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ECONOMICS IB

Unit 1: Foundation of Economics

Section Topic Subtopic Example

1.1 What is economics?

1.2 How do economists

approach the world?

1.3

Unit 2: Microeconomics
Sectio Topic Subtopic Example
n

2.01 Demand Non price determinants Substitute:

of demand - Nike or Adidas football
• Income - Train or Car
• Tastes and - Du or Etisalat Sim card
preferences -
• Future price Complimentary:
expectations - Printers and Ink cartridges
• Price of related goods - Cereal and milk
(in the cases of - Football and Football shoes
substitutes and
complements) Iphones and Samsungs are arguably the two most popular
• Number of consumers phone brands in the modern day. This means they are highly
competitive. A change in price in Iphones will lead to one in
Samsungs, with iphone prices increasing by 81% globally,
followed by a 6.1% increase in demand for Samsung phones.
(Rebecca)
The tourism industry in the Maldives has seasonal demand,
especially in the period between December and March, when
the weather is pleasant and there are least chances of rain. In
the first quarter of 2019, tourist bookings rose by 15% in
comparison to 2018. (Margot)

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ECONOMICS IB

Taste and preferences can affect what is being bought based on

trends and fashions. One example of this is fidget spinners as
as they became increasingly popular, demand increased in
march of 2017 and peaked between April and may. However,
fidget spinners quickly stopped being trendy and so the demand
for them largely decreased in the month of june. (dexter)

In recent years milk producers in the US have seen demand for

milk decline significantly. According to the US department of
agriculture, per capita consumption of milk in the US has
declined from 247 pounds per person in 1975 to 146 pounds
per person in 2018. (Margot)

2.02 Supply Non price determinants Technological Changes - Since World War II, cotton production
of supply in the United States has seen significant improvements in
• Changes in costs of technology. Genetically modified seeds, as well as planting,
factors of production harvesting and transportation technologies, have improved
(FOPs) productive efficiency, increasing yield per acre significantly over
• Prices of related time.
goods (in the cases of (dexter)
joint and competitive
supply) No. of Firms in the market - as the population in China
• Indirect taxes and increased, the number of consumers increased, from 1.393 in
subsidies 2018 to 1.398 (billion) people in 2019, the number of
• Future price restaurants in China also increased from 6.8 to 7.12 (millions).
expectations Therefore, as consumers increased, demographics changed
• Changes in causing the need for more supply. (Dexter)
technology
• Number of firms

2.03 Competitiv A condition in which - An example of excess demand is chip manufacturers

e Market profit-maximising and supply chain shortages. This makes prices of CPU’s
Equilibrium producers and utility- and all technology, therefore, higher due to less supply
maximising consumers to meet consumer demands hence firms have to raise
in competitive markets prices to reduce demand. Car prices in the USA have
with freely determined gone up by at least 12%.
prices arrive at an - Oil prices in the USA $84 per barrel.
equilibrium price where
the quantity supplied is
equal to the quantity
demanded.
Functions of the price
mechanism
● Resource
allocation:
signalling,
incentive
● Rationing

2.04 Critique of
the

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ECONOMICS IB

maximising
behaviour
of
consumers
and
producers

2.05 Elasticities 1. Cigarettes are price inelastic - large changes in price only
of demand affect a small quantity of demand
2. Plain water is price elastic despite it being a necessity. This is
because in most countries tap water is practically free and there
is generally a lot of competition in the market as many
companies provide bottled plain water.
(Yash)

There was an 8.53% rise in tea prices between January and

April in India, 2019, yet, there hasn’t been a fall in demand as
tea is a widely staple morning starter for most families. (Margot)

2.06 Elasticities 1. Inelastic supply 1. Nuclear reactors take years as well as high expertise to
of Supply 2. Elastic supply build therefore regardless of demand the supply costs
high with the quantity being low. Being inelastic.(roman)
the UK and othe western governments are considering
building more nuclear power plants to reduce
dependency on Russian energy. However, this process
takes a long time and there are not enough resources of
expertise to do this quickly.
2. Fidget spinners are easy product to create just requiring
cheap plastic therefore leading to being elastic as the
good is quick and cheap to produce allowing quantity to
increase much more compared to price. (roman)
3. The cross-price elasticity of new book demand with
respect to use is only 0.088. As a result, only 16% of
used book sales take over new book purchases
(Rebecca)

2.07 Role of Price ceiling imposed on rent for example in New york. The rent
governmen can only be raised up to 7.5% every two years in order to
protect the consumers. The rent is not allowed to exceed a
t in maximum base rent which is determined per unit and covers the
microecon landlord's maintenance costs. (dexter)
omics
Scotland was one of the first countries in the world to introduce
minimum unit pricing in May 2018 as they put a floor price of
50p on every unit of alcohol sold in shops. This was done to
protect the producers and also to try and reduce the demand for
alcohol as it is a sin good
(Rory)

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