The nine key concepts: IB Economics notes and IA guide

What the key concepts are and why they matter

The 2022 IB Economics course is built around nine key concepts: scarcity, choice, efficiency, equity, economic well-being, sustainability, change, interdependence and intervention. They are not extra content to memorise; they are lenses that recur in every unit, so the same idea, say sustainability, shows up in micro (common access resources), macro (long-run growth) and the global economy (development).

You use them in two graded places. In the internal assessment, each of your three commentaries must be built around a different key concept. In the exams, especially in evaluation, framing your answer through the relevant concept adds depth and shows the examiner you understand why a topic matters. Learn one concrete example for each so you can deploy them quickly.

Scarcity and choice

Scarcity is the mismatch between unlimited wants and finite resources; it is the reason economics exists. Concrete example: in 2018 Cape Town approached Day Zero, the day the city would run out of piped water, forcing residents to ration to 50 litres a day and the city to reallocate a genuinely scarce resource.

Choice follows directly from scarcity: because we cannot have everything, every decision means selecting one option and forgoing others, at a real opportunity cost. Concrete example: a government with a fixed budget that funds a new defence programme is choosing not to fund the schools or clinics that the same money could have built.

Efficiency and equity

Efficiency is about getting the most from scarce resources, wasting as little as possible. Allocative efficiency means producing the combination of goods society values most; productive efficiency means producing at lowest cost. Concrete example: a competitive market for wheat, where price equals marginal cost, tends toward allocative efficiency because output expands to where the value to buyers meets the cost of the last unit.

Equity is about fairness in how income, wealth and opportunity are distributed, which is not the same as equality. Concrete example: Brazil's Bolsa Familia cash-transfer programme pays low-income families conditional on keeping children in school, aiming to improve equity even though it does not make everyone equal. Markets can be efficient yet produce outcomes many regard as inequitable, which is a central tension in the course.

Economic well-being and sustainability

Economic well-being is a broad measure of people's living standards and quality of life, going beyond just income. Concrete example: the OECD Better Life Index and Bhutan's Gross National Happiness both try to capture health, work-life balance and the environment, recognising that GDP per capita alone can overstate how well people actually live.

Sustainability asks whether current activity can continue without degrading the resources future generations depend on. Concrete example: Norway channels much of its oil revenue into a sovereign wealth fund so that consumption today does not simply exhaust a finite resource, converting depleting oil into a lasting financial asset. Overfishing and carbon emissions are the classic cases where present gains threaten future capacity.

Change and interdependence

Change is the idea that economies are dynamic: prices, technology, policies and institutions are always in motion, and economists study how systems respond. Concrete example: automation and artificial intelligence are shifting the demand for labour, raising demand for some skills while making other jobs obsolete, which reshapes wages and training over time.

Interdependence is the idea that economic actors and economies are linked, so decisions in one place ripple to others. Concrete example: Bangladesh's garment exports depend on consumer demand in the European Union and the United States, so a downturn in those markets quickly affects factory employment in Dhaka. The 2008 financial crisis spread across borders for the same reason.

Intervention

Intervention is government action to change the outcomes a free market would produce, usually to correct market failure or improve equity. Concrete example: the United Kingdom's Soft Drinks Industry Levy, introduced in 2018, taxes high-sugar drinks to reduce consumption of a demerit good and to nudge manufacturers to reformulate, which many did.

Intervention runs through the whole course because most policy questions are really about how much government should do and how well it works. Carbon pricing in the European Union, minimum wage laws and subsidies for renewable energy are all intervention. Strong answers weigh the intended benefit against the risk of government failure, unintended consequences or high administrative cost.

Using a key concept in a Paper 1 essay

In Paper 1, part (b) is a 15-mark evaluation and this is where a key concept earns you marks. Choose the concept that fits the command term and the policy, then use it as the backbone of your judgement rather than a label bolted on at the end. For a question on indirect taxes, efficiency (correcting an externality) and equity (who bears the burden) give you two clear evaluative angles.

Name the concept explicitly and let it structure the trade-off. For example: this subsidy may raise short-run economic well-being by lowering prices, but it threatens sustainability if it encourages overuse of a finite resource. That single sentence shows analysis, evaluation and a key concept working together, which is exactly what the mark scheme rewards.

Key concepts in the internal assessment

The internal assessment is a portfolio of three commentaries, each 800 words, so 2,400 words in total, written on articles published within one year of when you write. The rules are strict: the three commentaries must cover three different units of the syllabus and each must be based on a different key concept, and you must state which concept you are using.

Choose the article first, then pick the key concept that the article genuinely illustrates, not the one that sounds impressive. A commentary on a minimum wage article naturally fits equity or intervention; one on a carbon tax fits sustainability or efficiency. Referring back to your chosen concept in the evaluation, not just naming it in the introduction, is what turns a descriptive commentary into an analytical one.

How this is examined

• In the internal assessment each of the three commentaries must use a different key concept and cover a different unit: plan the set together so you do not accidentally repeat a concept or a unit.
• In Paper 1 part (b) and Paper 2 evaluation, name the relevant key concept and use it to frame a trade-off; examiners reward explicit conceptual framing far more than a concept mentioned in passing.
• Memorise one concrete real-world example per concept (Cape Town water for scarcity, UK sugar levy for intervention, Norway's fund for sustainability) so you can anchor answers fast.
• Do not force a concept that does not fit the article or question. Equity and efficiency often pull in opposite directions, which is exactly the tension good evaluation should highlight.

Key terms

scarcityopportunity costallocative efficiencymarket failureexternalityeconomic growth