IB Economics SL common mistakes
IB Economics SL · Understand the traps and how to avoid them.
Writing that a price ceiling set below equilibrium 'reduces demand and increases supply', instead of stating that it creates excess demand because quantity demanded exceeds quantity supplied at the controlled price.
Candidates carry over the loose everyday language of 'demand falls' from the demand-and-supply model and forget that in the diagram the curves do not move; only the quantities change along them. The confusion is reinforced by textbooks that talk about 'reducing consumption', so students substitute the wrong word.
What to do instead
Use a strict vocabulary drill: every time you draw a price control, label the four quantities (Qd, Qs, Qe, controlled Q) and write the sentence 'At Pc, Qd > Qs, so there is excess demand of (Qd - Qs)'. Practise writing 'quantity demanded changes' for movements along a curve and reserve 'demand changes' for shifts. Mark your own answer against this rule before moving on.
Calculating price elasticity of demand and then interpreting a value of 1.8 as 'the good is elastic by 1.8 units' or as a percentage rather than recognising it as a ratio meaning a 1% price rise cuts quantity demanded by 1.8%.
The formula produces a bare number, and candidates memorise 'greater than 1 means elastic' without connecting the coefficient back to the definition. They also mix up the sign and the meaning of the absolute value, and forget that the coefficient is unit-free.
What to do instead
After every calculation, write one full sentence translating the number into a percentage response: 'A 10% rise in price reduces quantity demanded by 18%.' Practise the midpoint formula on a two-point example until the arithmetic is automatic, and state explicitly why the negative sign is dropped. Do three translation sentences per practice calculation, not just the number.
Drawing an externality diagram and shading the welfare loss as the triangle between the two curves from the origin to the market quantity, rather than the triangle bounded by the marginal social cost and marginal social benefit curves between the market quantity and the socially optimal quantity.
Candidates learn 'deadweight loss is a triangle' as a shape to copy, not as the area where marginal social benefit exceeds marginal social cost. They also forget to label the socially optimal quantity Q* and to mark it where MSC = MSB, so the triangle has no correct boundaries.
What to do instead
Before shading, always mark Q* where the two relevant curves cross and mark Qm where the market clears. Then shade only the area between the curves from Qm to Q*. Write a one-line justification next to the diagram naming the units (each unit between Q* and Qm has MSB > MSC or MSC > MSB). Redo the same diagram for a negative production externality, a positive consumption externality and a positive production externality until the pattern is automatic.
Treating a movement along the aggregate demand curve and a shift of it as interchangeable, so that a fall in the price level is described as 'increasing aggregate demand' and a rise in government spending is described as 'moving along the AD curve'.
The micro habit of 'price up, demand down' is transferred to the macro model, where the price level is on the vertical axis and a change in it produces a movement along AD through wealth, interest-rate and net-export effects, while a change in any component of expenditure shifts the curve. Candidates rarely learn the three reasons the AD curve slopes downward.
What to do instead
Make a two-column table headed 'Movement along AD' and 'Shift of AD' and sort ten scenarios into it, including a fall in the price level, a rise in consumer confidence, a cut in interest rates and a depreciation. For each movement, name the transmission channel (real wealth, interest rate, net exports). Recite the three channels aloud before every macro essay.
Using expansionary fiscal policy to close a recessionary gap without stating the effect on the government budget balance and the national debt, and without acknowledging the time lags and crowding-out risk.
Candidates learn the policy instrument as a one-way lever: recession means spend more. The evaluation marks in IB Economics reward precisely the trade-offs, and students have not been trained to write the second sentence that names the cost of the policy.
What to do instead
Adopt a fixed three-sentence template for every policy recommendation: (1) the mechanism, (2) the intended effect on the objective, (3) the cost or limitation with a named concept (budget deficit, debt servicing, crowding out, implementation lag, political constraint). Practise it for fiscal, monetary and supply-side policy so the evaluation sentence becomes reflexive.
Describing a depreciation of the currency as automatically improving the trade balance, without applying the Marshall-Lerner condition or noting the J-curve lag.
The simple story 'weaker currency makes exports cheaper' is intuitive and easy to remember, so candidates stop there. They do not connect the price elasticity of exports and imports to the outcome, and they ignore that contracts and consumption patterns adjust slowly.
What to do instead
Write the conditional explicitly every time: 'A depreciation improves the trade balance only if the sum of the price elasticities of export and import demand exceeds one (Marshall-Lerner), and even then the improvement may be delayed by the J-curve.' Add a short-run versus long-run sentence and a case where the condition fails (inelastic exports such as primary commodities).
Confusing the current account and the financial account of the balance of payments, and asserting that a current account deficit is necessarily a sign of economic weakness.
Candidates memorise the names of the accounts but not their contents, and they import a political talking point ('deficits are bad') into an analytical question. They also forget that the balance of payments must balance overall through the financial account.
What to do instead
Build a one-page map of the accounts with three example entries each (goods, services, primary income, secondary income for the current account; direct investment, portfolio investment, reserve assets for the financial account). Then write two short evaluations of a current account deficit, one negative (reliance on foreign borrowing) and one neutral or positive (importing capital goods, attracting investment).
Answering a development question with 'developing countries need more aid and education' without defining the indicator used, distinguishing economic growth from economic development, or naming a specific policy mechanism.
Development questions invite generic moral statements, and candidates reproduce them because they have not learned the specific indicators (GDP per capita, HDI, Gini coefficient, multidimensional poverty index) or the difference between growth and development. Vague answers cannot earn application or evaluation marks.
What to do instead
For every development answer, open by naming the indicator and its limitation, then use at least one contrast (e.g. GDP per capita versus HDI), then give a named policy with a mechanism (e.g. conditional cash transfers raising school enrolment, which raises human capital). Keep a glossary of five indicators with one strength and one weakness each and use it in practice answers.
Describing a public good as any good provided by the government, and failing to link non-rivalry and non-excludability to the free-rider problem and the resulting under-provision.
The everyday meaning of 'public' (state-provided) collides with the technical meaning (non-rival and non-excludable). Candidates therefore classify healthcare or education as public goods and lose the analytical chain that earns the marks.
What to do instead
Test every example against both criteria in writing: 'Is one person's consumption reducing another's? Can non-payers be excluded?' Classify into pure public, quasi-public, common access and private, and for each public good write the chain: non-excludable → free rider → no private provision → government provision funded by taxation. Use a table of eight examples and justify each classification in one line.
Drawing a production possibility curve and labelling a point inside the curve as 'unattainable' or a point outside as 'inefficient', and failing to explain that movement along the curve illustrates opportunity cost while a shift outward requires an increase in quantity or quality of factors of production.
The PPC is introduced early and treated as a simple picture, so the labels are memorised without meaning. Candidates then lose marks in later questions that use the PPC to illustrate growth, unemployment or trade, because the underlying logic was never secured.
What to do instead
Annotate one PPC with all four cases: inside (inefficiency or unemployment), on the curve (full employment, and the slope as opportunity cost), outside (unattainable with current resources), and a shifted curve (growth from more or better factors, or new technology). Then write one sentence for each case explaining why. Revisit the same diagram when studying growth and trade so the concept is reused rather than relearned.