Overview:
The entire Microeconomics is available on YouTube by Khan Academy. This is a very reliable source of information and also very thorough. https://www.youtube.com/watch?v=ShzPtU7IOXs&list=PLB8eem3Gx7b4Qt5wIqWxOl58bx_husoWW Although some of the things they cover here are slightly more advanced, the more economics knowledge the more you are able to evaluate.
And also remember when writing your exams, knowledge isn’t all there is to what you have to write. You need to evaluate everything you say, and anything at all mentioned in the question in order to achieve a 7. Remember, always consider the side-effects of what you are arguing, what the uses are, what the effects are on stakeholders, who benefits most, who is at a disadvantage etc. and always make sure to include examples. In order to do this, you will need to do outside reading, as not everything can be found in your textbooks or in notes
Economics definitions:
Four Factors of Production:
Occurs as a result of investment
Organisation of other factors of production
Risk taking
Ceteris paribus
An assumption that all other variables remain constant when a single variable is being altered in an economic model
Scarcity
The existence of the limited availability of economic resources, due to infinite wants and needs of society, but a limited amount or resources available.
Economic good
A good or service that is relatively scarce, has a market price and an opportunity cost involved when consumed
Free goods
Goods that are non-rivalrous and non-excludable eg. such as public roads.
Utility
The satisfaction gained from consuming a good or service
Production possibilities curve (PPC)
A curve displaying the maximum combination of goods and services that can be produced in a time period if all factors of production are used fully and efficiently
Free market economy (market economy)
An economy where there is minimal or no government intervention, and all production and consumption is achieved by individuals and firms. Supply and demand curves indicate what, how and for whom goods are produced due to lack of government intervention, such as pure anarchy
Planned economy (command economy)
Means of production are owned by the state, and the state determines what, how and for whom in production, such as pure communism.
Transition economy
An economy that is moving from a centrally planned economic system to a more market-oriented economic system
Market
Where buyers and sellers establish an equilibrium price and quantity for a good or service
Demand
The willingness and ability to purchase a good or service at a given price level
Law of demand
As the price of a good rises, demand decreases ceteris paribus
Demand curve
A graphical representation for the law of demand
Shows inverse relationship between price and quantity demanded
Supply
The willingness and ability of the producer to produce a quantity good or service at a given price level
Law of supply
As price rises, quantity supplied increases
Supply curve
Graphical representation for the law of supply
Shows direct relationship between price and quantity supplied
Equilibrium price
Market clearing price
Where demand is equal to supply
Maximum price (ceiling price)
Set by the government above which the market price is not allowed to surpass
Aims to protect consumers from high prices
Minimum price (floor price)
Price set by government below which market price is not allowed to fall
Aims to protect producers.
Price elasticity of demand (PED)
Measures the responsiveness of quantity demanded when there is a price change
Elastic demand
Change in quantity demanded is relatively larger than change in price
Inelastic demand
The change in price of a good or service will cause a proportionally smaller change in quantity demanded
Cross elasticity of demand (XED)
The measure of responsiveness of the demand for a good or service to a change in the price of a related good
Substitute goods
Goods that can be used instead of each other
Complement good
Goods which are used together
Income elasticity of demand (YED)
The measure of responsiveness of demand when consumer income changes
Normal good
Positive income elasticity of demand
As income rises, demand rises
Inferior good
As income rises, demand decreases
Price elasticity of supply
The measure of quantity supplied of a good or service when there is a change in its price
Indirect tax
An expenditure tax on a good or service
Shown by an upward shift in supply curve
Specific tax
Specific amount of money taxed per unit of good.
Ad valorem tax
Percentage tax applied onto a good.
Incident (of tax)
The amount of tax paid by the producer or consumer
Fixed costs
Costs of production that do not change with the level of output.
Variable costs
Costs of production that vary with the level of output.
Total costs
Total costs of producing at a certain level of output
Fixed costs + variable costs
Average cost
•The average cost of production per unit
•Total cost/quantity produced
Marginal cost
The additional cost of production an additional unit of output
Short run
The period of time where at least one factor of production is fixed (production stage)
Law of diminishing average returns
States that as extra units of a variable factor are applied to a fixed factor, the output per unit of the variable factor will eventually diminish
Law of diminishing marginal returns
States that as extra units of a variable factor are applied to a fixed factor, the output from each addition unit of the variable factor will eventually diminish
Long run
Period of time in which all factors of production are variable
Total revenue
The total revenue gained by a firm from a particular level of output
Average revenue
Revenue received dived by number of units sold
Marginal revenue
The extra revenue gained from selling an additional unit of a good or service
Allocative efficiency
Level of output where marginal cost is equal to average revenue or price\firm sells the last unit it produces at the amount that it costs it to make it
Productive efficiency
•Exists when production is achieved at lowest cost per unit of output
•Where average total cost is at its lowest value
Price discrimination
Syllabus Notes, Links.
1.1 to 1.3 (Markets, Elasticity, Government Intervention) Excellent notes on markets and elasticity, covering supply and demand, different types of elasticities, and some forms of government intervention can be found at: http://www.ibcram.com/2-1-Markets.php
1.4 Market Failure
Market failure occurs where allocative inefficiency occurs, meaning too much or too little of a good is produced for a socially optimum equilibrium.
http://en.wikibooks.org/wiki/IB_Economics/Microeconomics/Market_Failure
http://ibguides.com/economics/notes/the-meaning-of-market-failure
Fresh Questions & Good Talks 