Unit 2
Microeconomics
Select a topic to view class notes, key terms, worked examples and practice questions.
2.1
Demand
Law of demand, demand curve, non-price determinants, movements vs shifts.
2.2
Supply
Law of supply, supply curve, non-price determinants, movements vs shifts.
2.3
Competitive Market Equilibrium
Market equilibrium, price mechanism, consumer and producer surplus, allocative efficiency.
2.4
Critique of Maximising Behaviour
Behavioural economics, biases, bounded rationality, nudge theory, alternative business objectives.
HL only 2.5
Elasticities of Demand
PED, YED — definitions, calculations, determinants, and significance for firms and government.
2.6
Elasticity of Supply
PES — definition, calculation, determinants, and significance.
2.7
Role of Government in Microeconomics
Price controls, indirect taxes, subsidies, regulation, and consequences for stakeholders.
2.8
Externalities and Common Pool Resources
Positive and negative externalities, merit/demerit goods, common pool resources, government responses.
2.9
Market Failure — Public Goods
Non-rival, non-excludable goods and the free rider problem. Government provision.
2.10
Asymmetric Information
Adverse selection, moral hazard, and government and private responses.
HL only 2.11
Market Power
Perfect competition, monopoly, oligopoly, monopolistic competition, and profit maximisation.
HL only 2.12
The Market's Inability to Achieve Equity
Why free markets produce unequal distributions of income and wealth.
HL only