IB Diploma Programme Economics HL, Unit 1 Introduction to economics (first assessment 2022). This topic covers syllabus sections 1.1 and 1.2 in full: what economics is (scarcity, choice, the economic agents, positive and normative statements) and how economists approach the world (the scientific method, economic models, the ceteris paribus assumption, and the nine key concepts that frame the whole course). Worked numbers are original and re-derived below.

Must-know for Unit 1:

Economics 经济学 studies the choices made by economic agents — CONSUMERS, PRODUCERS and the GOVERNMENT (joined later by the rest of the world) — under scarcity 稀缺性: unlimited wants against finite resources. Because resources are scarce, every choice has an opportunity cost 机会成本 — the next-best alternative forgone — and the basic economic questions are what to produce, how to produce it, and for whom. A student's hour spent revising economics cannot also be spent at work; a government budget spent on hospitals cannot also build schools. Economic resources 资源 (the factors of production) are land, labour, capital and enterprise, and each earns a reward — rent, wages, interest and profit.

The distinction that runs through every IB data response: a POSITIVE statement is testable against evidence ("the inflation rate fell to 3%"), while a NORMATIVE statement carries a value judgement ("inflation should be lower"). Economists can disagree about values while agreeing about facts, and exam answers must keep the two apart.

Worked example. A government has 10 billion to spend and can build one hospital (benefit valued at 10 bn) or two schools (benefit valued at 7 bn). Choosing the hospital has an opportunity cost of the two schools' 7 bn of benefit; the choice is rational if the hospital's benefit exceeds that of the best alternative forgone.

Economics follows the scientific method 科学方法: observe, form a hypothesis, build a model 模型 — a simplified representation of reality (demand curves, production possibility frontiers, circular flow) — make predictions, and test them against data, revising the model when it fails. Models deliberately simplify: their value is explanation and prediction, not photographic realism. The ceteris paribus 其他条件不变 assumption ("all other things equal") lets the economist isolate one relationship at a time — how quantity demanded responds to price, holding income and tastes fixed — the same discipline used in every later unit.

IB economics frames the whole course through nine key concepts 核心概念: SCARCITY and CHOICE (the underlying problem), EFFICIENCY and EQUITY (how well and how fairly resources are used), ECONOMIC WELL-BEING and SUSTAINABILITY (outcomes now and for the future), CHANGE, INTERDEPENDENCE (agents and nations linked through trade and markets) and INTERVENTION (when and how governments act). Every real-world issue the syllabus examines — and every HL commentary — is analysed through these lenses.

Worked example. A tuition subsidy is a model question: the hypothesis is that lower fees raise enrolment; the model (demand) predicts enrolment rises when price falls, ceteris paribus; the test compares enrolment before and after, or across regions with and without the subsidy; a mismatch (say, enrolment flat because incomes also fell) sends the economist back to re-specify the model — the method in one loop.

• Economics defined through scarcity and choice; the three (later four) economic agents (1.1).
• Opportunity cost applied to consumers, producers and government (1.1).
• Resources/factors of production and their rewards (1.1).
• Positive versus normative statements, with the disagreement insight (1.1).
• The scientific method loop: hypothesis → model → prediction → data test → revision (1.2).
• Models as deliberate simplifications; ceteris paribus and what it isolates (1.2).
• The nine key concepts and how they frame every unit; Paper 1 essays reward concept-linked analysis — name the concept, then the theory (1.2).

IB Diploma Programme Economics HL, Unit 2 Microeconomics (first assessment 2022). This topic covers syllabus sections 2.1–2.7 in full: demand, supply, competitive market equilibrium, the critique of maximizing behaviour, elasticity of demand and supply, and the role of government in microeconomics. One shared market model runs through the worked examples: demand $Q_d = 140 - 2P$ and supply $Q_s = 20 + 4P$, equilibrium $P = 20$, $Q = 100$ — the same numbers used across the Edexcel drives, so every calculation cross-checks.

Must-know for this topic:

Demand 需求 is the quantity consumers are willing AND able to buy at each price over a period (2.1). The demand curve slopes downward — the LAW of demand — explained by DIMINISHING MARGINAL UTILITY: each extra unit gives less additional satisfaction, so a lower price is needed to justify it. A change in the good's own price MOVES ALONG the curve; shifts follow income (normal/inferior), the prices of substitutes and complements, tastes, expectations and the number of consumers. CONSUMER choice theory (2.4's critique): the rational, utility-maximising consumer is a simplification — bounded rationality, herd behaviour, framing and imperfect information bend real choices, and BEHAVIOURAL economics supplies the evidence.

