Microeconomics is a core part of IB Economics. Revise the key concepts and common mistakes below, then lock them in with the free games.
Key concepts
DemandQuantity buyers want at each price
SupplyQuantity sellers offer at each price
EquilibriumPrice where Qd = Qs
Consumer surplusAbove price, below demand curve
Producer surplusBelow price, above supply curve
Ceteris paribusAll other variables held constant
PED%ΔQd / %ΔP — sensitivity to price
PES%ΔQs / %ΔP — supply sensitivity
YED%ΔQd / %ΔY — sensitivity to income
XED%ΔQd_A / %ΔP_B — sensitivity to other price
Elastic|elasticity| > 1 — large response
Inelastic|elasticity| < 1 — small response
Perfect competitionMany firms, identical product, no power
Monopolistic competitionMany firms, differentiated products
Common mistakes to avoid
Questions where students often pick the tempting wrong answer — make sure you know the right one:
What is opportunity cost?✗ Only the money price of an item. ✓ The next best alternative given up when you make a choice.
According to the law of demand, what happens as price rises?✗ Demand rises with price. ✓ Quantity demanded usually falls.
What does a change in a good's own price cause?✗ A shift of the whole demand curve. ✓ A movement ALONG the demand curve.
What is market equilibrium?✗ Where supply is at its highest. ✓ Where quantity demanded equals quantity supplied.
Practise Microeconomics — free games
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