Each of the equations for the elasticity of demand measures the relationship between one specific factor and demand. Elasticity of demand for exports elasticity of demand for imports exchange rate expenditurereducing policies expenditureswitching policies factor endowment fair trade fixed exchange rate floating exchange rate free trade free trade area fta infant industry argument invisible balance jcurve hl marshalllerner condition hl protection. With substitute goods such as brands of cereal, an increase in the price of one good will lead to an increase in demand for the rival product. These economic theories are not studied in a vacuum rather, they are to be applied to realworld issues. For example, we can compare the demands for latte and baseball tickets. Ib economics revision notes are listed as in the official ib economics syllabus which can be found here. To excel in ib economics, students need to have a good understanding of economics terminology. Elasticity is a central concept in economics, and is applied in many situations. Elasticities of demand outline 1 price elasticity of demand mit. This section of economics predominantly lends itself to paper 1, where we have to answer a two part essay question purely on microeconomics plus another one on macro. Price elasticities for foods and nonalcoholic beverages ranged from 0.
Export promotion, import substitution and economic. Demand elasticity definition, examples step by step. Ib economicsinternational economics wikibooks, open. Explain the concept of price elasticity of demand, understanding that it involves responsiveness of quantity demanded to a change in price, along a given demand curve. Learn vocabulary, terms, and more with flashcards, games, and other study tools. Transportation elasticities victoria transport policy institute. Elasticity 11 june multiple choice questions for microeconomics ecn 2103 these economics exam answers were submitted to the site and no efforts were made to. Basic demand and supply analysis explains that economic variables, such as price, income and demand, are causally related.
This section of the course examines four types of elasticity. This concept of elasticity has two formulas that one could use to calculate it, one called point elasticity and the other called arc elasticity. If the price rises by 3 %, the quantity demanded falls. An explanation that price elasticity of supply is the responsiveness of supply or, of quantity supplied to a change in price. The determinants of price elasticity of demand the. For instance, once you have studied this section of the course you will know about free trade, protectionism, exchange rates, the balance of payments, economic integration and, for hl students, the terms of trade. Apr 16, 2016 this topic video looks at the basics of price elasticity of demand and the factors that influence the coefficient of elasticity.
Core or underlying rate of inflation this measurement eliminates. There are a few types of elasticities discussed in alevelib, including price elasticity of demand ped, cross elasticity of demand xed. Presentations ppt, key, pdf logging in or signing up. Core or underlying rate of inflation this measurement eliminates the effect of volatile swings in the prices of e. Chapter 4 elasticities of demand and supply 1 the price elasticity of demand measures the sensitivity of the quantity demanded of a good to a change in its price it is defined as. Now, let us take an example of an inferior good to look at the impact of income on it. May 2019 economics higher level paper 3 ib documents. A companion to mankiw and taylor economics by ken heather managerial economics the mcgrawhill economics series ma economics. For international economics, as the name suggests, you will learn about how countries interact and trade with each other.
Absolute advantage a condition where a country can produce an equal amount of a good with less resources than another, aggregate demand the total quantity of goods and services demanded in a country at a given price level and time period, aggregate supply. Countries are at various stages of economic development and so have widely different income elasticities for the same products. Marshall who introduced the concept of elasticity into economic theory remarks that the elasticity or responsiveness of demand in a market is great or small according as the amount demanded increases much or little for a given fall in price, and diminishes much or little for a given rise in price. Find tips on how to tackle the ib economics course, and articles about my personal view on the global economy and financial markets. How to use these ib economics notes and study guide. It is concerned with human beings and the social systems by which they organize their activities to satisfy basic material needs e. Cross price elasticity of demand economics tutor2u.
As an economic tool, elasticity can help determine whether the tax costs can be passed on to the customer through a price. Read expert opinions, top news, insights and trends on the economic times. It is what you to when you have finished analysing. Below are the examples of income elasticity of demand. Read this article to learn about elasticity of demand and supply. Deflation decrease in the price level of an economy over a period of time. Evaluation is a very important concept in economics. The cross price elasticity for two substitutes will be positive. What supplyside policies could a government use to shift the as curve. Chapter 4 elasticity sample questions multiple choice. Analyze how prices change through the interaction of buyers and sellers in a market including the role of supply, demand, equilibrium, elasticity, and explain how incentives monetary and nonmonetary affect. Explaining price elasticity of demand economics tutor2u. This section covers an introduction to some of the fundamental concepts of ib economics, as well as the study of economics in general.
Firms will want to avoid producing inferior goods countries are at various stages of economic development and so have widely different income elasticities for the. Mindtap economics for mankiws principles of economics, 8th edition, instant access, 1 term 6 month mindtap economics for mankiws principles of economics, 8th edition, instant access, 1 term 6 month maths for economics. This section of the site focuses on how the relationship between the two variables changes, according to the elasticity of the good or. I studied economics at the london school of economics and passionate about the subject and research. If the file has a name in the title, it means it has been composed by a previous student of mine. The fundamental problem of economics is that there is scarcity and that choices must be made. Elasticity microeconomics economics and finance khan academy. International baccalaureate baccalaureat international bachillerato internacional. The law of demand indicates the direction of change in quantity demanded.
