to avoid mass unemployment.
- Modern Economics: Behavioral economics, nudge theory, circular economy.
Course Structure
- Microeconomics: Individual and company choices.
- Macroeconomics: Choices at regional and national levels.
- Global Economy: International choices and development economics.
Microeconomics
Demand and Supply
Law of Demand
- Negative relationship between price and quantity demanded.
- Factors affecting demand: Income, prices of related goods, population, tastes, etc.
Law of Supply
- Positive relationship between price and quantity supplied.
- Influencing factors: Costs of production, technology, taxes, number of firms.
Market Equilibrium
- Where supply equals demand.
- Effects of price changes: Excess supply or demand.
Market Efficiency
- Consumer and producer surplus determine total welfare.
- Market equilibrium maximizes community surplus.
Elasticities
Types
- Price Elasticity of Demand (PED): Responsiveness of demand to price change.
- Price Elasticity of Supply (PES): Responsiveness of supply to price change.
- Income Elasticity of Demand (YED): Effect of income change on demand.
Externalities
Definitions and Types
- Negative/Positive externalities (production and consumption).
Government Intervention
- Methods: Taxes, subsidies, regulations.
Macroeconomics
Overall Economic Activity
- Circular flow of income and its components.
- Business cycle phases: Recovery, Boom, Recession, Trough.
Aggregate Demand and Supply
- Determinants of AD and AS.
- Short run vs. long run supply changes.
Macroeconomic Objectives
Low Unemployment
- Types and solutions: Cyclical, structural, seasonal, frictional.
Inflation
- Definitions: Inflation, disinflation, deflation.
- Measuring with the Consumer Price Index (CPI).
Economic Growth
- Sources: Increased output or potential output.
Equity in Income Distribution
- Methods to promote equity: Taxation, government spending.
- Lorenz Curve and Gini Index for measuring inequality.
Government Intervention
Fiscal Policy
- Types: Expansionary vs. contractionary.
- Government budget components: Revenue and expenditure.
Monetary Policy
- Central bank roles: Interest rates, money supply.
Supply Side Policies
- Types: Interventionist vs. Market-based.
Global Economy
Trade
- Free trade benefits and protectionism.
- World Trade Organization (WTO) roles and challenges.
Exchange Rates
- Free-floating vs. fixed exchange rate systems.
- Effects of currency appreciation and depreciation.
Balance of Payments
- Financial, capital, and current accounts.
Sustainable Development
- Distinction between economic growth and development.
- Sustainable Development Goals (SDGs).
Measuring Development
Indicators
- Economic, health, education, and institutional indicators.
- Human Development Index (HDI), Gender Inequality Index (GII).
Contributions and Barriers to Development
Domestic and International Factors
- Role of foreign aid, FDI, and international debt.
- Benefits and drawbacks of market-oriented and interventionist policies.
Essay Writing Guide
- Time management and structure (DEED & CLASPP).
- Importance of evaluation and real-world examples in essays.
These notes encapsulate the main topics and themes covered in the IB Economics SL study guide, providing a comprehensive overview for revision and understanding.