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1.1 What is economics?
Economics as a social science
Economics = social science, because:
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It deals with human society and behavior(how societies organize their activities,how they behave to meet their needs and wants)
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Its approach to studying human society is based on the scientific method.
Due to the complexities within societies, economists build models so as to better understand certain interactions
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A model is a simplified version of reality
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All models make a range of assumptions. These are often generalized on behaviors, choices and outcomes
9 Central concepts
Scarcity | Excess of human wants over what can actually be produced to fulfill these wants
• People have unlimited wants but resources are limited
• All needs and wants can’t be satisfied; this necessitates choices and give rise to the idea of opportunity costs |
Choice | Since resources are scarce, not all needs and wants can be satisfied → choices must be made |
Efficiency | Making the best possible use of scarce resources to produce the combinations of goods and services that are optimum for society → minimize resource waste.
• Allocative efficiency refers to making the best possible use of these resources that is optimum for society = minimizing resource waste |
Equity | Idea of fairness |
Economic well-being | Quality of living standards enjoyed by members of an economy. Multifaceted concept encompassing prosperity, quality of life, financial security, and freedom of choice. |
Sustainability | Ability of the present generation to meet its needs without compromising the ability of future generations to meet their needs. |
Change | World that is studied by economists is always subject to continuous and profound change at institutional, structural, technological, economic and social levels. |
Interdependence | Economic agents such as consumers, firms, households, workers and governments interact with each other to achieve economic goals. Therefore, any action of economic agents will impact other agents. |
Intervention | Government involvement in the workings of markets. |
The problem of scarcity and choice
The basic economic problem is that resources are scarce
In economics, these resources are called the factors of production
There are finite resources available in relation to the infinite wants and needs that humans have
Needs are essential to human life e.g. shelter, food, clothing
1. Introduction to Economics
2. Microeconomics
3. Macroeconomic
4. The Global Economy
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1.1 Overview
The Internal Assessment (IA) is your opportunity to apply economic theory to real-world events, demonstrating your analytical skills through an economist’s lens. You’ll select articles and evaluate the relevant economic themes across Microeconomics, Macroeconomics, and The Global Economy units. Together, these three commentaries contribute 20% of your final grade. While each commentary is only 800 words, writing all three over the span of nearly a year can feel like a lengthy, ongoing process—so stay organized and on track!
Individual Work
You are responsible for selecting your own articles and preparing each commentary independently. While others may choose the same article, the work you produce must be your own and not collaboratively prepared.
Focus of Each Commentary
Each commentary must:
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Link the article to relevant economic theory from the syllabus section it covers.
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Show economic insights, demonstrating your ability to discuss the implications of the event as an economist.
1.2 Assessment Criteria for the IA
The IA is a significant part of your final grade, so approach it seriously. Many students fall short despite having ample time. Be clear on what a high-quality IA looks like, there’s no reason not to aim for a 6 or 7!
Criterion A: Diagrams
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Provide 2 relevant, labeled diagrams: Ensure each diagram directly relates to the article and is clearly labeled.
1. Essential Considerations
2.1 Key Theories by Unit
Choose topics with clear economic theories and room for detailed evaluation. Use the suggested list below to guide your topic selection and set yourself up for a high score.
Finding the right article can be challenging, so focus on these examples to help you stay on track.
Your IA journey will begin with Microeconomics, as it provides a solid foundation for understanding and applying economic theory. As you move from Microeconomics to Macroeconomics and The Global Economy, expect the difficulty to increase due to the depth of analysis required.
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Microeconomics: (say that you only have to talk about one market or one firm etc and which stakeholders and not as difficult)
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Macroeconomics: You’ll analyze policies affecting the entire country.. Instead of focusing on individual markets, you’ll need to evaluate broader issues like unemployment, inflation, economic growth, and sustainability. This requires connecting policies to national-level outcomes and assessing impacts on diverse stakeholders like households, businesses, and governments.
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The Global Economy: While diagrams for trade and exchange rates exist, this chapter demands more complex analysis. Topics like tariffs, trade balances, and currency fluctuations require evaluating impacts on multiple stakeholders, both domestic and international, such as exporters, importers, governments, and consumers. Balancing short-run and long-run effects adds to the challenge.
