Course map
Four units. Topics marked HL are studied only at Higher Level.
Unit 1: Introduction to economics Paper 1, Paper 2
- Guide 1.1LessonPractice
Scarcity, choice and the production possibilities curve
- Explain scarcity, choice and opportunity cost with the factors of production
- Draw and read a PPC: efficiency, growth and opportunity cost
- Use the circular flow of income model with leakages and injections
- Guide 1.2LessonPractice
How economists approach the world
- Tell positive and normative statements apart
- Explain how economists use models, assumptions and ceteris paribus
- Use the nine key concepts to frame an economic question
Unit 2: Microeconomics Paper 1, Paper 2, Paper 3 (HL)
- Guide 2.1LessonPractice
Demand
- Explain the law of demand and the movements along and shifts of the demand curve
- Name the non-price determinants of demand
- HL: explain the assumptions behind the law of demand: the income and substitution effects and diminishing marginal utility
- Guide 2.2LessonPractice
Supply
- Explain the law of supply and the movements along and shifts of the supply curve
- Name the non-price determinants of supply
- HL: explain the assumptions behind the law of supply: diminishing marginal returns and increasing marginal costs
- Guide 2.3LessonPractice
Market equilibrium, surplus and efficiency
- Explain how prices move a market to equilibrium and the signalling and incentive roles of price
- Identify consumer and producer surplus and allocative efficiency
- HL: calculate consumer and producer surplus from a diagram
- Guide 2.4HLLessonPractice
Rational choice, behavioural economics and business objectives
- Explain the assumptions of rational consumer choice and their limits
- Apply bounded rationality, biases, choice architecture and nudges
- Compare profit maximisation with other business objectives
- Guide 2.5LessonPractice
Price elasticity of demand
- Calculate and interpret PED
- Explain the determinants of PED and its link to total revenue
- Apply PED to decisions by firms and governments, including tax revenue
- HL: explain how PED changes along a straight-line demand curve and why primary commodities have lower PED than manufactured products
- Guide 2.5, 2.6LessonPractice
Income elasticity of demand and price elasticity of supply
- Calculate and interpret YED for normal, inferior and luxury goods
- Calculate and interpret PES and its determinants
- HL: explain the importance of YED for firms and for the sectoral structure of the economy, and why primary commodities have lower PES than manufactured products
- Guide 2.7LessonPractice
Government intervention: taxes, subsidies and price controls
- Explain indirect taxes, subsidies, price ceilings and price floors with diagrams
- Evaluate the effects on consumers, producers, government and society
- HL: calculate the effects of price controls, indirect taxes and subsidies on markets and stakeholders, and explain consumer nudges
- Guide 2.8LessonPractice
Externalities and the common pool
- Explain negative and positive externalities of production and consumption with welfare loss; HL: calculate welfare loss from a diagram
- Evaluate taxes, tradable permits, regulation, education, subsidies and international agreements as responses
- Explain the tragedy of the commons and sustainability
- Guide 2.9LessonPractice
Public goods
- Define non-rivalry and non-excludability
- Explain the free rider problem
- Evaluate direct provision and contracting out
- Guide 2.10HLLessonPractice
Asymmetric information
- Explain adverse selection and moral hazard
- Evaluate screening, signalling, regulation and information provision
- Guide 2.11HLLessonPractice
Market power: costs, revenues and market structures
- Calculate total, average and marginal costs and revenues and the profit-maximising output
- Compare perfect competition, monopoly, monopolistic competition and oligopoly
- Evaluate regulation of market power and the game theory of oligopoly
- Guide 2.12HLLessonPractice
The market's inability to achieve equity
- Explain why free markets need not produce an equitable distribution
- Link equity to the policies of Unit 3
Unit 3: Macroeconomics Paper 1, Paper 2, Paper 3 (HL)
- Guide 3.1LessonPractice
Measuring economic activity
- Explain GDP, GNI, nominal and real values, per capita and PPP
- Read the business cycle and output gaps
- Calculate GDP from the expenditure approach, GNI, real values with a price deflator and per capita values
- Guide 3.2LessonPractice
Aggregate demand and aggregate supply
- Explain the components and determinants of AD
- Compare the Keynesian and new classical models of aggregate supply
- Show short-run and long-run equilibrium, inflationary and deflationary gaps
- Guide 3.3LessonPractice
Economic growth
