EconomicsHL

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Lessons31

Unit 1Introduction to economics2 lessons

1.1What is economics?Scarcity, the factors of production, opportunity cost, the production possibilities curve, economic systems and the circular flow of income: the vocabulary and the two models on which the rest of the course is built.19 sections
1.2How do economists approach the world?Distinguish positive from normative claims, test models against evidence, tell equity from equality, and trace how economic ideas have changed from Adam Smith to the circular economy.20 sections

Unit 2Microeconomics12 lessons

2.1DemandDefine demand and the law of demand, build market demand from individual demand, explain what shifts the demand curve, and separate a shift from a movement along it. HL adds the assumptions behind the downward slope.14 sections, 3 HL only
2.2SupplyDefine supply and the law of supply, build market supply from individual firms, explain what shifts the supply curve, and separate a shift from a movement along it. HL adds the short-run assumptions behind the upward slope.14 sections, 3 HL only
2.3Competitive market equilibriumHow demand and supply set the equilibrium price and quantity, how shortages and surpluses move the market to a new equilibrium, what the signalling, incentive and rationing functions of price do, and why social surplus is greatest where MB = MC.16 sections, 5 HL only
2.4Critique of the maximizing behaviour of consumers and producersHL only. The assumptions of rational consumer choice and the behavioural evidence against them, choice architecture and nudges, and whether firms maximise profit or pursue corporate social responsibility, market share, a satisfactory profit or growth.13 sections, 13 HL only
2.5Elasticity of demandCalculate and interpret PED and YED, work backwards from an elasticity, link PED to total revenue and to the decisions of firms and governments, and draw the diagrams, including the Engel curve.31 sections, 8 HL only
2.6Elasticity of supplyCalculate and interpret PES, work backwards from it, draw each degree of PES, and explain what determines how far supply responds to price in the short run and the long run.15 sections, 3 HL only
2.7Role of government in microeconomicsWhy governments intervene in markets, how price ceilings, price floors, indirect taxes, subsidies, direct provision and regulation work, and what each does to markets and stakeholders.26 sections, 8 HL only
2.8Market failure: externalities and common pool or common access resourcesWhy markets produce too much of some goods and too little of others, why shared resources are overused, and how taxes, permits, regulation, education, subsidies, provision and cooperation respond.27 sections, 6 HL only
2.9Market failure: public goodsWhy goods that are non-rivalrous and non-excludable are not supplied by the market, and how well direct provision and contracting out correct the failure.13 sections
2.10Market failure: asymmetric informationHow unequal information causes adverse selection before a transaction and moral hazard after it, and how well government and private responses deal with each.14 sections, 14 HL only
2.11Market failure: market powerHow firms in perfect competition, monopoly, oligopoly and monopolistic competition choose output and price, why market power is a market failure, and how governments respond to its abuse.28 sections, 28 HL only
2.12The market's inability to achieve equityWhy a free market, working as intended, leaves income and wealth unequally distributed, shown with the circular flow of income.9 sections, 9 HL only

Unit 3Macroeconomics7 lessons

3.1Measuring economic activity and illustrating its variationsMeasure national income by three equivalent approaches, calculate nominal and real GDP and GNI in total and per person, read the business cycle, and judge how far these statistics measure well-being.20 sections
3.2Aggregate demand and aggregate supplyExplain shifts of AD, SRAS and LRAS with correctly labelled diagrams, and compare the monetarist/new classical model of automatic adjustment with the Keynesian model of persistent gaps.22 sections
3.3Macroeconomic objectivesEconomic growth, low unemployment, and low and stable inflation: how each is measured, what causes it to be missed, what that costs, and when the objectives conflict. HL adds the weighted price index, the Phillips curve and sustainable government debt.32 sections, 7 HL only
3.4Economics of inequality and povertyDistinguish equality from equity and inequality from poverty, read the Lorenz curve and the Gini coefficient, explain how poverty is measured and what causes it, and evaluate taxation and six further policies.26 sections, 8 HL only
3.5Monetary policyHow a central bank uses interest rates and other tools to manage aggregate demand, how the effect travels through the economy, and when it works well or poorly.19 sections, 6 HL only
3.6Fiscal policyHow governments use spending and taxation to manage aggregate demand: the budget and its goals, the diagrams of both schools of thought including the long run, the strengths and constraints of the policy, and separately labelled HL mechanisms.25 sections, 11 HL only
3.7Supply-side policiesThe five goals of supply-side policies, the market-based and interventionist policies that pursue them, the LRAS and minimum-wage diagrams, and the strengths and constraints of each policy family.17 sections

Unit 4The global economy10 lessons

4.1Benefits of international tradeWhy countries trade: the nine benefits and their mechanisms, the two free-trade diagrams, and at HL comparative advantage, the gains from specialisation and the limits of the theory.20 sections, 10 HL only
4.2Types of trade protectionTariffs, quotas, production and export subsidies and administrative barriers: the diagram for each, who gains and who loses, and at HL the calculation of every stakeholder effect.21 sections, 5 HL only
4.3Arguments for and against trade control/protectionExplain each argument for and against trade protection as a mechanism with its condition and weakness, and weigh free trade against protection for a given industry, country and time period.16 sections
4.4Economic integrationDistinguish the kinds of trade agreement and trading bloc, weigh the advantages and disadvantages of membership, define monetary union, and explain what the World Trade Organization does and what limits it.22 sections, 6 HL only
4.5Exchange ratesHow floating, fixed and managed exchange rates are determined, what moves them, how to calculate with them, and what a change in a currency's value does to inflation, growth, unemployment, the current account and living standards.23 sections, 4 HL only
4.6Balance of paymentsHow a country's transactions with the rest of the world are recorded in the current, capital and financial accounts, why the accounts sum to zero, and how to calculate the balances. HL adds the links with the exchange rate, persistent deficits and surpluses, methods of correction, the Marshall–Lerner condition and the J-curve.28 sections, 15 HL only
4.7Sustainable developmentWhat sustainable development means, what the Sustainable Development Goals are and how they interrelate, and (HL) how poverty and environmental damage reinforce each other.12 sections, 4 HL only
4.8Measuring developmentWhy development needs more than one measure: single indicators in five groups, the HDI, IHDI, GII and Happy Planet Index, what each approach can and cannot show, and how growth and development are related.16 sections
4.9Barriers to economic growth and/or economic developmentHow the poverty cycle reproduces low incomes, how each economic, political and social barrier holds back growth or development, and how to judge which barriers matter most for a given country.15 sections
4.10Economic growth and/or economic development strategiesEvery main strategy, from import substitution to land rights, with the barrier each removes, how it works, and when it succeeds; the case for markets against the state; and how to judge progress towards the SDGs in two countries.22 sections

Interactive labs5

Diagram LabAggregate demand and aggregate supplySee how a change in monetary policy shifts aggregate demand, and how the new short-run equilibrium depends on the slope of SRAS and on where the economy starts.
Reasoning LabHow a rise in interest rates reduces inflationary pressureThe transmission mechanism of contractionary monetary policy, from the central bank's decision to its effect on demand-pull inflation, with the considerations that weaken or delay each link.
Reasoning LabPublic purchases and outputA conditional causal explanation; reveal evaluation nodes to inspect limits.
Reasoning LabTraining and productive capacityA conditional causal explanation; reveal evaluation nodes to inspect limits.
Reasoning LabDemand shift and market adjustmentTrace a demand increase through excess demand, price adjustment and movements along supply and demand.

Diagram gallery: every rendered market diagram, with before-and-after scenes