IB DP Economics: Why economics, and how economists think – Practice Questions

These are original questions written for Marlbridge, for revision and practice on this content. They are not reproduced past-paper questions, and they do not replicate the exam’s exact structure, question count or mark tariffs – the IB holds copyright in its own papers. Use these alongside the official past papers available through your school or the IB store.

These questions follow the IB Diploma Programme Economics guide (first assessment 2022, published February 2020), the course examined from the 2022 session onwards. They cover sub-topics 1.1 and 1.2, which are SL and HL content; the guide marks no HL-only parts, so no question is HL only. Countries and figures are fictional. The marks in the answers are a revision aid: extended answers are judged as a whole, so reasoning counts more than ticking points.

Read the study guide first, or use the revision notes. The course hub is IB DP Economics and the printable checklist tracks each statement.

Questions

1. (a) Define scarcity. [2] (b) Explain why a free good has no opportunity cost. [2]

2. State whether each statement is positive or normative. [4] (i) Unemployment in Pellora fell from 8% to 6% last year. (ii) Pellora ought to protect its farmers from foreign competition. (iii) A rise in bus fares in Dunmere reduced the number of journeys. (iv) Incomes in Orlen should be shared more equally.

3. (calculation) Four points on the PPC of Pellora, which makes tractors and cloth:

Point	Tractors	Cloth (tonnes)
A	0	90
B	15	84
C	30	48
D	45	0

(a) Calculate the opportunity cost, in tonnes of cloth, of one extra tractor when moving from A to B and from B to C. [3] (b) Explain what your results show about the shape of the PPC. [2]

4. (diagram) Orlen produces capital goods and consumer goods. Sketch and label a PPC for Orlen. Show a point of unemployment W, an unattainable point X, and growth in production possibilities, and explain one cause of that growth. [6]

5. (calculation) In Pellora, S = 45, T = 70, M = 35, I = 60, G = 65, X = 30 (billions of crowns). (a) Calculate total leakages and total injections. [2] (b) State and explain the likely effect on the flow of income. [2] (c) Name the sector that channels S towards firms’ investment. [1]

6. (a) State the meaning of ceteris paribus. [1] (b) Explain why it matters when testing the hypothesis that a fall in the price of sandals raises the quantity demanded. [3]

7. A hypothesis states that, ceteris paribus, a rise in cinema ticket prices reduces attendance. On the fictional island of Tavish the price rose from 8 to 10 crowns and weekly attendance rose from 5 000 to 5 400. A rival cinema closed in the same month. (a) State what the hypothesis predicts. [1] (b) Calculate the percentage change in attendance. [2] (c) Explain whether the evidence refutes the hypothesis. [2]

8. Explain the three basic economic questions and compare how a free market economy and a planned economy answer them, referring to the mixed economy. [8]

9. Outline the difference between Say’s law and the Keynesian view of unemployment, and explain how the two views lead to different policy attitudes. [6]

10. Evaluate the view that economic models are of little use because their assumptions are unrealistic. [10]

11. The fictional economy of Veldon can produce 120 tonnes of grain or 40 machines, with a straight-line PPC. (a) Calculate the opportunity cost of one machine. [2] (b) Calculate the maximum grain output if 25 machines are made. [2] (c) Veldon makes 25 machines and 30 tonnes of grain. Explain what this shows. [3] (d) Distinguish actual growth from growth in production possibilities, using Veldon. [3] (e) State two assumptions of the PPC model. [2]

Answers

1. (a) Wants and needs are unlimited [1] while resources are limited [1]. (b) A free good uses no scarce resources [1], so consuming it takes nothing from anyone else and nothing is given up [1]. [4] Examiner insight: “Define” asks for precise meaning, so an example alone does not replace the definition.

2. (i) Positive [1]. (ii) Normative [1]. (iii) Positive [1]. (iv) Normative [1]. [4] Examiner insight: Statement (iii) is positive even if false, because it can be tested; answers lose credit by confusing “positive” with “true”.

3. (a) A to B: 90 − 84 = 6 tonnes lost [1] over 15 tractors: 6 / 15 = 0.4 tonnes [1]. B to C: (84 − 48) / 15 = 36 / 15 = 2.4 tonnes [1]. (b) Opportunity cost rises as more tractors are made [1], so the PPC is bowed outwards because resources are not equally suited to both goods [1]. [5] Examiner insight: Show the subtraction and the division; a bare number earns less than a number with working.

