IB Economics Unit 1:Competitive markets

Revision notes on the first section of the IB economics syllabus, competitive markets. Explanations of key concepts and diagrams, including excess demand and supply, equilibrium and allocative efficiency. There are notes on both the standard and higher part of the course and it has been written to the syllabus points. The higher parts are indicated by a dashed line along the left side of the page. 

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1.1 Competitive markets: Demand and supply
Markets




Demand




The non-price determinants of demand

Page 2

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Linear demand functions (equations), demand schedules and graphs




Supply

Page 3

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The non-price determinants of supply

Page 4

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Linear supply functions, equations and graphs




Market equilibrium




Equilibrium and changes to equilibrium

Page 5

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Calculating and illustrating equilibrium using
linear equations


Qd = 50-5P Qs = -10 +
4P
Qd/Qs = 0=50-5P 0=-10+4P
0 5P=50 10=4P
P=10 P=2.5
P=0 Qd=50-5(0 Qs=-10+4(0)
) Qs=-10
Qd=50

Page 6

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Calculate Pe Calculate Qe
50-5P=-10+4P Qd = 50-5(6.67)
9P=60 Qd=50-33.33
P$6.67 Qd16.67 units




Excess supply

Qd=50-5(8) Qs=-10+4(8)
Qd=10 Qs=22
22-10=12
units of
excess supply




The role of the price mechanism

Page 7

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Market efficiency

Page 8

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