IBDP Economics

HL/SL
 Syllabus
Section 1: Microeconomics

Section 2: Macroeconomics

Section 3: International economics

Section 4: Development economics

Distinction between SL and HL
SL and HL students of economics are presented with
a common syllabus, with an HL extension in some
topics. The syllabus for both SL and HL students
requires the development of certain skills and
techniques, attributes and knowledge—as described
in the assessment objectives of the programme.
 Prior learning

The economics course requires no specific prior

learning. No particular background in terms of
specific subjects studied for national or international
qualifications is expected or required.
Economics and theory of knowledge

As with other subject areas, there is a variety of ways in

which to gain knowledge in group 3 subjects. For example,
archival evidence, data collection, experimentation,
observation, inductive and deductive reasoning can all be
used to help explain patterns of behaviour and lead to
knowledge claims.
During the economics course a number of issues will arise
that highlight the relationships between TOK and economics.
Syllabus outline
Assessment outline—SL
Assessment outline—HL
 Use of diagrams
Students are expected, where appropriate, to include correctly labelled and clearly drawn
diagrams. Sometimes individual questions specify that the use of diagrams is essential
because more detailed information is required from the students in order to show specific
knowledge and understanding.

Use of examples
Students are expected, where appropriate, to illustrate their answers with examples in order
to reach the highest mark bands. Examples should be used to highlight economic concepts,
theories and relationships in the real world. When examples are used, students should not
just state the example (as this is too limited), but should also offer some explanation of the
example in relation to the question asked.

Use of economic terms

Students are expected to demonstrate the ability to define the economic terms included in
the syllabus details.
INTRODUCTION TO ECONOMICS

The Economic Problem

Opportunity Cost

Production Possibility Frontiers

What is the difference between both?
 Give some examples from your real life about needs
& wants

In economics, the idea of survival is real, A want, in economics, is one step up in the
meaning someone order from needs
would die without their needs being met. This and is simply something that people desire
includes things like to have, that they
food, water, and shelter. may, or may not, be able to obtain.
 Need- something you have to have
Want -something you would like to have

Wants change with time, place and the individual.

It is determined by someone’s culture and
personality and therefore wants are not always
the same. It is not critical to human’s life but
rather complementary. If a want is always
satisfied, it becomes a need. In the case of Nike,
a person will need sports shoes but will want
Nike.
The$Economic$Problem$
LIMITED RESOURCES
The Economic Problems
 Opportunity Cost:

Opportunity cost the cost of best alternative which is forgone.

Examples: If we want a missile defence system, we have to

have less of other goods.

If an individual wants to have a higher level of consumption

during working years, then the person will have to give up
something
Have a lower level of consumption in retirement
Some real-life examples….
Measuring Opportunity Cost
Scarcity is illustrated by point F which lies outside the production possibility curve.
We would like to produce more food and guns but it is not possible given our existing
resources and efficiencies.
Inefficiency is indicated by point G and implies that not all the resources are being used
fully. It is possible to have more of both goods by being on the production possibility
curve at e.g., point d.
Opportunity cost is illustrated by the negative slope of the curve which indicates that more
of one good can only be obtained by sacrificing the other good. In terms of this production
possibility curve, the opportunity cost of increasing the production of guns by 3 million we
need to sacrifice 300 tons of food. One of the questions we study in economics, is how this
choice is made by society.
Choice is illustrated by the choice we need to make between available combinations
along the production possibility curve. For instance we need to choose whether we are
going to produce combination c or combination e.

If economy reallocates its resources (from

c to d) it can produce more guns but only
at the expense of fewer food. The
opportunity cost of producing 2 extra
guns is 200 units of food.
 Difference between
movement from one point
inside PPC to another and
shift in PPC
What makes the PPF move outwards?
 Task
!

This Activity is designed to help you to understand at least

something about what you will be studying over the coming
months and to be able to identify some of the key economic
issues and problems that make up the subject.

! • Why can't we just pay doctors and nurses more money?

• Why can't I just get a grant to go to university?
• The unemployed should get off their backsides and get a job!
• Why do people always get so excited about interest rate changes?
• Inflation - no idea what it is; it doesn't affect me!
• It's obvious that fining polluters would stop them from doing it!
• We should just wipe out the debt that third world countries owe us.
• I never seem to have enough to get what I want, I wish I could win the lottery - not millions just
enough to get by!
• Not another threatened strike, why don't they just go back to work?
RECAP
 Test of understanding
How many papers does Economics HL students attempt in IBDP?

