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v0.1.103
NotesEconomicsTopic 3.2
Unit 3 · Macroeconomics · Topic 3.2

IB Economics — Variations in economic activity: aggregate demand and aggregate supply

AD/AS model, business cycles, demand-pull vs cost-push changes, and macro shocks.

Exam technique guidePractice questions

Key concepts in Variations in economic activity: aggregate demand and aggregate supply

Key Idea: Topic 3.2 introduces the AD/AS model — the most important diagram in macroeconomics. It shows how the price level and real GDP are determined, and how shocks affect the economy.

✅ Core definitions

📉 Why AD slopes downward

🔄 What shifts AD?

📊 SRAS vs LRAS

SRAS: Upward-sloping. Shifts with **input costs** (wages, oil). Taxes, subsidies, supply shocks. Short-run price adjustments.

LRAS: Vertical at potential output. Shifts with **productive capacity**. Technology, labour force, capital. Long-run growth.

AD shifts affect actual output (short run). LRAS shifts affect potential output (long run). Know which diagram to draw for each policy.

⚡ Equilibrium and shocks

What you'll learn in Topic 3.2

  • 3.2.1 Aggregate demand
  • 3.2.2 Aggregate supply
  • 3.2.3 Equilibrium and macroeconomic shocks
Suggested study order: Read the notes for each sub-topic below → test yourself with flashcards → attempt practice questions → review exam technique.

Study resources — 3.2 Variations in economic activity: aggregate demand and aggregate supply

3.2.1

Aggregate demand

Notes
3.2.2

Aggregate supply

Notes
3.2.3

Equilibrium and macroeconomic shocks

Notes

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Topic 3.2 Variations in economic activity: aggregate demand and aggregate supply forms a core part of Unit 3: Macroeconomics in IB Economics. Mastering these concepts will strengthen your understanding of connected topics across the syllabus and prepare you for exam questions that require analysis, evaluation, and real-world application.

Frequently asked questions

What does Topic 3.2 Variations in economic activity: aggregate demand and aggregate supply cover in IB Business Management?
Topic 3.2 covers variations in economic activity: aggregate demand and aggregate supply as part of the IB BM syllabus. Students learn key business concepts, tools, and frameworks that are assessed in Paper 1 (case study) and Paper 2 (structured questions).
How should I revise Variations in economic activity: aggregate demand and aggregate supply for IB Business Management exams?
Start with the micro-topic notes to build understanding, then use flashcards for key terms and formulas. Practise applying concepts to case study scenarios and review how marks are allocated in IB mark schemes.
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3.1 Measuring economic activity and illustrating its variations
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