Supply 供给 is the quantity producers are willing AND able to sell at each price (2.2); higher prices make production profitable, so the curve slopes upward. Own-price changes move ALONG; shifts follow costs of production, technology, indirect taxes and subsidies, and the number of sellers. The profit-maximising producer assumption (2.4 again) is also a simplification — satisficing, corporate social responsibility and stakeholder aims bend it.

Equilibrium (2.3) sets $Q_d = Q_s$: $140 - 2P = 20 + 4P$ gives $P^* = 20$, $Q^* = 100$. At $P = 12$: excess demand $= 116 - 68 = 48$ — the price is bid up; at $P = 25$: excess supply $= 120 - 90 = 30$ — the price is pushed down. The market's self-correction is the "invisible hand" allocating resources by price signals, rationing and incentives.

Welfare: consumer surplus 消费者剩余 is the area below the demand curve above price; producer surplus 生产者剩余 the area above supply below price. At equilibrium here: $CS = \tfrac12 \times 100 \times (70 - 20) = 2500$ and $PS = \tfrac12 \times 100 \times 20 = 1000$. Allocative efficiency 配置效率 holds where $P = MC$ — the competitive equilibrium in the absence of externalities — and the SUM of the surpluses (social surplus) is then maximised. Any price away from equilibrium creates deadweight loss.

Price elasticity of demand 需求价格弹性 (2.5): $PED = \tfrac{\%\Delta Q_d}{\%\Delta P}$. On the shared model at $P = 20$: price rising to 22 moves $Q_d$ from 100 to 96, so $PED = \tfrac{-4\%}{+10\%} = -0.4$ — inelastic. The TOTAL REVENUE test: TR $= P \times Q$ rises from 2000 to 2112 when price rises, confirming inelastic demand; TR peaks (unitary PED) at $P = 35$, $Q = 70$, TR $= 2450$. PED depends on substitutes, necessity, the share of income and time. HL adds: linear demand is elastic at high prices and inelastic at low prices; marginal revenue $= 70 - Q$ here, and $MR = 0$ exactly where TR peaks.

Price elasticity of supply 供给价格弹性 (2.6): $PES = \tfrac{\%\Delta Q_s}{\%\Delta P}$; price 20 → 24 moves $Q_s$ 100 → 116, so PES $= +0.8$. PES depends on spare capacity, stocks, factor mobility and time. IB applications: primary commodities tend to have INELASTIC supply (growing periods, perishability) and often inelastic demand (necessities) — so small demand shifts cause LARGE price swings, the volatility that commodity exporters suffer.

Other elasticities (HL within 2.5): income elasticity YED $= \tfrac{\%\Delta Q_d}{\%\Delta \text{income}}$ (positive for normal, negative for inferior; $> 1$ luxury) and cross elasticity XED between goods (positive substitutes, negative complements) — firms use YED to forecast over the business cycle and XED to price against rivals.

Government intervenes (2.7) when markets fail or on equity grounds. Indirect taxes 间接税: a specific tax of 6 on the shared model shifts supply to $Q_s = 4P - 4$; equilibrium moves to $P_c = 24$, $Q = 92$ with producers keeping 18 — consumers pay 4 more, producers receive 2 less, revenue $6 \times 92 = 552$ per day, and incidence follows relative elasticity (demand at $-0.4$ is the inelastic side, so consumers bear more). Subsidies 补贴 (6 per unit) reverse the shift: $P_c = 16$, $Q = 108$, cost $6 \times 108 = 648$. Price controls: a maximum price 最高价格 at 16 creates excess demand $108 - 84 = 24$ (rationing, queues, black markets); a minimum price 最低价格 at 24 creates excess supply $116 - 92 = 24$ (the government may have to buy the surplus). Quantity controls (quotas) restrict supply directly. Every intervention answer weighs the correction against unintended consequences — the Unit-1 key concepts (intervention, efficiency, equity) are the framing.

