Microeconomics
Microeconomics 2.1–2.12
Microeconomics is where IB Economics stops being vocabulary and starts being diagrams-plus-judgement. Every subtopic here reduces to the same skeleton: draw the market, show why the outcome isn't allocatively efficient (or isn't equitable), then evaluate a specific government response. Examiners reuse this skeleton relentlessly — the marks are lost not from not knowing content, but from skipping a step (no diagram, no named mechanism, no evaluation with a criterion). Learn the skeleton once and it carries you through demand, supply, elasticity, and all four market-failure chapters.
Overview — The Shape of Microeconomics
What HL Microeconomics Actually Tests
Microeconomics answers three questions for individual markets: what gets produced, how, and for whom — all resolved through the price mechanism unless something breaks it. HL adds two extra demands SL doesn't face: market power (2.10) with its price-discrimination and natural-monopoly detail, and the behavioural critique of rational maximizing behaviour (2.12). Both are pure HL extension content and appear only in HL papers.
- Roughly half the chapter is market failure (externalities/CPR, public goods, asymmetric information, market power) — this is where Paper 1 essays cluster.
- Every diagram question rewards the same three things: correctly labelled axes/curves, a clearly marked equilibrium or welfare-loss area, and a one-sentence link back to allocative efficiency ( or ).
- Paper 3 (HL only) tests the numeric side directly — calculating PED/PES, tax incidence, consumer/producer surplus, and deadweight loss from given equations or data, not just drawing.
- Real markets rarely appear 'purely' as one failure — an insurance market can combine asymmetric information AND be evaluated on equity; examiners reward candidates who notice the overlap.
The shape of the chapter
Command terms that decide your mark
| Command term | What it demands | AO | Mark-earning move |
|---|---|---|---|
| Define | State the precise meaning of a term | AO1 | 1 mark for an accurate, complete statement — vague paraphrase ('when it's unfair') scores 0. |
| Explain | Give a reasoned chain: mechanism → consequence, usually with an example | AO2 | Each mark rewards a developed step. A bare definition with no causal chain to the outcome asked for caps the answer at half marks. |
| Distinguish | State the difference between two similar terms, directly compared | AO2 | Defining both terms separately without an explicit point of contrast loses the top mark. |
| Examine | Consider multiple aspects or arguments in detail | AO3 | Needs breadth (more than one angle) but not necessarily a final verdict. |
| Evaluate | Weigh strengths and weaknesses against a stated criterion to reach a justified conclusion | AO3 | Top band requires an explicit judgement (e.g. on magnitude, time frame, equity vs efficiency) — a list of pros then cons with no conclusion is capped in the middle band. |
| To what extent | Like evaluate, but the conclusion must state a degree, not just a direction | AO3 | 'It depends' with no stated degree or condition loses the final judgement mark. |
| Calculate | Produce a numerical answer with visible working | AO2 | HL numeric questions give method marks for correct formula/substitution even if the final number is wrong — always show the equation before the answer. |
Key point
Overview