IB Economics SL: Microeconomics

Han Zhang
Mind Map by , created over 5 years ago

A mind map for key elements of Microeconomics for Paper 1 questions

Han Zhang
Created by Han Zhang over 5 years ago
Luisa Mandacaru
IB Biology Topic 4 Genetics (SL)
Using GoConqr to study Economics
Sarah Egan
Attachment - Psychology - Flash Cards
Megan Price
Historia matematyki II
Tomasz Kacperek
Micro Daniel Moreno
2016: Daniel Mor
AP Micro Quiz
Economics - unit 1
Amardeep Kumar
Higher Level Economics
Jim hammerton
IB Economics SL: Macroeconomics
Han Zhang
IB Economics SL: Microeconomics
1 Scarcity
1.1 Opportunity Cost
1.1.1 the cost of the next best thing forgone
1.2 Production Possibility Curve
1.2.1 Capital goods/ consumer goods
1.2.2 Move inside Law of diminishing returns Achieving productive efficiecy
1.2.3 Shift Economic Growth
1.3 Utility
1.3.1 satisfaction or pleasure gained from an economic action
1.4 Finite source, infinite wants
1.4.1 What to produce? How to produce? For whom to produce?
1.4.2 Land, Labor, Capital, Enterprise
2 Market - Allocation of resources
2.1 Demand
2.1.1 a want backed by the willingness and ability to buy at a given price
2.1.2 Move along Income/ Substitution effects
2.1.3 Shift Income Population Price of complements Price of substitutes Tastes and preferences
2.2 Supply
2.2.1 the quantity of a good or service producers are able and willing to supply to a market at a give price
2.2.2 Move along Extension/ contraction
2.2.3 Shift Cost of production New firms entering a market Indirect taxes and subsidies Price of subsitutes Technological advancement
2.3 Ceteris paribus
2.4 Market Equilibrium
2.4.1 Equilibrium exists when Demand = Supply Equilibrium price - (Market clearing price)
2.4.2 Disequilibrium - excess demand or supply
2.4.3 Price Mechanism a signal, an incentive and a rationing device to allocate resources in a market
2.5 Market Efficiency
2.5.1 Surpluses Producer the extra revenue gained by producers (Marginal costs) Consumer the extra utility gained by consumers (Marginal benefits)
2.5.2 Allocative Efficiency consumer wants are satified
3 Elasticity
3.1 PED
3.1.1 the responsiveness of the quantity demanded to a chance in price
3.1.2 Elastic - responsive Inelastic - not responsive
3.1.3 Determinants of PED Closeness of substitues Close subs - elastic Luxury or necessity Luxury - elastic Necessity - inelastic Percentage of income spent on the good Less spent, more inelastic Time period In the long term, demand more elastic
3.1.4 Commodities - inelastic, few subs Manufactured - elastic, many subs
3.2 PES
3.2.1 responsiveness of the quantity supplied to a change in price
3.2.2 Determinants of PES Time Period Very SR - all fixed SR - some fixed LR - all variable Level of spare capacity Spare = PES Type of good E.g. Agriculture Level of stocks Response to demand
3.3 XED
3.3.1 responsiveness of the quantity demanded of one good to a change in price of another
3.3.2 Determine Substitutes/ Complements relationship
3.4 YED
3.4.1 responsiveness of the quantity demanded to a change in the real income of consumers
3.4.2 Determine Normal/ Inferior goods
4 Government Intervention
4.1 Minimum/ Maximum Prices
4.1.1 Price floor (above eq point) Excess supply Shift Demand
4.1.2 Price ceiling (under eq point) Excess demand Parallel market Shift Supply
4.2 Indirect taxation
4.2.1 Tax incidence (Consumer/ Producer) Depends on PED and PES
4.2.2 Ad valorem (% tax) Specific (fixed amount)
4.3 Subsidy
4.3.1 payments by a government to producers
4.3.2 Increase supply
4.4 Comment on Consumer/ Producer surplus, producer revenue, government revenue and expenditure and impact on eq price and quantity
5 Market Failure and Government Response
5.1 Externalities
5.1.1 Negative Production MSC > MPC E.g. Pollution Consumption MSB < MPB E.g. Cigarettes Government Respose Taxation Disadvantages Difficult to estimate the spillover effect Price inelastic D or S have little effect Income inequality Loss of international competitiveness Creation of black market Advantages Direct Impact e.g.Carbon tax Tradable Permits Reduction of Pollution Quotas Incentive to be environmentally efficient More efficient firms buying more to produce more Regulation Measure and set standards for firms to comply However,... Difficult to set an optimal limit Cost of regulation Disincentive to change, when benefits from staying outweigh the costs of change Extending property rights Regulated through legal rights Not effective in ELDCs due to lack of legal system International co-operation UN Reduction on greenhouse gases Political problems Still 30 countries are committed to reach the outcome
5.1.2 Positive Production MSC < MPC R&D in technology Consumtion MSB > MPB Vaccines Government Response Subsidy Hard to estimate MEC Opportunity Cost on other social benefits PED > 1, ineffective Free provision e.g Education, healthcare Lack of funding especially in ELDCs Information Educate the population Make informed choices Could be inefficient Government expediture
5.1.3 the costs or benefits of production or consumption that are experienced by their parties but not by the producers and consumers who cause them
5.2 Merit and Demerit Goods
5.2.1 Merit goods consumers consume too few goods and services that are seen as being good for them e.g. Education
5.2.2 Demerit goods consumers consume too many goods and services that are seen as being bad for them e.g. alcohol
5.2.3 Preferred solution: Education and Information on choices
5.3 Common Access Resources and Sustainability
5.3.1 CAR - are resources that are available to everyone without payment, do not have a price, and are not woned bt anyone e.g. Air, biodiversity non-excludable but rivalrous
5.3.2 Sustainability resources are used today in such a way that does not compromise their use by future generations Response similar to negative externalities Economic activities threatens sustainability
5.3.3 Requires International co-operation EU emissions Trading System
5.4 Public Goods
5.4.1 non-excudability even if you have paid for a good you cannot confine its use to yourself
5.4.2 non-rivalry the consumption of a good does not reduce its availability to others
5.4.3 "Free rider" effect e.g. National defense or street lamps
5.5 Why and how market fails and evaluate the solutions
5.6 Asymmetric info
5.7 Abuse of monopoly power

Media attachments