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v0.1.634
NotesEconomicsTopic 2.8
Unit 2 · Microeconomics · Topic 2.8

IB Economics — Market failure: externalities and common pool resources

External costs/benefits, socially optimal outcomes, and policy responses.

Exam technique guidePractice questions

Key concepts in Market failure: externalities and common pool resources

Key Idea: Topic 2.8 explains why markets fail when there are external costs or benefits that are not reflected in the price. It covers negative externalities, positive externalities, and common pool resources.

✅ Core definitions

📉 Negative externalities

📈 Positive externalities

🌊 Common pool resources

Know the diagram labels: MPC, MSC, MPB, MSB. The gap between private and social curves = the externality. The welfare loss is ALWAYS a triangle.

What you'll learn in Topic 2.8

  • 2.8.1 Negative externalities
  • 2.8.2 Positive externalities
  • 2.8.3 Common pool resources
Suggested study order: Read the notes for each sub-topic below → test yourself with flashcards → attempt practice questions → review exam technique.

Study resources — 2.8 Market failure: externalities and common pool resources

2.8.1

Negative externalities

Notes
2.8.2

Positive externalities

Notes
2.8.3

Common pool resources

Notes

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Topic 2.8 Market failure: externalities and common pool resources forms a core part of Unit 2: Microeconomics 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 2.8 Market failure: externalities and common pool resources cover in IB Economics?
Topic 2.8 covers market failure: externalities and common pool resources as part of the IB Economics syllabus. Students learn key economic concepts, models, and real-world applications that are assessed in Paper 1, Paper 2, and Paper 3 exams.
How should I revise Market failure: externalities and common pool resources for IB Economics exams?
Start by reading the micro-topic notes to understand each concept, then use flashcards to memorise key terms and diagrams. Practise drawing and explaining economic models, and work through past paper questions to apply your knowledge under exam conditions.
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