Economic profit sometimes known as abnormal profit and normal profit zero economic profit occurring at the breakeven point. The determinants of price elasticity of demand by jason welker in this second lesson on elasticity well outline the factors that affect the relative price elasticity of demand for a good, summarized by the useful acronym splat. Stay up to date with the latest information on what this means for ib diplomas, course credit for ib classes, and more with our ib covid19 faq article. Subject matter of elasticity of demand and supply 2. Firms will want to avoid producing inferior goods countries are at various stages of economic development and so have widely different income elasticities for the same products. Ib economicsmicroeconomicselasticities wikibooks, open. Price elasticity of demand ped price elasticity of demand and its determinants. Elasticity types of elasticity economics online economics online.
Application of income elasticity to economic growth. Countries are at various stages of economic development and so have widely different income elasticities for the. Prominent among these issues are fluctuations in economic activity, international trade. The time taken to produce goods is an important determinant of the price elasticity of supply. Cross price elasticity definition substitutes and complements 4. Transport demand refers to the amount and type of travel that people would choose. If a good has an inelastic ped and a firm raises its price, the firms revenue. Bthe units used to measure price and the units used to measure quantity. Basic demand and supply analysis explains that economic variables, such as.
Glossary of ib economics terms ib tuition igcse tuition. To read a definition scroll your cursor over a term or click on the term. Ib economics higher level subject brief the ib diploma programme, for students aged 16 to 19, is an academically challenging and balanced programme of education that prepares students for success at university and life beyond. Another example is the cross price elasticity of demand for music. Ib economics wikibooks, open books for an open world. With price elasticity, if demand has changed by a smaller percentage than the price, the. Price elasticity of supply pes price elasticity of supply and its determinants. Economic lesson plans edition i unit 1 economic lesson. Beef, rice, wine, lamb and sugar exports are among those. Economists use the concept of elasticity to describe quantitatively the impact on one economic variable such as supply or demand caused by a change in another economic variable such as price or income. International baccalaureate diploma programme subject brief.
It also plays a large part in paper 3, which is the quantitative paper, although that is relatively straightforward. In this page, we created a glossary of ib economics terms to help students search for economics definitions in just a few clicks. Economics lecture notes chapter 3 elasticity of demand and supply will be taught in economics tuition in the fourth and fifth weeks of term 1. Until now your students will have largely worked on the assumption that demand is linear and that the relationship between selling price and quantity demanded was the same or at least similar for most products the exceptions being giffen and veblen goods. A level economics revision flashcards these superb packs of. The others were written by me or are from ib mark schemes. Let us make an indepth study of elasticity of demand. Microeconomics this section of economics predominantly lends itself to paper 1, where we have to answer a two part essay question purely on microeconomics plus another one on macro. Additionally, the license tied with this product prohibits commercial use of any selected. This topic video looks at income elasticity of demand and in particular the distinction between normal and inferior goods.
Elasticity of demand is the ratio of two percentages and so elasticity is a number with no units. In ib economics we define elasticity as a measure of how responsive one variable is to changes in price or any of the variables determinants. New terms will be added as they become relevant to coursework or previous classes in order to keep these pages convenient for study. Ib economicsmicroeconomicselasticities wikibooks, open books. I have included this page, which contains a pdf handout as a simple revision exercise. Elasticity allows us to compare the demands for different goods. Paper 2 involves data response questions focussing on. Answers to test your understanding quantitative questions chapters 27 answers have been provided for all quantitative test your understanding questions throughout the.
Elasticity can provide important information about the strength or weakness of such relationships. Ib economics is a stimulating and interactive, online teaching and learning resource that offers comprehensive coverage of the economics syllabus for the international baccalaureate diploma programme, including standard sl and higher hl level topics. Students can refer to economics a singapore perspective for the diagrams. By analyzing we mean giving your definitions, explanations, examples and diagrams deed. Ib points to understand for both sl and hl unless otherwise noted price elasticity of demand and its determinants.
The best ib economics notes and study guide for slhl. Inflation is persistent increase in the price level of an economy over a period of time. Analyze how prices change through the interaction of buyers and sellers in a market including the role of supply, demand, equilibrium, elasticity, and explain how incentives monetary and nonmonetary affect choices of households and economic organizations. As economies grow, income elasticity helps determine what should be produced. The page below contains most of the key terms from an introductory economics course. Show how the theories relate to the question and explain the theories. Elasticity measures the sensitivity or responsiveness of these changes definition elasticity measures the change in one variable in response to a change in another variable we look at. Ep 1 indicates that the good is price elastic, perhaps because the. Home a level and ib study tools economics elasticity. Elasticity is independent of the units used to measure price and quantity. Section 0 introduction economics as a social science. Price elasticity of demand is usually a negative number.
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