• Demand definition, the law from diminishing marginal utility, movements vs shifts (2.1).
• Supply definition, movements vs shifts (2.2).
• Equilibrium (20, 100); excess demand 48 at 12; excess supply 30 at 25; the invisible hand (2.3).
• The critique of maximizing behaviour: bounded rationality, herding, framing for consumers; satisficing and CSR for producers (2.4).
• PED with the −0.4 calculation and the TR test (2000 → 2112 → 2450); determinants; linear-demand elasticity ranges and MR (HL) (2.5).
• PES +0.8 with determinants; commodity volatility from double inelasticity (2.6); YED and XED classifications (HL).
• Consumer/producer surplus (2500/1000); allocative efficiency at P = MC; social surplus (2.3).
• Government (2.7): tax of 6 (price 24, quantity 92, revenue 552, incidence 4:2); subsidy of 6 (price 16, quantity 108, cost 648); maximum price 16 (shortage 24); minimum price 24 (surplus 24).

Boundary notes: HL Paper 3 quantifies exactly this arithmetic — elasticity from data, incidence, surplus areas. Paper 1's 25-mark essays want a diagram, definitions and evaluation of government failure against market failure. The nine key concepts (intervention, efficiency, equity) frame the policy questions. All worked numbers are original on the shared model.

IB Diploma Programme Economics HL, Unit 2 Microeconomics (first assessment 2022). This topic covers syllabus sections 2.8 (market failure — externalities and common pool or common access resources), 2.9 (public goods) and 2.12 (the market's inability to achieve equity) in full. The externality model reuses the shared curves in inverse form — demand (marginal private benefit) $P = 70 - Q/2$, supply (marginal private cost) $P = Q/4 - 5$, market equilibrium $(100, 20)$ — with an external cost or benefit of 6 per unit, so every welfare area cross-checks against the earlier drives.

Must-know for this topic:

An externality 外部性 is a cost or benefit falling on a THIRD PARTY not involved in the transaction (2.8). Negative production externalities — pollution, congestion — put the marginal social cost 边际社会成本 MSC above MPC; positive consumption externalities — vaccination, education — put the marginal social benefit 边际社会效益 MSB above MPB. The market trades at $(100, 20)$ where MPB $=$ MPC; with an external cost of 6 per unit, MSC $=$ MPC $+ 6$ crosses MSB at $(92, 24)$ — the market OVER-produces by 8 units and the deadweight welfare loss is $\tfrac12 \times 8 \times 6 = 24$ per day. With an external benefit of 6 on consumption, the social optimum moves to $(108, 16)$ — the market UNDER-consumes by 8, again sacrificing 24 of welfare. HL diagrams label MPB/MSB and MPC/MSC and shade the welfare-loss triangle between the curves over the gap.

Policy responses follow the diagnosis: a Pigouvian TAX equal to the marginal external cost (6 here) shifts MPC to the social optimum; a SUBSIDY equal to the marginal external benefit does the reverse; regulation caps the quantity; tradable permits fix the total and let the market find the price. Common pool or common access resources 公共资源 (also 2.8) — fisheries, groundwater, the atmosphere — are RIVAL but NON-EXCLUDABLE: each user imposes costs on the others, so without property rights or quotas the resource is over-used (the tragedy of the commons), and sustainability — a Unit-1 key concept — frames the long-run evaluation.

A public good 公共物品 (2.9) is NON-RIVAL (one person's consumption does not reduce another's) and NON-EXCLUDABLE (no one can be stopped from using it): street lighting, national defence, flood control. Non-excludability creates the free-rider problem 搭便车问题 — everyone can benefit without paying, so no private firm can collect revenue, so the market UNDER-provides or does not provide at all. The state provides public goods from taxation, valuing them at society's willingness to pay. The contrast pair: common pool resources are non-excludable but RIVAL (each fish caught is gone); public goods are non-excludable AND non-rival — the two exam cases travel together.

Markets reward scarcity of resources, not need (2.12): the price mechanism answers "for whom?" by willingness and ability to pay, so market outcomes can be efficient yet grossly UNEQUAL — the equity 公平 half of the efficiency-equity key-concept pair. IB measures: the LORENZ CURVE plots cumulative income against cumulative population (from the poorest); the GINI COEFFICIENT — area between the equality line and the Lorenz curve over the whole triangle — runs from 0 (perfect equality) to 1 (one person takes all). Original example: quintile shares $5, 10, 15, 20, 50$ percent give a Lorenz curve through $(20,5), (40,15), (60,30), (80,50)$; the area under it is $3000$ of the $10000$ square, so Gini $= 1 - 2 \times 0.30 = 0.40$. Poverty 贫困 may be ABSOLUTE (basic needs unmet) or RELATIVE (deprivation against the social norm). Responses: progressive taxation, transfer payments, and access to education and health — each weighing equity gains against incentive and efficiency costs, the trade-off every Paper-1 essay must evaluate.

