16 October – IB Economics
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Review
Paper 1 exam questions and command terms
Small mistake on p. 47
Examine XED and YED
Play “The Snickers Effect” to review market demand
and elasticities
- Portfolio check on 24 October (Unit 1 reading notes,
class notes and dictionary)
- Practice exam question on 24 October
What does the value of XED mean?
Practice Exam Question – 24 October
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Paper 1 question
Both questions are on PED (Syllabus #18-19)
Command term for (a) – Explain
Command term for (b) – Examine
Have 1 hour (normally 45 minutes)
Please bring lined paper
May prepare a note card
DEED – Paper 1, Part A Questions
• D - define all the key terms in the question
• E - explain the key concepts (this is the main part
of a 10-mark question)
• E – give examples
• D - always include diagrams
Based on:
http://www.ibsurvival.com/topic/19067answering-p1-question-10-15-marks/
DEADER for Evaluation-style Questions
(from Mr. Barratt)
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D - Define
E - Examples (diagrams and explanations)
A - Advantages
D - Disadvantages
E - Evaluate (e.g. time, stakeholders, pros/cons,
gender)
• R - Recommendation (clear decision)
(often for 15-mark questions and part D of data
response)
Cross Price Elasticity of Demand (XED)
Syllabus Items 20-21
• Show that substitute goods have a positive value of
XED and complementary goods have a negative
value of XED.
• Explain that the (absolute) value of XED depends on
the closeness of the relationship between two
goods.
• Examine the implications of XED for businesses if
prices of substitutes or complements change.
Cross-price elasticities of demand
• Air-conditioning units and kilowatts of electricity = -0.34
• Coke and Pepsi = +0.63
• High-fuel-consuming sport-utility vehicles (SUVs) and
gasoline = -0.28
• McDonald’s burgers and Burger King burgers = +0.82
• Butter and margarine = +1.54
How would a 5% increase in the price of Pepsi affect the
quantity of Coke demanded?
http://faculty.pepperdine.edu/jburke2/ba210/PowerP1/Set6
Answers.pdf
XED Graphs (on IWB)
How can a number line show the closeness
of the relationship between two goods?
Cross-Price Elasticity of Demand
Worksheet
YED - Syllabus Item 22
• Outline the concept of income elasticity of demand,
understanding that it involves responsiveness of
demand (and hence a shifting demand curve) to a
change in income.
Income elasticity of demand (YED)
Measures how much the demand for a product
changes in response to a consumer’s income
YED = ?
What are examples of each of these?
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Normal Goods – Positive elasticity
Necessity Goods – Low elasticity
Superior Goods – High elasticity
Inferior Goods – Negative elasticity
The Snickers Effect
Syllabus
http://ibeconomics-isd.weebly.com/