A. Microeconomic
#Advice: Avoid complex topics such as Theory of the Firm due to difficulty of diagram and calculations
Focus on demerit goods (e.g., negative externalities such as cigarettes, sugary drinks) and government intervention and policies. Explain the market failure, evaluate policies, and discuss the pros and cons.
Key Theory | Real World Examples |
Taxes | Vaping Tax, Carbon Tax, Tobacco Tax, Red Meat Tax, Fish Tax, Fashion Tax, Aviation Fuel Tax |
Subsidies | Pre-School Subsidy, Agricultural Subsidy, Electric Car Subsidy, Vaccination Subsidy |
Price Floors | Alcohol Price Floor, Minimum Wage, Cabbage Price Floor, Milk Price Floor |
Price Ceilings | Energy Price Ceiling, Rent Price Ceiling, Petrol Price Ceiling |
B. Macroeconomic
2. Selecting ‘Your’ Topic
3.1 Selection Criteria
Too many students lower their IA score by picking a poor article. Avoid this by following these steps:
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Rely on reputable sources: Stick to BBC, CNN, or The Guardian. Avoid The Economist or Wall Street Journal, as they already include analysis.
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Prioritize recent sources: Ensure the article is from the last 12 months.
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Focus on policy-focused contents and limited economic analysis: Articles discussing policies (not just problems) allow for deeper analysis.
3.2 Common Reasons for Rejection
The first step in your IA is submitting a research proposal with a suitable article. Many students successfully meet the first two steps but fail at the third, leading to rejections.
Here are the common reasons for rejection:
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Lack of Economic Focus and Policy Discussion: Articles must center on specific economic concepts or policies and not just describe problems without proposing solutions, as this limits meaningful analysis.
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Too Broad or Inadequate Data: Avoid articles that cover overly general issues or lack sufficient quantitative data, as this makes it difficult to apply theories or discuss impacts effectively.
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Highly Analytical: Refrain from using articles that already include extensive economic analysis (e.g., The Economist), as they leave little room for your own interpretation and evaluation.
Bad Article Example
“India Faces Rising Unemployment and Economic Challenges”
3. Finding Quality Articles
4.1 Introduction
Start your introduction with a concise statement summarizing the article while linking to your WISE ChoICES concept.
For example:
In response to the economic challenges caused by the COVID-19 pandemic, the U.S. government introduced fiscal stimulus measures, including $1,200 direct payments to individuals and a $600 weekly unemployment boost. These demand-side policies were designed to stimulate aggregate demand (AD) and reduce unemployment, which peaked at 14.8% in April 2020. The article highlights how these interventions were crucial in stabilizing the economy and supporting welfare through fairer resource distribution and reduced financial hardships.
Criterion B (Terminology):
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The introduction effectively uses key economic terms like "fiscal stimulus," "aggregate demand," and "unemployment," demonstrating clear understanding of the concepts.
Criterion D (Key Concepts):
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It links the analysis to welfare (improving well-being).
4.2 Structuring Diagram & Analysis
Diagrams are crucial in IB Economics, and your IA is no exception. Here’s how to ensure they enhance your work:
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Size and Clarity: Make sure diagrams are large, clear, and well-labelled, especially axes.
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Presentation: Avoid drawing diagrams on paper and scanning them
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Connect Analysis: Link your analysis back to the diagram to show understanding.
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Incorporate Article Data: Add relevant article data to provide context
4. Analysis and Evaluation
5.1 Paraphrasing Introduction
Paraphrase the article into a concise summary, including direct quotes where relevant. Make sure to capture the main points in your own words while using direct quotes sparingly and only when they add value.
News article |
Rising gas prices and soaring mortgage and rent costs drove inflation higher than expected in March, intensifying the financial strain on Americans and potentially prolonging the Federal Reserve's tight monetary policy.
The Consumer Price Index (CPI) revealed a 3.5% annual increase for the 12 months ending in March, up from February's 3.2% rate, according to the Bureau of Labor Statistics. This marks the steepest annual inflation rise in six months.