- Explain the causes of growth in actual and potential output
- Evaluate the consequences of growth for living standards, inequality and the environment
- Calculate a growth rate
- Guide 3.3LessonPractice
Unemployment
- Calculate the unemployment rate and explain the problems of measuring it
- Explain structural, frictional, seasonal and cyclical unemployment
- Evaluate the costs of unemployment
- Guide 3.3LessonPractice
Inflation and deflation
- Explain demand-pull and cost-push inflation, disinflation and deflation
- Evaluate the costs of high inflation and of deflation
- Calculate the inflation rate from CPI data; HL: calculate a weighted price index
- HL: explain the trade-off between unemployment and inflation with the short-run and long-run Phillips curves
- Guide 3.4LessonPractice
Inequality and poverty
- Read Lorenz curves and Gini coefficients; HL: construct a Lorenz curve from income quintile data
- Explain the causes of inequality and poverty
- Evaluate progressive taxes, transfers and other policies; HL: calculate indirect tax paid and total and average tax rates from data
- Guide 3.5LessonPractice
Monetary policy
- Explain the goals of monetary policy and calculate real interest rates
- HL: explain money creation, the tools of monetary policy and how the money market sets the interest rate
- Show the effects of expansionary and contractionary monetary policy on AD
- Evaluate the strengths and limits of monetary policy
- Guide 3.6LessonPractice
Fiscal policy
- Explain government revenue and spending and the budget balance
- Show expansionary and contractionary fiscal policy; HL: explain automatic stabilisers
- HL: calculate the Keynesian multiplier and its effect on real GDP
- Evaluate the constraints on and strengths of fiscal policy; HL: explain crowding out and a sustainable level of government debt
- Guide 3.7LessonPractice
Supply-side policies
- Explain market-based and interventionist supply-side policies
- Show their effect on LRAS
- Evaluate their time lags, costs and equity effects
Unit 4: The global economy Paper 1, Paper 2, Paper 3 (HL)
- Guide 4.1LessonPractice
The benefits of international trade
- Explain the benefits of international trade with free trade diagrams
- HL: explain absolute and comparative advantage, the gains from specialisation and the limits of the theory
- HL: calculate opportunity costs to find comparative advantage, and exports, imports and their values from a diagram
- Guide 4.2LessonPractice
Types of trade protection
- Show the effects of tariffs, quotas, production subsidies and administrative barriers
- Identify the effects on consumers, producers, government and welfare
- HL: calculate the effects of tariffs, quotas and subsidies on stakeholders from a diagram
- Guide 4.3LessonPractice
Arguments for and against trade protection
- Explain the arguments for protection: infant industries, jobs, security, standards
- Evaluate them against the arguments for free trade
- Apply them to a real trade dispute
- Guide 4.4LessonPractice
Economic integration
- Compare preferential agreements, free trade areas, customs unions, common markets and monetary unions
- Evaluate the WTO and regional trading blocs
- HL: explain trade creation and trade diversion, and evaluate monetary union
- Guide 4.5LessonPractice
Exchange rates
- Show how floating exchange rates are set by demand and supply
- Explain how fixed and managed exchange rates are maintained; HL: evaluate fixed versus floating systems
- Convert prices between currencies and calculate changes in the value of a currency
- Guide 4.6LessonPractice
The balance of payments
- Explain the current, capital and financial accounts and calculate their balances from data
- HL: explain how the current and financial accounts relate to the exchange rate, and the implications of persistent current account deficits and surpluses
- HL: evaluate the methods to correct a persistent current account deficit, with the Marshall-Lerner condition and the J-curve
- Guide 4.7LessonPractice
Sustainable development
- Explain sustainable development and the Sustainable Development Goals
- HL: explain the relationship between sustainability and poverty
- Guide 4.8LessonPractice
Measuring development
- Compare single indicators with composite indicators such as the HDI
- Interpret development data across countries
- Guide 4.9LessonPractice
Barriers to economic growth and development
- Explain poverty traps, inequality, debt, poor infrastructure and weak institutions
- Evaluate how far each holds back growth and development
- Guide 4.10LessonPractice
Strategies for growth and development
- Evaluate trade, FDI, aid, microfinance, debt relief and market-led and interventionist approaches
- Use real-world examples to judge which strategy suits a country