The IB Diploma Programme Economics course forms part of group 3 – individuals and societies.

Economics is an exciting, dynamic subject that allows students to develop an understanding of the complexities and interdependence of economic activities in a rapidly changing world.

At the heart of economic theory is the problem of scarcity. While the world’s population has unlimited needs and wants, there are limited resources to satisfy these needs and wants. As a result of this scarcity, choices have to be made. The DP economics course, at both SL and HL, uses economic theories to examine the ways in which these choices are made:

  • at the level of producers and consumers in individual markets (microeconomics)
  • at the level of the government and the national economy (macroeconomics)
  • at an international level where countries are becoming increasingly interdependent through international trade and the movement of labour and capital (the global economy).

The choices made by economic agents (consumers, producers and governments) generate positive and negative outcomes and these outcomes affect the relative well-being of individuals and societies. As a social science, economics examines these choices using models and theories. The DP economics course allows students to explore these models and theories, and apply them, using empirical data, through the examination of six real-world issues.

As economic growth and increased efficiency become prominent goals, two other important global economic issues related to these goals are; the ways in which economic activity impacts the environment, and the challenges facing the world in terms of fair access to resources, goods and services. When exploring these significant global issues, sustainability and equity become key concepts for DP economic students to understand.

In all areas of economic activity, the economic agents can be divided up into the private sector (consumers and producers) and the public sector (governments). To different extents and with different outcomes, the public sector in any economy assumes some responsibility for monitoring and regulating the behaviour of the private sector. This government intervention is a significant concept that appears throughout the course and students are expected to critically evaluate the balance between the market forces of the private sector and intervention by governments.

Given the rapidly changing world, economic activity and its outcomes are constantly in flux. Therefore, students are encouraged, throughout the course, to research current real-world issues. Through their own inquiry, it is expected that students will be able to appreciate both the values and limitations of economic models in explaining real-world economic behaviour and outcomes.

By focusing on the six real-world issues through the nine key concepts (scarcity, choice, efficiency, equity, economic well-being, sustainability, change, interdependence and intervention), students of the DP economics course will develop the knowledge, skills, values and attitudes that will encourage them to act responsibly as global citizens.

For the internal assessment, both standard level and higher level candidates are required to produce a portfolio of three commentaries based on published extracts from the news media using the key concepts as a lens. In addition, for the external assessment, there are two examinations for standard level students and three examinations at higher level. 

Please click on the arrow for a detailed breakdown:

Unit / Block of workKey Episodes / QuestionsAdditional DetailsTimelineLearner Attribute(s)
1 – What is Economics  Sept – OctRisk Taker
 1.1 What is Economics?1.1.1 Economics as a social science
  1.1.2 The problem of Choice
  1.1.3 The Production Possibility Curve Model
  1.1.4 Modelling the Economy
 1.2 How do economists approach the world?1.2.1 Economic MethodologyCaring
  1.2.2 Economic Thought
2 – Micro Economics  Knowledgeable
 2.1 How is Demand determined in an economy?2.1.1 The Nature of Markets
  2.1.2 The Law of Demand
  2.1.3 Assumptions underlying the law of demand (HL)
  2.1.4 Movements along the demand curve and shifts in the demand curve
  2.1.5 Non-price determinants of demand: change in income
  2.1.6 Non-price determinants of demand: changes in the rice of related goods
  2.1.7 Non-price determinants of demand: tastes & preferences, future expectations, number of consumers, seasonal changes
 2.2 How is Supply determined in an economy?2.2.1 Law of SupplyThinker
  2.2.2 Assumptions underlying the law of supply (HL)
  2.2.3 Movements along the supply curve & shifts in the supply curve
  2.2.4 Non-price determinants of supply; costs of production, technological changes, future expectations, number of firms in the market
  2.2.5 Non-price determinants of supply; prices of related goods
  2.2.6 Non-price determinants of supply; government intervention
 2.3 Why is Competitive Market Equilibrium important?2.3.1 Market Equilibrium
  2.3.2 Changes in Demand
  2.3.3 Changes in Supply
  2.3.4 Functions of the Price Mechanism
  2.3.5 Social / Community Surplus
  2.3.6 Calculations of social/community surplus (HL ONLY)
 2.4 How is the behaviour of consumers & producers maximized in an economy?2.4.1 Rational consumer choiceOct – Dec 
  2.4.2 Imperfect information, bounded rationality, bounded self-control, bounded selfishnesBalanced/principle
  2.4.3 Behavioural Economics in Action 
  2.4.4 Business Objectives 
 2.5 Why is Price Elasticity of Demand (PED) so significant to economists?2.5.1 Price Elasticity of Demand: definition, formula and calculationsInquirer
  2.5.2 Price Elasticity of Demand: range of values and diagrams
  2.5.3 Determinants of price elasticity of demand
  2.5.4 Price elasticity of demand and total revenue for firms
  2.5.5 Changing price elasticity of demand (HL ONLY)
  2.5.6 Implications of price elasticity of demand for government policies
  2.5.7 Price elasticity of demand of primary commodities (HL ONLY)
  2.5.8 Income Elasticity of demand: Definition, formula, calculation, range of values & diagrams
  2.5.9 Importance of income elasticity of demand for firms & sectoral changes in the economy (HL ONLY)
 2.6 Why is Price Elasticity of Supply (PES) so significant to economists?2.6.1 Price elasticity of supplyOpen Minded
  2.6.2 Determinants of price elasticity of supply
  2.6.3 PES of primary commodities compared with manufactured goods (HL ONLY)
 2.7 Role of Governments in Microeconomics2.7.1 Why to governments interveneRisk Taker / Reflective
  2.7.2 Price Ceilings
  2.7.3 Price Floors
  2.7.4 Calculating price controls (HL ONLY)
  2.7.5 Indirect taxes
  2.7.6 Calculating Indirect Taxes (HL ONLY)
  2.7.7 Subsidies
  2.7.8 Calculating subsidies (HL ONLY)
  2.7.9 Direct Provision of services
  2.7.10 Command and control regulation & legislation
  2.7.11 Consumer Nudges (HL ONLY)
 2.8 What is Market Failure?2.8.1 Types of market failureJan – FebCaring
  2.8.2 Negative externalities of production
  2.8.3 Positive externalities of production
  2.8.4 Negative externalities of consumption
  2.8.5 Positive externalities of consumption
  2.8.6 Calculating welfare loss (HL ONLY)
  2.8.7 Common pool resources
  2.8.8 The importance of international cooperation
 2.9 How can Market Failure be controlled?2.9.1 What are public goodsReflective
  2.9.2 Government Intervention in response to public goods
 2.10 How does Asymmetric information cause market failure? (HL ONLY)2.10.1 Asymmetric Information
  2.10.2 Adverse selection
  2.10.3 Moral Hazard
  2.10.4 Government responses to asymmetric information
  2.10.5 Private responses to asymmetric information
 2.11 How does market power influence market failure? (HL ONLY)2.11.1 Types of competitive marketsKnowledgeable
  2.11.2 Rational producer behaviour
  2.11.3 Perfect competition
  2.11.4 Monopoly
  2.11.5 Oligopoly
  2.11.6 Monopolistic Competition
  2.11.7 Government intervention in response to market power abuse
 2.12 Why have Markets got the inability to achieve equity (HL ONLY)2.12.1 The meaning of equityMarch – AprilThinker
  2.12.2 How does the free market result in income inequality
  2.12.3 The Circular Flow of Income
3 – Macro Economics  Balanced
 3.1 How is Economic Activity measured?3.1.1 National income accounting
  3.1.2 Approaches to national income accounting
  3.1.3 Nominal Gross Domestic Product (GDP) & Gross National Income (GNI)
  3.1.4 Real GDP & Real GNI
  3.1.5 The Business Cycle
  3.1.6 Alternative measures of well-beingMay-July
 3.2 What are the Variations in economic activity (AD & AS)3.2.1 Aggregate demandPrincipled
  3.2.2 Determinants of aggregate demand components
  3.2.3 Aggregate supply
  3.2.4 Macroeconomic equilibrium in the short run
  3.2.5 Equilibrium in the long run
  3.2.6 Assumptions and implications of the models
 3.3 What are the key Macroeconomic Objectives?3.3.1 Economic Growth in the short and long termOpen Minded
  3.3.2 Low unemployment
  3.3.3 Causes of unemployment, costs & solutions
  3.3.4 Inflation and its causes
  3.3.5 Deflation, disinflation and its costs
  3.3.6 Relative costs of unemployment versus inflation
Unit / Block of workKey Episodes / QuestionsAdditional detailsTimelineLearner Attribute(s)
3 – Macroeconomics3.3  What are the key Macroeconomic Objectives?  continued Sept – OctRisk Taker
  3.3.7 Calculating inflation with a weighted index (HL ONLY)