• Externality definition; MSC/MSB with the $(100,20) \to (92,24)$ negative-production and $(108,16)$ positive-consumption optima; welfare loss 24 in each direction (2.8).
• Pigouvian tax and subsidy at the marginal external cost/benefit; regulation; tradable permits (2.8 policy, HL diagrams).
• Common pool or common access resources: rival + non-excludable, tragedy of the commons, sustainability (2.8).
• Public goods: non-rival + non-excludable; the free-rider problem and non-provision; state provision (2.9).
• The market's "for whom" answer and its equity failure; Lorenz curve and Gini with the 0.40 calculation; absolute vs relative poverty; the three redistribution instruments and their trade-offs (2.12).

Boundary notes: HL Paper 1 25-mark essays on market failure want the labelled diagram (MPB/MSB/MPC/MSC, both optima, the shaded triangle), a policy with its mechanism, and evaluation of government failure against the market failure it corrects. The key concepts sustainability, equity, efficiency and intervention frame this whole topic. All worked numbers are original on the shared model.

IB Diploma Programme Economics HL, Unit 2 Microeconomics (first assessment 2022). This topic covers syllabus sections 2.10 (market failure — asymmetric information) and 2.11 (market failure — market power) in full. The monopoly model reuses the shared curves — demand (average revenue) $P = 70 - Q/2$, marginal revenue $P = 70 - Q$, marginal cost $P = 10 + Q/2$ — with the profit-maximising output 40 at price 50, so every number cross-checks against the earlier drives.

Must-know for this topic:

Asymmetric information 信息不对称 (2.10) means one party to a transaction knows more than the other — the used-car seller knows the car, the borrower knows the repayment odds, the insured knows the risk. Two failure mechanisms: adverse selection 逆向选择 BEFORE the contract (the informed side self-selects badly — only lemmings get offered, only high-risks buy insurance at a pooled price), and moral hazard 道德风险 AFTER the contract (the protected side takes more risk — insured drivers drive less carefully, bailed banks lend recklessly). The market fails because mutually beneficial trades vanish: quality sellers cannot credibly signal, so prices average down and good products exit — the market for lemons. Responses: signalling (warranties, brands, credentials), screening (excesses, deductibles, credit checks), disclosure regulation, and state provision of information. Information gaps join the Unit-1 critique of rational choice: framed, partially-informed agents are the norm the policy must handle.

Market power 市场力量 (2.11) is the ability of a firm to influence price — culminating in MONOPOLY: one seller, a unique product, high barriers to entry 进入壁垒 (legal, patents, branding, control of resources, economies of scale) keeping entrants out, so the monopolist is a PRICE-MAKER. The monopoly model: profit maximisation where MR $=$ MC — $70 - Q = 10 + Q/2$ gives $60 = 1.5Q$, so $Q_m = 40$; the price read from the demand curve is $P_m = 50$; with ATC $= 30$ at that output, supernormal profit $= (50 - 30) \times 40 = 800$ per day, sustained by the barriers.

The welfare case: the competitive benchmark ($P = MC$) sits at $(60, 40)$ — so the monopolist produces 20 FEWER units at a price 10 HIGHER. The deadweight loss 无谓损失 is the triangle between demand and MC over the lost output: $\tfrac12 \times 20 \times 20 = 200$ per day, plus a transfer from consumers (higher price) to the firm. Monopoly may also bring X-inefficiency (costs drifting above the achievable floor for lack of pressure) — though economies of scale and dynamic innovation are the standard defences, and Schumpeter's case is that big profits fund the next technology.

A natural monopoly 自然垄断 has falling average costs over the whole market demand (one network is cheapest — rails, water mains): fragmenting it would RAISE costs, so the response is regulation — price capping at $P = MC$ or average-cost pricing — or state ownership, trading profit against coverage.

