Complete list of real world examples covering the whole unit 1 and 2 of the IB HL Economics course. Excellent to use in Paper 1, for the 15-mark question, that requires to include examples from the real world. The document is divided in 2 main units: Introduction to Economics and Microeconomics. It...
REAL WORLD EXAMPLES
IB ECONOMICS, 2022
Unit 1,2,3 and 4
Topic Real World Example
Unit 1: Introduction to Economics
Economic Free Market: No perfectly free market economies. The freest are: US, Hong Kong,
Systems Singapore, New Zealand, Australia, Switzerland, the United Kingdom, Canada, and
Ireland.
Planned Economy: Communist and socialist systems are the most noteworthy examples
in which governments control facets of economic production. Central planning is often
associated with Marxist-Leninist theory and with the former Soviet Union, China,
Vietnam, and Cuba.
Mixed Economy: Countries that have a mixed economy include the United States, the
United Kingdom, Sweden, Iceland, France, and Germany.
Unit 2: Microeconomics
Non-Price Income:
Determinants of As global incomes rise, people are shifting from a carbohydrate-based diet to a protein
Demand and fat rich one, thus shifting demand from some products (cereals) to others (meat,
sweets).
Tastes and Preferences:
- Cristiano Ronaldo's removal of two Coca-Cola bottles at a news conference (2020)
coincided with a $4 billion drop in the market value of the American drink giant. He
influenced the preferences of consumers, affecting demand.
- Converse demand goes up and down: in 2001, Converse filed for bankruptcy - a few
years after that it became popular again
- Avocados: in 1982 prices were so low that US producers were considering selling it as
dog food - then scientists stated that fat in avocado is ‘good’ fat - increase in demand for
avocados - increase in price
Non-Price Changes in costs of factors of production (FOPs):
Determinants of As Russian gas prices soar (2022), some companies have to back down on production to
Supply maintain low costs of production and profit
Excess Demand - Overall excess demand of face masks and sanitation products during Covid-19 (2020)
in a market - Increased demand for exotic food (due to growing middle class) → imports required to
fulfil excess demand
Excess Supply - Agricultural goods in EU are highly protected by governments, creating an excess
in a market supply, which the government has to buy
- Surplus of electrical machinery in China = exports
Behavioural Default Choices:
Economics: - Going to other cities, and sticking with a popular chain, that you know quite well, e.g.
Choice McDonald’s, Starbucks.
Architecture - Organ donation: "opt in" (only those who have given explicit consent are donors) and
"opt out" (anyone who has not refused consent to donate is a donor). Opt in: US, Brazil,
Israel, UK (Northern Ireland only). Opt out: UK (Scotland, England and Wales only,
since 2020), Netherlands (since 2020), Argentina (since 2005), Spain (since 1979)
Mandated Choice:
- In Illinois (US): to get a driver’s licence, people must answer a question on whether
they would like to become an organ donor or not
Nudge Theory:
- In the UK, households where given two bins for their garbage. The recycling one was
1/3 larger than the regular waste one - hoping that by limiting the space in the general
, waste one, people would be more inclined to use the recycling one
- In Philippines, government provided smokers with a savings account for six months.
At the end of this period they had to take a urine test for nicotine levels. If they passed,
they got all their money. If they failed, it was given to charity.
PED - Apple products are highly inelastic
- If Sky/DAZN increases the membership cost, many football fans will be willing to pay
the extra price
- Elastic demand: if Kit Kats’ price increases, people will switch to alternative types of
chocolate bars
YED - Rate of growth in demand for agricultural commodities such as wheat and rice will
decrease as, with rising consumer incomes and growing middle class, people are
expected to switch to food with high protein and fat content, rather than carbohydrates
→ change in demand given a change in income
- Inferior goods: If your income increases, you stop buying Tesco value beans and
switch to Heinz, which are better quality
PES - Inelastic supply: It would take considerable time to increase the supply of nuclear
power (to replace polluting energy sources) if this was in high demand because you
would need skilled labour, a lot of investment, and it would take a long time to build
Government 1. European Union’s Common Agricultural Policy (CAP)
Intervention: - Price floor on agriculture products which guarantees farmers an income
Price Floors - The EU will purchase the surplus
- Introduced in 1957 under the Treaty of Rome
- Aim: create stability in the agriculture markets where farmers are subject to
fluctuations in supply (and thus income) due to droughts and other weather conditions
- It includes goods such as wheat, rice, beef, butter, and other dairy products
2. Scottish alcohol price floor
- In 2018, Scotland set a price floor on alcoholic beverages
- The minimum price was set at 50 pence (70 cents) per unit of alcohol, targeting cheap,
but strong alcoholic beverages
- Aim: reduce the consumption of cheap but highly toxic alcoholic beverages and
thereby limit the side effects (healthcare, policing, public disorder, and any criminal
damage that is committed)
3. Indian imports
- In 2016, India set a price floor on steel imports
- Why? To deter foreign competitors such as China from dumping cheap steel into the
market
- With the country facing competition from Chinese cheap steel, its domestic steel
manufacturers were under significant pressure → customers were opting for the cheaper
Chinese option, which threatened the existence of Indian manufacturers
- The government, therefore, stepped in to artificially inflate the price of Chinese steel
and essentially make it uncompetitive
- This protected its domestic steel industry as it saw demand return as Indian steel
became comparatively cheap
Government 1. New York City Rent Control
Intervention: - The city’s regulation started to take off shortly after the Second World War.
Price Ceilings - The purpose of rent ceiling is helping the poor to be able to afford houses
- Rent ceiling price for New York City was around $1000 in 2008 which was 60%
below the market price
- Substantial declines in the availability of rental housing
- White tenants have disproportionately benefited relative to black or Hispanic tenants,
and landlords give preference to older and childless households.
- Rent control reduces investment in a property’s quality and causes a city’s housing
stock to decay.
2. Uber in India
- In 2016, the Indian government implemented a price cap on Uber
- The Indian government set a price ceiling as an attempt to give taxis back an
advantage
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller miaricci. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $4.28. You're not tied to anything after your purchase.
