You need to include at least one example for each essay question to get the highest band. Be sure to continue referring to your example throughout your essay.
| Microeconomics | |
| Concept | Examples |
| PED | Elastic: restaurant meals, Inelastic: oil and gas |
| XED | Complements: shampoo + conditioner, Sub: low-fat milk and high-fat milk |
| Tax incidence | |
| PES | PES elastic: pens, inelastic: vegetables and flower |
| YED | Luxuries – e.g Gucci, Prada, branded goods. Normal – instant coffee. Inferior – processed foods |
| Indirect taxes | Ad valorem tax in HK on property, 2% for under 2m and 20% for under 20m. $0.03 tax on beer in US |
| Price floors | NYC – 1m houses controlled w/ ceiling |
| Price ceilings | Minimum wage in HK is HKD34/hour. EU wheat 38% of the EU budget |
| Negative externalities of production | Sweden’s carbon tax ↓ 23% in 25 years (€27/tn) EU Cap and Trade, ↓ 13% Very successful |
| Negative externalities of consumption | INDIRECT TAX 67% tax in HK on cigarettes, 10% smokers |
| Positive externalities of production | Beekeepers + bees that pollinate surrounding flowers (not just honey), ecotourism, developing R&D (e.g. cure for AIDS, ebola) |
| Positive externalities of consumption | Free vaccinations in HK, 80% coverage now Public transport subsidy ($400 or above, 25% rebate) |
| Public goods | Fresh air, beaches, lighthouses, trash pickup |
| Threat to sustainability | Trawling Ban in HK 🐟 HK$1.7 billion in compensation 2013, Amazon rainforest 17% forest lost in 50 years |
| Assymetric information | Money-back guarantee, warrantee, HK regulates the insurance policy |
| Abuse of monopoly power | Salt monopoly broken in China, 25k police, 100+ companies introduced by gov’t Senegal’s government tried both (water) min cost pricing and average cost = more successful (less loss) |
| Perfectly competitive market | Ladies’ Market in Hong Kong |
| Monopolistic | Hotels, pubs in the UK – Hilton, Marriot, Holiday Inn – attempt at non-price competition, quality of service, advertising |
| Monopolistic v perfect | |
| Monopoly v perfect | Natural monopoly – MTR – pure monopoly is a theoretical scenario, not in RL |
| Oligopoly | CMHK, PCCW, 3, HKBN in HK as cell-phone providers. Example of Collusion: BMW + Volkswagen, to hinder technological progress in improving the quality of vehicle emissions in order to reduce the cost of production and maximize profits |
| Keynesian multiplier | |
| Price discrimination | Disneyland park tickets |
| Merger legislation | AT&T and Time Warner – illegal merger, allow cable companies + entertainment industry = merge |
| Cartel | OPEC |
| Macroeconomics | |
| New classical | |
| Keynesian | |
| National Income statistics | GNI |
| Increases in AD | R&D of UK – additional 2.3bn pounds a year to increase productivity after Brexit (Nov 2017). New Deal in 1930s by Roosevelt |
| Unemployment | Structural unemployment, 27% in Portugal due to declining mining industry. Min wage is rigid. Seasonal – tourism |
| Policies for Unemployment | Trade Union ban in 1980s in UK – difficult to strike Increase in productivity (20% workers hours lost to 5%) |
| Inflation rates | Combat inflation – Federal Reserve, 2%. When economy was growing, increase interest from 2.25 to 2.5% Dec 2018 |
| Inflation/deflation | Japan deflation is 0.2%, solution is to loosen monetary policy |
| Unemployment and inflation | Stagflation in 1970s due to oil crisis. FED interest rose to 20%, inflation decreased from 13.5% to 3.2% |
| Economic growth | |
| Poverty | Swaziland – 63% in poverty: drought, education, high inequality |
| Taxation | Taxes in US avg at 20% |
| Equity | |
| Equity and efficiency | Empirically untrue – ttop marginal tax rates were about 90 percent in the 1950s and ’60s – landed on moon, avg GDP growth 6.5%. Yet other studies suggest that increase to 75% tax rate = decrease in 7% innovation |
| Fiscal policy | $152bn stimulus in 2008 after Great Depression in the US |
| Monetary policy | Stagflation in the US – 20% interest rate, inflation decreased from 13.5% to 3.2%, unemployment increased to 10% (shocking debt and cut costs) |
| Supply-side | Reagan – 1980s, deregulation, 5% economic growth avg in 1980s/90s. Yet Thatcher’s policies did not increase LR potential output – due to gov’t spending cuts |
IB Wisdom 