Oligopoly and collusion (also 2.11's scope in IB's treatment of market power): a few interdependent firms behind barriers may collude towards the monopoly outcome (cartels) or compete (price wars); regulation polices cartels. The concentration ratio 集中度 measures structure: with market shares 40, 25, 15, 10 and 10 percent, the four-firm ratio is $40 + 25 + 15 + 10 = 90\%$ — a concentrated market, though the ratio misses foreign competition and contestability. Policy responses to market power: competition law (merger control, abuse-of-dominance cases), regulation of natural monopolies, and deregulation where contestability disciplines incumbents.

• Asymmetric information definition; adverse selection vs moral hazard (before vs after the contract); the lemons market where good products exit; signalling, screening, disclosure (2.10).
• Market power and monopoly assumptions; the five barriers to entry; price-maker behaviour (2.11).
• The model: MR = MC at $Q = 40$, price 50, profit $(50-30) \times 40 = 800$; competitive benchmark $(60, 40)$; deadweight loss 200 (2.11).
• X-inefficiency; the economies-of-scale and dynamic-efficiency defences; the Schumpeter case (2.11).
• Natural monopoly: falling ATC over the market; regulate price at MC or average cost rather than fragment (2.11); oligopoly and collusion — interdependence, cartels, price wars; CR4 = 90% with its limits; competition law, regulation, deregulation.

IB Diploma Programme Economics HL, Unit 3 Macroeconomics (first assessment 2022). This topic covers syllabus sections 3.1–3.7 in full: measuring economic activity and illustrating its variations, aggregate demand and aggregate supply, macroeconomic objectives, the economics of inequality and poverty, monetary policy, fiscal policy and supply-side policies. One shared macro model runs through the worked examples — AD $P = 90 - Y/2$ against SRAS $P = 20 + Y/2$, equilibrium $(70, 55)$ — with the multiplier and CPI arithmetic from the earlier drives, so every number cross-checks.

Must-know for this topic:

Gross domestic product 国内生产总值 (3.1) is the value of all final goods and services produced within a country in a period — measurable by the output, income or expenditure approach (they agree in principle). NOMINAL GDP uses current prices; REAL GDP removes price changes with the GDP deflator: nominal index 112 with deflator 108 gives real $= \tfrac{112}{108} \times 100 = 103.7$; per head divides by population. GDP PER CAPITA is a headline welfare proxy with limits (non-market activity, distribution, environmental damage, price differences), which is why the IB pairs it with alternative indicators — the Human Development Index, health and education measures, and (HL) the adjusted net savings measure of sustainable welfare. The business cycle 经济周期 (also 3.1) illustrates short-run fluctuations around the trend: recovery → boom → recession → trough; each stage moves growth, inflation and unemployment together.

Aggregate demand 总需求 (3.2) $= C + I + G + (X - M)$; the components follow disposable income and confidence (consumption), the interest rate and expectations (investment), the budget (government spending) and incomes, exchange rates and world demand (net exports). The AD curve slopes down with the price level (wealth, interest-rate and trade effects); a price change MOVES along, a component change SHIFTS. The HL calculation: with $C = 60$, $I = 20$, $G = 20$ and $X - M = 0$, AD $= 100$.

Aggregate supply 总供给: short-run AS rises with the price level; the LONG run divides the schools — the KEYNESIAN range is flat with spare capacity then curves up to full employment; the MONETARIST (classical) AS is vertical at the natural level of output, so demand-side policy moves only prices. On the shared model AD meets SRAS at $(70, 55)$; a demand injection shifting AD up 15 gives the new equilibrium $(85, 62.5)$ — more output AND a higher price level; against a vertical LRAS the same shift only raises prices. Shifters of LRAS: technology, productivity, education, labour-force growth, institutional quality.

HL adds the multiplier 乘数: $k = \tfrac{1}{1 - MPC} = \tfrac{1}{MPW}$ where $MPW = MPS + MPT + MPM$. With MPC $= 0.5$, $k = 2$, so a £30bn injection raises income by £60bn (the SAM anchor from the earlier drive); with $MPW = 0.5$ the same $k = 2$; with MPC $= 0.8$, $k = 5$ and 20 becomes 100. The crowding-out debate — government spending displacing private investment — is the standard evaluation.