  3.3.8 Deficits and debt (HL ONLY)
  3.3.9 The Phillips Curve (HL ONLY)
 3.4 Why is inequality and poverty important to economists?3.4.1 The relationship between equality and equityCaring
  3.4.2 Measuring economic inequality
  3.4.3 Measuring of Poverty
  3.4.4 Causes of economic inequality and poverty
  3.4.5 The role of taxation in reducing poverty, income inequality and wealth distribution
  3.4.6 Calculating income tax rates (HL ONLY)
  3.4.7 Further policies to reduce poverty, income, inequality & wealth inequality
 3.5 What is the monetary policy and why is it important? (Demand side policies)3.5.1 Monetary policyReflective
  3..5.2 Goals of monetary policy
  3.5.3 Money creation (HL ONLY)
  3.5.4 Toos of monetary policy (HL ONLY)
  3,5,5 Demand & supply of money (HL ONLY)
  3.5.6 Nominal versus real interest rates
  3.5.7 Expansionary & contractionary monetary policies
  3.5.8 Effectiveness of monetary policy
 3.6 What is the Fiscal Policy and why is it important? (Demand-side policies)3.6.1 Fiscal policyKnowledgeable
  3.6.2 Goals of fiscal policy
  3.6.3 Expansionary and contractionary fiscal policy
  3.6.4 Keynesian multiplier (HL ONLY)
  3.6.5 Constraints on fiscal policy
  3.6.6 Crowding out (HL ONLY)
  3.6.7 Strengths of fiscal policy
  3.6.8 Automatic Stabilizers (HL ONLY)
 3.7 What are Supply-side policies and why are they used by governments?3.7.1 Goals of supply side policiesThinker
  3.7.2 Market-based supply side policies to increase competition
  3.7.3 market-based supply side policies for the labour market
  3.7.4 Incentive-related supply side policies
  3.7.5 Interventionist supply-side policies
  3.7.6 Demand-side effects of supply-side policies
  3.7.7 Supply-side effects of fiscal policies
  3.7.8 Effectiveness of supply-side policies
4 – The Global Economy  Oct – DecBalanced
 4.1 Why is International Trade so important to the global economy?4.1.1 Benefits of international trade
  4.1.2 Calculating the benefits of international trade (HL ONLY)
  4.1.3 Absolute and comparative advantage (HL ONLY)
  4.1.4  Limitations of the theory of comparative advatage (HL ONLY)
 4.2 How can countries protect their economies from global trade?4.2.1 TariffsPrincipled
  4.2.2 Calculating tariffs (HL ONLY)
  4.2.3 Quotas
  4.2.4 Calculating quotas
  4.2.6 Calculating subsidies (HL ONLY)
  4.2.7 Administrative barriers
 4.3 What are the arguments for and against trade control/protectionism?4.3.1 Arguments for trade protectionOpen Minded
  4.3.2 Arguments against trade protection
  4.3.3 Free Trade versus trade protection
 4.4 What is Economic Integration?4.4.1 Preferential trade agreementsCommunicator
  4.4.2 Trading Blocs
  4.4.3 Advantages and disadvantages of trading blocs
  4.4.4 Trade Creation & Trade diversion
  4.4.5 Monetary Unions
  4.4.6 Advantages & disadvantages of monetary unions (HL ONLY)
  4.4.7 The World Trade Organization
 4.5 Why do Exchange Rates exist and why do they fluctuate?4.5.1 Floating Exhange ratesInquirer
  4.5.2 Changes in demand and supply for a currency
  4.5.3 Consequences of changes in the exchange rate
  4.5.4 Fixed exchange rates
  4.5.5 Managed exchange rates
  4.5.6 Fixed versus floating exchange rate systems (HL ONLY)
 4.6 How is the Balance of Payments measured and controlled?4.6.1 Balance of paymentsJan – MarchRisk Taker
  4.6.2 Components of the balance of payments
  4.6.3 Interdependence between the accounts
  4.6.4 The current account and exchange rate (HL ONLY)
  4.6.5 The Financial account and the exchange rate (HL ONLY)
  4.6.6 Implications of a persistent current account deficit (HL ONLY)
  4.6.7 Correcting a persistent current account deficit (HL ONLY)
  4.6.8 Effectiveness of measures to correct a current account deficit (HL)
  4.6.9 The Marshall-Lerner condition and the J-Curve effect (HL ONLY)
  4.6.10 Implications of a persistent current account surplus (HL ONLY)
 4.7 Why is the global economy interested in Sustainable Development?4.7.1 What is development?Caring
  4.7.2 Wat is sustainable development?
  4.7.3 Modelling sustainable development
  4.7.4  The importance of resilience and culture for sustainable development
  4.7.5 Sustainable Development Goals (SDGs)
  4.7.6 Relationship between sustainability and poverty (HL ONLY)
 4.8 How is economic development measured?4.8.1 The multidimensional nature of economic developmentReflective
  4.8.2 Single indictors: income
  4.8.3 Single indicators: health & education
  4.8.4 Single indicators: economic/social inequality
  4.8.5 Single indicators: energy
  4.8.6 Single indicators: environment
  4.8.7 Composite indicators
 4.9 What are the barriers to economic growth/development?4.9.1 Poverty traps/cyclesKnowledgeable
  4.9.2 Economic barriers: infrastructure & appropriate technology
  4.9.3 Economic barriers: low human capital & dependence on the primary sector
  4.9.4 Economic barriers: international market access and the informal economy
  4.9.5 Economic barriers: capital flight & indebtedness
  4.9.6 Geographic barriers: landlocked countries, climate, endemic diseases
  4.9.7 Political barriers
  4.9.8 Institutional barriers: legal systems and poverty rights
  4.9.9 Institutional barriers: tax structure and banking systems
  4.9.10 Sociocultural barriers
 4.10 What strategies can be used to develop an economy?4.10.1 Trade strategies: liberalization & integrationThinker
  4.10.2 Trade Strategies: alternative to liberalization
  4.10.3 Social enterprises
  4.10.4 Market-based policies
  4.10.5 Interventionist policies: redistribution
  4.10.6 Interventionist policies: merit goods
  4.10.7 Inward foreign direct investment
  4.10.8 Foreign Aid
  4.10.9 Multilateral development assistance
  4.10.10 Institutional change: banking and microcredit
  4.10.11 Institutional change: women’s empowerment, corruption, poverty/land rights.