The report underscores the challenges of reducing inflation, as persistent cost pressures continue to burden households. It also signals that the Federal Reserve may need to maintain higher interest rates for an extended period, delaying any potential easing of monetary policy. |
Quoted Improved
Initial Writing
The article discusses the United States’ “CPI revealed a 3.5% annual increase” from “February's 3.2%”, and marks the highest rise in six months. High gas prices and housing costs are driving this inflation, which is prolonging Americans' financial strain. The Federal Reserve may keep interest rates high to address inflation to reduce aggregate demand and stabilize prices.
While the summary introduces contractionary monetary policy, it does not fully define the term or explain its effects on stakeholders. Key economic terminology is included but not used consistently.
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Criterion B: Level 1 Relevant economic terminology is present (e.g., contractionary monetary policy) but lacks consistent, appropriate use.
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Criterion C: Level 1 – Contractionary monetary policy is mentioned but not fully applied to analyze its effects or implications.
Improved Writing
The article discusses the United States’ “CPI revealed a 3.5% annual increase” from “February's 3.2%”' and marks the highest rise in six months. High gas prices and housing costs drove this increase, exacerbating financial pressure on households. To combat inflation, the Federal Reserve is likely to maintain 'punishing rates higher for longer,' showcasing its use of contractionary monetary policy to reduce aggregate demand by curbing consumer and business borrowing. This policy aims to shift aggregate demand leftward, alleviating price pressures, but risks slowing economic activity further, potentially affecting consumers and businesses differently.
This version clearly defines contractionary monetary policy and explains its effect on aggregate demand and stakeholders, integrating economic terminology appropriately throughout.
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Criterion B: Meets Level 2 – Terminology (e.g., contractionary monetary policy, aggregate demand) is consistently defined and applied throughout.
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Criterion C: Meets Level 2 – Economic theory is appropriately applied, explaining the policy's effects on aggregate demand and stakeholders.
5. Common Mistakes to Avoid
6.1 Microeconomics
Title of the Article | LED Streetlights Bring Cost Savings, And Headaches, To Colorado Cities |
Source of the extract | Colorado Public Radio online site |
Date of the extract | 15 September 2016 |
Date of the commentary | 17 March 2017 |
Word count | 792 words |
Unit | Microeconomics |
WISE ChoICE Concept | Efficiency |
LED Streetlights Bring Cost Savings, And Headaches, To Colorado Cities
Denver’s LED Overhaul
Denver is in the midst of a $2 million project to update the lighting along its iconic 16th Street Mall. The 30-year-old high-pressure sodium lights, which emitted an orange hue, are being replaced by modern white LEDs. Heather Burke, spokeswoman for Denver Public Works, explained the rationale behind the change: “Technology changes, and it was time to change with it.”
This project also marks a return to a part of Denver’s lighting history. Designers have restored the "twinkle rings," decorative halos of light that had been inoperable for decades due to earlier bulb changes. Burke noted that these enhancements will create a brighter, more inviting atmosphere for pedestrians, blending aesthetic charm with improved functionality.
The project aligns with new guidelines from the American Medical Association (AMA), issued in June, which call for LEDs with a color temperature of 3000 Kelvin or below. These lights produce a warmer glow, reducing the risks associated with blue light, which can suppress melatonin production and contribute to health issues like insomnia, depression, and diabetes.
The Nationwide LED Movement
The move to LEDs is part of a broader trend across the United States, where over 10% of outdoor lighting has already transitioned to this energy-saving technology. LEDs can cut energy consumption by up to 50%, making them an appealing option for cost-conscious cities. However, the AMA has warned that poorly designed LED systems can create unintended consequences, such as glare and light pollution.
To address these issues, the AMA’s guidelines recommend that cities not only use warmer-colored LEDs but also shield lights to reduce glare and install dimmable systems to adapt lighting to specific needs. Dr. Mario Motta, a member of the AMA’s Council on Science and Public Health, emphasized that cities now have access to LED technology that balances efficiency with community well-being. "There's absolutely no reason to put in bad lighting," he said. "You can put in good lighting."
Smarter Lighting Technology
Beyond energy savings, LED technology offers cities new capabilities. Lighting designer Nancy Clanton of Boulder-based Clanton & Associates has spearheaded projects in San Diego, Anchorage, and San Jose, incorporating innovations like dimmable lighting. In San Jose, streetlights are brightened before bars close to encourage patrons to leave and dimmed afterward to conserve energy.
6. Exemplar