The objectives (3.3): LOW unemployment 失业 (measured by the ILO definition; types cyclical, structural, seasonal, frictional, voluntary — the HL addition being the natural rate and its policy neutrality); LOW AND STABLE inflation 通货膨胀 (the CPI basket: weights 50/30/20 over relatives 110/100/120 gives CPI $= 109$, inflation 9%; demand-pull vs cost-push); EQUITY IN THE DISTRIBUTION OF INCOME (3.4 pairs here — the Lorenz curve and Gini with the quintile 5/10/15/20/50 calculation of 0.40, absolute vs relative poverty, and the equity-efficiency trade-off); and (HL extension) HEALTHY GROWTH and BALANCE OF PAYMENTS STABILITY, with the Phillips-curve short-run trade-off between unemployment and inflation as the classic conflict. The losses from deflation and demand-deficient unemployment quantify the cost of missing the objectives; every objective answer evaluates the trade-offs among them.

Monetary policy 货币政策 (3.5) is the central bank's management of interest rates and the money supply: higher rates raise borrowing costs, cut consumption and investment, cool demand and inflation (and appreciate the currency). QE adds money when rates are near the zero bound; the equity of distributional effects is the standard critique. A rate cut works through the same mechanism in reverse — the SAM India anchor (6.5% → 6.25%) shows a 25-point cut supporting demand.

Fiscal policy 财政政策 (3.6) uses government spending and taxation: expansionary shifts AD right through the multiplier ($k = 2$ turns £30bn into £60bn); contractionary does the reverse. The BUDGET balance divides into the structural deficit (persists at full employment) and the cyclical deficit (varies with the cycle); automatic stabilisers (taxes falling, benefits rising in recessions) dampen fluctuations without discretion, and the balanced-budget multiplier is HL. Debt and deficits raise crowding-out and intergenerational-equity concerns.

Supply-side policies 供给侧政策 (3.7) shift LRAS right: education and training, infrastructure, deregulation and privatisation, lower taxes on work and investment, labour-market reform. On the shared model, LRAS from 85 to 105 along AD cuts the price level from 47.5 to 37.5 while output RISES — growth with disinflation, the contrast the IB wants drawn against demand management.

• GDP by the three approaches; nominal vs real (112/108 → 103.7); per capita; welfare limits and the alternative indicators; the business cycle's four stages (3.1).
• AD = C + I + G + (X − M) with each component's shifter; movements vs shifts (3.2).
• SRAS; the Keynesian vs monetarist long run; LRAS shifters (3.2).
• The multiplier k = 1/(1−MPC) = 1/MPW; £30bn → £60bn at MPC 0.5; crowding out (3.2 HL).
• The objectives: ILO unemployment with its five types and the natural rate; CPI 109 → 9% with both causes; the Phillips trade-off (3.3).
• Inequality and poverty: Lorenz/Gini 0.40; absolute vs relative; equity-efficiency (3.4).
• Monetary policy: the interest-rate mechanism, QE, distributional critique; the India 6.5 → 6.25 anchor (3.5).
• Fiscal policy: the multiplier route; structural vs cyclical deficits; automatic stabilisers; debt concerns (3.6).
• Supply-side: the six instruments; LRAS 85 → 105 cutting prices from 47.5 to 37.5 with rising output (3.7).

Boundary notes: HL Paper 3 quantifies the multiplier, deflator and AD/AS arithmetic above; Paper 1's 25-mark macro essays want a labelled AD/AS diagram, the transmission mechanism named link by link, and evaluation of trade-offs and lags — the key concepts change, interdependence and intervention frame it. All worked numbers are original or SAM-adapted as labelled.

IB Diploma Programme Economics HL, Unit 4 The global economy (first assessment 2022). This topic covers syllabus sections 4.1–4.10 in full: the benefits of international trade, types of trade protection, the arguments for and against trade control, economic integration, exchange rates, the balance of payments, sustainable development, measuring development, barriers to growth and development, and development strategies. The trade model reuses the shared curves ($Q_d = 140 - 2P$, $Q_s = 20 + 4P$) at a world price of 12, and the exchange model sits at 5 domestic per foreign currency — every number cross-checks against the earlier drives.

Must-know for this topic:

The benefits of trade (4.1): SPECIALISATION according to comparative advantage 比较优势 — lowest opportunity cost, not most output (Country A makes 4 wheat or 2 cloth per hour, Country B 1 or 1: A has absolute advantage in both, but one cloth costs A two wheat and B only one, so A specialises in wheat, B in cloth, and any trade ratio between 1 and 2 wheat per cloth lets both consume beyond their frontiers) — greater choice, lower prices, economies of scale and the gains from variety. Types of trade protection 贸易保护 (4.2): tariffs 关税 (import taxes), quotas 配额 (quantity limits), SUBSIDIES to domestic producers, and administrative/technical barriers. The tariff on the shared model: at the world price 12 imports are $116 - 68 = 48$; a tariff of 4 raises the domestic price to 16, imports fall to $108 - 84 = 24$, the government collects $4 \times 24 = 96$ and the deadweight loss is $32 + 16 = 48$.

