Microeconomics - real world examples for IB students
Real world examples of economic principles are an essential tool for IB Economics students. However, finding good examples can often be challenging. In this series our IB Economics author, George Graves, shares some examples from the current Covid-19 pandemic for you to further investigate and use in your study of IB Economics. This article focuses on microeconomics, but be sure to see our other articles on macroeconomics, international trade, and development for further exploration.
These articles are particularly relevant for IB students who will be taking their final exams in May 2022, where paper 1 requires the use of real world examples as it can provide a rich source of such examples for answering questiosns. These examples are also useful for those sitting exams in 2021.
Microeconomics and Covid-19
Example 1 - Increased demand for particular goods
Increased demand for masks and hand sanitiser are but two potential examples, there are undoubtedly a variety of other products which you can use your own experience to identify. This example can be used to illustrate how a change in the conditions of demand can affect a market and to describe how the market responds by providing price signals and incentives from producers to increase quantities supplied.
Example 2 - Rising prices
In New York, many shops faced with shortages of the aforementioned items increased prices causing the authorities to impose price caps (ceilings) on these products.
Example 3 - Research & Development
The rush to find a suitable vaccine and the funding necessary for this is a good example of the importance of Research and Development (R&D) and the fact that only large scale pharmaceutical companies are able to engage in the necessary R&D.
For Moderna, the vaccine that it developed was the only success that it had and justifies its ability to patent the product in order to secure further profit. If the pharmaceutical industry was perfectly competitive it is very unlikely that any vaccines would have been developed.
Example 4 - Economics & the Environment
The imposition of lockdowns in many countries greatly reduced traffic and industrial production which had a negative effect on the economy but it also had a striking effect on the quality of the atmosphere in many cities such as New Delhi and Bangkok which were temporarily cleared of smog. This also highlights the contribution of carbon and other emissions to the market failure of pollution.
Example 5 - Demand
Other important micro examples are the increased incidence of people working from home and the corresponding increase in demand for online platforms such as Zoom. This in turn is likely to lead to decreased demand for office space and transportation in the future as working from home will become more widespread.
There are other knock on effects of this such as increased popularity of online education and teaching which also reduce travelling requirements. Long run effects could include a reduced demand for cars and especially those that use fossil fuels, a reduced demand for fossil fuels as well as a greater sensitivity of governments to problems of environmental degradation and sustainability.
Additional Reading
To delve deeper into the topics identified above and to discover additional areas for thought read the following articles:
The Covid-19 changes that could lasst long-term by Lewis Dartnell, June 30, 2020, BBC
Impact of the coronavirus pandemic on the global economy - Statistics & Facts by Statista Research Department, November 20, 2020, Statista
Further investigation
Hopefully, the above will have sparked your curiosity and inspired your own ideas about how the Covid-19 pandemic impacts microeconomics. Bear in mind, all of the above also show how different parts of the micro economy are interrelated with a change in one market having an impact on the markets for substitutes and complements.
As you move forward with your IB Economics studies, consider keeping track of the real world economics examples that you find. Start a spreadsheet that categorises the examples allowing you to filter for the economic concept you are investigating and link to articles that delve further into the idea. If spreadsheets aren't your thing, consider keeping a notebook divided into different economic concepts and writing your ideas, examples, and sources there for reference during your revision process. Whatever method you choose, be sure to stay organised and revisit the examples you collect throughout your study process. Doing so will make your IB exam preparation process easier and will help you earn the marks you deserve in your IB Economics exams.
Finally, don't forget to bookmark our IB Economics subject page where you'll find more articles to help you with your exam revision. You can also take a look at our IB Economics study guides which contain comprehensive review of the Economics syllabus, lots of practice questions, and numerous examples of economic principles to make sure you are exam ready.