What is the duration of Paper-1, 2 & 3 for IBDP Economics?

How many commentaries one has to write in IB Economics?

Which are the four units of IBDP Economics?

What is the basic economic problem every economy has to face?

Define the term Opportunity cost.

What is the difference between movement from one point inside PPC to
another and shift in PPC?
Which factors can shift PPC curve outwards?

What are the labels for Y & X axis in PPC/Opportunity cost diagram?
How can one show scarcity through PPC/Opportunity cost diagram?
How can one show inefficiency through PPC/Opportunity cost diagram?
A rational behaviour decision-making process is
based on making choices that result in the most
optimal level of benefit or utility for the individual.
Most conventional economic theories are created
and used under the assumption all individuals
taking part in an action/activity are behaving
rationally.
 Ceteris paribus, a Latin phrase, roughly means “holding
other things constant.” The more common English translation
reads “all other things being equal.” This term is most widely
used in economics and finance as a shorthand indication of
the effect of one economic variable on another, keeping all
other variables constant that could render an effect on the
second variable.
ECONOMIC SYSTEMS
 Positive and Normative Economics

•  Positive •  Health care can be improved

with more tax funding
Statements:
•  Pollution control is effective
–  Capable'of'being'verified'
or'refuted'by'resor5ng'to' through a system of fines
fact'or'further'
inves5ga5on'
!
•  Society ought to provide
•  Normative homes for all
Statements: •  Any strategy aimed at
–  Contains'a'value'judgement'
which'cannot'be'verified'by' reducing factory closures in
resort'to'inves5ga5on'or' deprived areas would be
research' helpful
 Micro & Macro economics
•  The branch •  The field of
of economics that economics that
studies the behavior
analyzes the
of the aggregate
market behavior of economy.
individual Macroeconomics exa
consumers and mines economy-wide
firms in an attempt phenomena such as
changes in
to understand the
unemployment,
decision- national income, rate
making process of of growth, gross
firms and domestic product,
households. inflation and price
levels.
Economic Development
•  Economic'development'is'a'measure'
of'welfare,'a'measure'of'well5being.'
•  Commonly'used'measure'is'Human'
Development'Index'(HDI).'
•  Measures'naBonal'income'power'
head,'adult'literary'rate,'average'
years'of'schooling,'life'expectancy'
 Sustainable Development

•  Development that meets •  Countries should not

the needs of the present use up resources too
without compromising the quickly and should not
ability of future harm the environment
generations to meet their since this will stop
own needs. growth taking place in
the future.
Economics as a Social Science

The social sciences are academic disciplines that

study human society and social relationships.

Economics is a social science because it deals

with human society and behaviour, and
particularly those aspects concerned with how
people organise their activities and how they
have to satisfy their needs and wants.
 The social scientific method
consists of the following steps:
Step 1: Make observations of the world around us,
and select an economic question we want to
answer. For e.g.; Why are more oranges bought in
some weeks and fewer in others?

Step 2: Identify variables we think are important to

answer the question. For e.g..; Quantity of oranges
that people buy each week and price of oranges.
Step 3: Make a hypothesis about how the
variables are related to each other. For e.g..; If
the price of oranges increases, the quantity of
oranges people wants to buy each week will fall.

Step 4: Make assumptions. For e.g.; we assume

that the price of oranges is the only variable that
influences the quantity of oranges.
Step 5: Test the hypothesis to see if its predictions fit with
what actually happens in the real world. For e.g.; We must
collect data on the quantity of oranges bought by people
during different weeks throughout the year and compare
the quantity with different prices at different times in a year.

Step 6: Compare the predictions of the hypothesis with

real-world outcomes. For e.g..; If we discovered that as the
price of oranges increases, the quantity of oranges people
wants to buy each week also increases. This goes against
our hypothesis and we would have to reject the hypothesis
as invalid.
Economists as model builders
Everyone is familiar with the idea of a model. As children, many of us
played with paper aeroplanes, which are models of real aeroplanes.
Models are a simplified representation of something in the real world,
and are used a lot by scientists and social scientists in their efforts to
understand or explain real-world situations. Models represent only the
important aspects of the real world being investigated, ignoring
unnecessary details, thereby allowing scientists and social scientists to
focus on important relationships. Whereas sciences like biology,
chemistry and physics offer the possibility to construct three-
dimensional models (as with molecules and atoms), this cannot be done
in the social sciences, because these are concerned with human society
and social relationships. In economics, models are often illustrated by
use of diagrams showing the relationships between important variables.