The arguments (4.3): FOR protection — infant industries, protection of domestic employment, anti-dumping, national security, revenue for developing states, diversification; AGAINST — higher consumer prices, retaliation and trade wars, inefficiency behind the wall, rent-seeking. The IB evaluation always weighs short-run protection against long-run comparative advantage. Economic integration 经济一体化 (4.4) deepens in stages — free-trade area, customs union, common market, economic and monetary union — trading trade creation against trade diversion; the WTO polices the multilateral rules.

The exchange rate 汇率 (4.5) is the price of one currency in another, set by demand and supply: interest rates, speculation, and the imports/exports of goods and services. The model: demand meets supply at 5 domestic per foreign currency; import-demand growth shifts demand right and the rate moves to 6.5 — a depreciation 贬值 (import prices rise, export prices abroad fall; the current account improves only if the Marshall–Lerner condition holds — export plus import demand elasticities exceed one — and the HL J-curve records the short-run worsening before volumes adjust). Fixed systems revalue or devalue by policy; floating systems appreciate or depreciate by the market.

The balance of payments 国际收支 (4.6) records all transactions with the rest of the world: the CURRENT ACCOUNT (goods and services, primary and secondary income) and the CAPITAL AND FINANCIAL ACCOUNTS; the accounts balance overall, so a current-account deficit is matched by net financial inflows. HL adds the terms of trade 贸易条件 — the ratio of export to import price indices: $ToT = \tfrac{100}{100}$ at base; with exports at 128.9 and imports at 117.1 (the Tanzania data), $ToT = \tfrac{128.9}{117.1} \times 100 = 110.1$, a 10.1% improvement — long-run deteriorating terms of trade for primary-product exporters is a standard development barrier.

Sustainable development 可持续发展 (4.7) meets present needs without compromising future generations — the intergenerational equity that GDP ignores and the key concept sustainability frames. MEASURING DEVELOPMENT (4.8): GDP per head (Purchasing Power Parity adjusted), the Human Development Index (education, health and income in one geometric mean), and complements such as health, education and gender measures; each indicator hides distribution. BARRIERS (4.9): the savings gap (the Harrod–Domar condition), primary-product dependency, debt, capital flight, corruption and poor governance, geographical isolation, and the HL additions of the poverty trap (low savings → low investment → low growth) and the basic needs conflict. STRATEGIES (4.10): trade liberalisation and export promotion, FDI and multinational investment, aid and debt relief, microfinance, human-capital development and infrastructure — each evaluated for dependency, sustainability and equity; the IB pairs every strategy with the barriers it targets.

• Comparative advantage with the 4/2 vs 1/1 table and the trade ratio between 1 and 2 wheat per cloth; absolute vs comparative (4.1).
• Tariffs, quotas, subsidies, administrative barriers; the tariff arithmetic (48 → 24, 96, 48) (4.2).
• The protection arguments both ways; integration's four stages with trade creation vs diversion; the WTO (4.3–4.4).
• Exchange-rate determination at 5; depreciation to 6.5; Marshall–Lerner and the J-curve; revaluation vs appreciation (4.5).
• Balance of payments structure; current vs capital/financial accounts; the terms of trade with the Tanzania 110.1 calculation and the primary-product deterioration (4.6).
• Sustainable development and intergenerational equity (4.7).
• Measuring development: PPP GDP per head, HDI's three components, the complements (4.8).
• Barriers: savings gap (Harrod–Domar), primary-product dependency, debt, capital flight, governance, geography, the poverty trap (4.9).
• Strategies: liberalisation, FDI, aid, debt relief, microfinance, human capital, infrastructure — each with the barriers it targets (4.10).

Boundary notes: HL Paper 3 quantifies the tariff, exchange-rate and terms of trade arithmetic above; Paper 1's 25-mark essays want the labelled diagram, the mechanism, and evaluation against the key concepts (interdependence, sustainability, equity, intervention). All worked numbers are original on the shared models.