Summary

Summary of HL only MICROECONOMICS topics from IB HL Economics (new 2020 syllabus)

1 purchase

Module
HL IB Economics

Institution
Loughborough University (LU)

Hi guys I'm a previous IB student that received a level 7 in the HL Economics course and 44 points overall. This doc has a summary of all of my class notes for the new 2020 Economics syllabus in the Introductory and Microeconomics topics. This includes: Changing PED and the Demand Curve; Competit...

[Show more]

Preview 4 out of 41 pages

View example

Uploaded on August 29, 2023
Number of pages 41
Written in 2020/2021
Type Summary

econ
economics
hl economics
demand
supply
market failure
monopoly
microeconomics
ib
hl
international baccalaureate
profit

£12.49

Add to cart

Add to wishlist

100% satisfaction guarantee
Immediately available after payment
Both online and in PDF
No strings attached

HL

UNIT 1:
MICROECONOMICS

NOTES FOR 2020 IB
SYLLABUS
Delicia Pascall

,Changing PED and the (straight line) Demand Curve

Why does PED vary along the straight-line demand curve?

In the upper section people will be more
sensitive to changes in price

Slope = ∆ P ÷ ∆ Q – constant for a straight line

p/q is falling when we move downwards the
demand curve as p decreases while q increases

Constant number x decreasing number =
decreasing value of PED

- On any(downward sloping) straight-line demand curve, demand is price-elastic at high prices &
low quantities, and price-inelastic at low prices and high quantities, and has a midpoint of unit
elastic demand
THEREFORE, the terms ‘inelastic’ and ‘elastic’ should not be used to describe an entire demand
curve, only for a portion of the curve corresponding with a particular price/price range (except
3 cases where PED is constant)

PED for Commodities

Commodities = raw materials and crops

Manufactured products = goods produced with factors of production including commodities

- They’re necessities for manufacturers and the demand depends upon their production targets
- Some manufactured products have inelastic demand as well if they are necessities.
- They have no or very small number of substitutes. Manufactured products normally have a lot
of substitutes >> PED is high
- Demand for commodities is price inelastic (PED < 1 )

PES for Commodities

- The supply of commodities is price inelastic
- It takes time to grow / extract commodities
- Import and export contracts
- Due to inelastic supply and demand for commodities – the prices for them are volatile
- PED < 1

PED and TR

,Total revenue = the amount of money received by firms when they sell a good/service

TR = P x Q

Elastic Demand: P increases, TR falls. Inelastic Demand:

- Fall in supply of commodities (e.g. due to poor weather conditions) will generate significantly
higher prices. The small in quantity is proportionately much smaller that the rise in price. The
total revenue of farmers increases
- In general any changes in supply will generate significant fluctuations in prices. The revenue of
farmers is unstable and requires government intervention.

, Applications of YED

- If goods and services have income elastic demand, the demand increases at a higher rate than
incomes
- If goods and services have income inelastic demand, the demand increases at a slower rate
than incomes

Luxury products:
(With income elastic demand)

- Benefit significantly during periods of economic growth – the demand increases at a faster rate
than the rise in incomes
- During recession: the demand for these goods falls at a faster rate than the decline in incomes

Inferior products:

(with negative income elasticity)

- Will be hit hardest during periods of economic expansion – the demand declines as incomes
are rising
- During recession: the markets for inferior products will benefit while markets for normal goods
decline

Necessities:

(with low income elasticity)

- Will benefit less than luxury goods during economic growth
- During recession: the demand for these goods will fall by far less than for luxury products

3 Sectors of the Economy

Primary Sector = Agricultural Products and Natural resources

- Have income inelastic demand
- Sector growth is at a very slow rate
- Share reduces relative to the other sectors (as they grow faster)
Secondary = Manufactured Products

- Have income elastic demand
- Sector growth is at a fast rate
- Share increases relative to primary sector
Tertiary = Services (high YED)

- Higher income elasticity than manufacturing sector
- Sector is expanding at the fastest rate
- Share increases relative to the other two sectors

Sectoral change = when the share of each sector changes. The overall output (GDP) is 100%

- Economically less developed countries tend to have a large primary sector.
While these countries are growing, the share of the primary sector declines as the other 2
sectors rise
- Developed countries have a very large tertiary sector with the highest share

The benefits of buying summaries with Stuvia:

Guaranteed quality through customer reviews

Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.

Quick and easy check-out

You can quickly pay through credit card for the summaries. There is no membership needed.

Focus on what matters

Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!

Frequently asked questions

What do I get when I buy this document?

You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.

Satisfaction guarantee: how does it work?

Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.

Who am I buying these notes from?

Stuvia is a marketplace, so you are not buying this document from us, but from seller deliciapascall. Stuvia facilitates payment to the seller.

Will I be stuck with a subscription?

No, you only buy these notes for £12.49. You're not tied to anything after your purchase.

Can Stuvia be trusted?

4.6 stars on Google & Trustpilot (+1000 reviews)

67479 documents were sold in the last 30 days

Founded in 2010, the go-to place to buy revision notes and other study material for 15 years now

Start selling