IB Micro diagrams Flashcards
(14 cards)
Price floor and price ceiling
Diagrams show a minimum (floor) above equilibrium or maximum (ceiling) below it, creating shortages or surpluses.
Price elasticity of supply
Calculated as % change in quantity supplied divided by % change in price; shows responsiveness of supply to price changes.
Income elasticity of demand
Measures how demand changes with income changes; calculated as % change in quantity demanded divided by % change in income.
Externalities
Diagrams show social cost or benefit lines diverging from private ones, illustrating under- or over-production in free markets.
price elasticity of demand
Calculated as % change in quantity demanded divided by % change in price; shows sensitivity of consumers to price changes.
Perfectly competitive firms
Diagrams show perfectly elastic demand (horizontal line) and firms producing where price = marginal cost for maximum efficiency.
Shifts in supply and demand
Diagrams shift curves left or right when non-price factors change; new equilibrium price and quantity are determined.
Subsidies and indirect taxes
Diagrams show subsidy shifting supply right (lower prices) and taxes shifting supply left (higher prices); affecting equilibrium.
Monopolies
Diagrams show downward-sloping demand with marginal revenue below it; monopolists produce where MR = MC, charge higher prices.
Producer and consumer surplus
Diagrams show consumer surplus above price, producer surplus below; together they measure total welfare in a market.
Monopoly calculations
Calculate total revenue (TR), marginal revenue (MR), and marginal cost (MC); profit maximized where MR = MC; price found from demand curve.
Monopolistic competition
Short-run diagrams show supernormal profits; long-run diagrams show normal profits as new firms enter and reduce demand.
circular flow of income
Diagrams show households, firms, and government flows of income, expenditure, and output; leaks (savings, taxes) and injections (investment, exports).
