IB Diploma Programme Economics SL, Unit 2 Microeconomics (first assessment 2022). This topic covers the SL content of 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. At SL the model is read as a DIAGRAM: the values quoted below are taken from it, and solving the functions algebraically belongs to HL Paper 3.

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) is where the curves cross, $Q_d = Q_s$: on the diagram $P^* = 20$, $Q^* = 100$. At $P = 12$ the diagram shows $Q_d = 116$ against $Q_s = 68$: excess demand of 48 — the price is bid up; at $P = 25$, $Q_s = 120$ against $Q_d = 90$: excess supply of 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. Along a straight-line demand curve PED is NOT constant: it is elastic on the high-price stretch and inelastic on the low-price stretch, so the TR test gives different answers at different points. Firms use PED to set prices; governments use it to predict tax revenue.

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.

Income elasticity of demand (2.5): YED $= \tfrac{\%\Delta Q_d}{\%\Delta \text{income}}$ — positive for normal goods, negative for inferior goods, above 1 for luxuries. Firms use YED to forecast demand over the business cycle; for the economy it explains why the primary sector (low YED) shrinks relative to services (high YED) as incomes grow.

Government intervenes (2.7) when markets fail or on equity grounds. Indirect taxes 间接税: a specific tax of 6 shifts supply vertically up by 6; on the shared diagram the consumer price rises to 24, quantity falls to 92 and producers keep 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) read from the diagram; 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; elastic and inelastic stretches of a straight-line demand curve (2.5).
• PES +0.8 with determinants; commodity volatility from double inelasticity (2.6); YED classifications and the sector shift (2.5).
• 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: SL sits Paper 1 (essays) and Paper 2 (data response), not Paper 3 — so elasticity from percentage changes is examinable, while solving linear functions and computing incidence areas is HL. Paper 1 essays want a diagram, definitions and evaluation of government failure against market failure; Paper 2 wants the case data read into the diagram. The nine key concepts (intervention, efficiency, equity) frame the policy questions. All worked numbers are original on the shared model.