4. Axes labelled capital goods and consumer goods, with a curve bowed outwards [1]. W inside the curve [1]. X outside the curve [1]. A second curve shifted outwards [1]. X is unattainable because resources are limited [1]. Cause of growth, for example better technology or more resources, which raises what can be produced [1]. [6] Examiner insight: Diagrams earn credit when axes and curves are labelled and the points are referred to in the written explanation.

5. (a) Leakages: 45 + 70 + 35 = 150 [1]. Injections: 60 + 65 + 30 = 155 [1]. (b) Injections exceed leakages by 5 [1], so the flow of income tends to rise [1]. (c) Banks and the financial sector [1]. [5] Examiner insight: Show the three terms added in each total, and say which side is larger before stating the effect.

6. (a) All other relevant factors are held constant [1]. (b) Without it, other influences such as income could change at the same time [1]. Quantity demanded might rise because incomes rose, not because the price fell [1]. Holding them constant isolates the effect of price alone [1]. [4] Examiner insight: Apply ceteris paribus to the sandals example; a general definition repeated in part (b) earns little.

7. (a) Attendance falls [1]. (b) (5 400 − 5 000) / 5 000 [1] = 8% rise [1]. (c) The result contradicts the prediction [1], but the rival closing means ceteris paribus did not hold, so the hypothesis cannot be refuted from this evidence alone [1]. [5] Examiner insight: A balanced answer uses the data and the closure; one-sided answers usually stop at “attendance rose”.

8. The questions: what and how much to produce [1], how to produce [1], for whom [1]. Free market: households and firms decide through prices [1] with private ownership [1]. Planned: a central authority decides [1] and sets output and distribution directly [1]. Mixed: markets operate with government intervention in some areas [1]. [8] Examiner insight: “Compare” needs both systems addressed against the same questions, not two separate descriptions.

9. Say’s law: supply creates its own demand [1], so general lack of demand is unlikely and the economy tends towards full employment [1]. Keynesian: total spending can fall short [1], so unemployment can persist [1]. Policy: the classical view favours little intervention [1]; the Keynesian view supports government action to raise demand [1]. [6] Examiner insight: “Outline” is brief; credit comes from clear contrasts, not extra historical detail.

10. A model simplifies reality to show key relationships [1]. Ceteris paribus lets one effect be isolated [1]. PPC and circular flow make opportunity cost and interdependence clear [1]. Assumptions such as fixed technology and two goods are unrealistic [1]. Human behaviour is complex and draws on other disciplines [1]. Predictions can be tested against evidence [1], though a social science cannot run controlled experiments [1]. Models can be revised after refutation [1]. Usefulness depends on purpose and the stated assumptions [1]. A supported conclusion, for example that models are useful as long as their limits are acknowledged [1]. [10] Examiner insight: “Evaluate” asks you to weigh strengths against limitations and reach a supported judgment.

11. (a) 120 / 40 [1] = 3 tonnes of grain [1]. (b) 25 × 3 = 75 tonnes given up [1]; 120 − 75 = 45 tonnes [1]. (c) Maximum is 45 tonnes, actual 30 [1]; 15 tonnes below the maximum, so inside the PPC [1], meaning resources are unemployed or used inefficiently [1]. (d) Actual growth is moving from inside the curve towards it, for example from 30 to 45 tonnes [1]. Growth in production possibilities is an outward shift of the curve [1], for example if new technology raises the maximum above 120 tonnes [1]. (e) Any two of: two goods only; fixed resources; fixed technology; full and efficient use on the curve [1] [1]. [12] Examiner insight: Keep each part’s working separate so earlier errors do not hide correct later steps.

Where marks are usually lost

• Defining opportunity cost as everything given up, not the next best alternative.
• Drawing a PPC without labelled axes, or marking a point without a letter.
• Showing growth as movement along the curve.
• Misplacing leakages and injections.
• Calling a statement positive because it contains a number.
• Describing ceteris paribus without applying it to the data.
• Discussing models without naming a limitation and a strength.
• Listing economists without stating their ideas.

Next steps

• Review with the revision notes and the study guide.
• Check coverage on the printable checklist and the IB DP Economics hub.
• Take the free 10-minute diagnostics.
• Book a free trial class.

Official syllabus

IB Diploma Programme Economics guide, first assessment 2022, published by the International Baccalaureate Organization (February 2020): Unit 1, sub-topics 1.1 and 1.2.