Economics · Unit 2: Microeconomics

EC2.3 — Competitive market equilibrium

Economics · SL / HL · syllabus-mapped notes

1. EC2.3.1

   Demand and supply curves forming a market equilibrium

   Draw demand and supply together to find the equilibrium price and quantity where the two curves intersect.

2. EC2.3.2

   Shifting the demand and supply curves to produce a new market equilibrium, with reference to excess demand (shortage) and excess supply (surplus)

   Explain how shortages and surpluses push price back to equilibrium, and show what happens to price and quantity when either curve shifts.

3. EC2.3.3

   Functions of the price mechanism

   Explain how prices allocate resources by acting as signals and incentives, and how price rationing decides who gets the good.

4. EC2.3.4

   Consumer and producer surplus

   Explain consumer and producer surplus as areas on a diagram, and at HL calculate each of them.

5. EC2.3.5

   Social/community surplus

   Explain social surplus as the sum of consumer and producer surplus, and why it is greatest at equilibrium.

6. EC2.3.6

   Allocative efficiency at the competitive market equilibrium:

   Explain why competitive equilibrium is allocatively efficient, social surplus is maximised there, and MB equals MC.