IB Economics Diagrams Explained

Diagrams are essential in IB Economics. A correct diagram can quickly demonstrate your understanding and help secure marks.

However, many students lose marks because diagrams are incomplete or incorrectly labelled.

Common IB Economics diagrams

• Supply and demand: Used to explain price changes and market equilibrium
• Market failure diagrams: Used to explain negative and positive externalities
• Tax and subsidy diagrams: Used to show government intervention effects
• AD-AS model: Used to explain macroeconomic changes in output and price level
• Exchange rate diagrams: Used to show currency appreciation and depreciation

How to draw diagrams correctly

• Label axes clearly: Price on the vertical axis, Quantity on the horizontal axis
• Label all curves: S, D, S₁, D₁ (use subscripts for shifts)
• Show equilibrium: Mark the equilibrium price and quantity
• Show shifts clearly: Use arrows to indicate direction of movement
• Add a title: Brief caption explaining what the diagram shows

Practise diagram-based questions and get feedback on your explanations — our tool checks whether your analysis matches IB mark schemes.

Externality diagrams

For negative externalities, you need to show the divergence between the private and social costs. The welfare loss triangle is often required for full marks.

For positive externalities, show the gap between the private and social benefits. Explain why the market underproduces and how government intervention can correct this.

Tips for exam diagrams

• Practice drawing each diagram from memory at least 5 times
• Always refer to your diagram in your written answer ("As shown in the diagram...")
• Use a ruler for straight lines if possible — neatness helps examiners read your work

For more exam strategies, see our guides on How to Write a 10-Mark Answer and IB Economics Paper 2 Strategy.