Nepal is a landlocked country in South Asia with an estimated population of 29 million. Agriculture remains central to the economy, accounting for about 27% of gross domestic product (GDP) and employing a sizeable proportion of the workforce. However, the country also relies heavily on tourism and remittances from migrant workers abroad, which make up more than 25% of Nepal’s total GDP. Nepal has been seeking to diversify its economy through foreign direct investment (FDI) in energy, infrastructure, and services.
In 2020, Nepal’s GDP stood at US$29.3 billion. By 2021, it had increased to US$30.5 billion, partly due to post-pandemic economic recovery and continued growth in the tourism sector. Official unemployment figures in Nepal are relatively low, but underemployment remains a major issue, especially in rural areas. The country’s Gini coefficient is estimated at 0.32, indicating moderate income inequality, though rural–urban disparities still persist. Nepal’s tax system includes both direct and indirect taxes; the highest marginal rate for personal income tax is approximately 30%.
The tourism sector is vital. Trekking permits, especially for the Annapurna, Everest, and Langtang regions, represent a key source of government revenue. Due to recent changes in permit fees and fluctuations in tourism numbers, local businesses have experienced varying levels of income from trekking-related services.
Table 1: Labour market data in Nepal (2021)
Population (millions)
Labour force (millions)
Employed (millions)
Unemployed (millions)
29
16.0
15.6
0.4
Table 2: Trekking permit data for Nepal
Year
Average permit price (USD)
Number of permits sold
2021
50
150 000
2022
60
120 000
(a)
Using the information in Table 1, calculate the official unemployment rate in Nepal for 2021.
[2]
(b)
Using the data provided in the text, calculate Nepal’s real GDP growth rate from 2020 to 2021. Show your working.
[2]
(c)
Using information from Table 2, calculate the price elasticity of demand for trekking permits in Nepal when the average permit price increases from US$50 to US$60.
[2]
(d)
Using information from Table 2, calculate the change in total revenue from trekking permit sales between 2021 and 2022.
[2]
HLPaper 3
Albania is a country in Southeastern Europe with an estimated population of about 2.8 million in 2022. The Albanian economy has been transitioning from a centrally planned system to a market-based system and has experienced positive real GDP growth in recent years. Tourism is a significant contributor to Albania’s GDP, and the government has intensified efforts to promote the country’s attractions along its Adriatic and Ionian coasts.
In 2022, Albania’s unemployment rate was around 12%, partly due to structural challenges in the economy. The government operates a progressive personal income tax system, with rates ranging from 0% up to 23%. Corporate income tax is set at 15%. Value-added tax (VAT) on most goods and services stands at 20%.
Albania’s trade balance remains negative, as the country’s main exports (textiles, footwear, and mineral fuels) have not kept pace with imports (machinery, food, and manufactured goods). The government has embarked on several infrastructural projects to attract foreign investment and reduce transport costs, including a newly announced US$200 million investment in highways. Economists estimate the marginal propensity to consume (MPC) in Albania to be about 0.8.
Table 1: Selected Macroeconomic Indicators for Albania
SL & HLPaper 1
(a)
With the aid of a demand diagram, explain what is meant by price elasticity of demand (PED), and its theoretical range of values.
[10]
(b)
Using real-world examples, discuss how differences in price elasticity of demand for goods and services can affect the impacts of indirect taxes on consumers, producers and government tax revenue.
[15]
HLPaper 3
Tunisia is a country in North Africa, with a population of approximately 12 million. Its economy relies heavily on tourism, agriculture (particularly olive oil and dates), and manufactured exports to the European Union (EU). In 2022, the tourism sector contributed about 8% of Tunisia’s GDP and employed more than Tunisian workers. However, rising input costs and changes in global travel patterns have made tourism revenue more volatile.
HLPaper 3
Solana is an emerging agricultural economy in Southeast Asia with a population of approximately 35 million. While the country has successfully industrialized its urban centers, the rural regions remain heavily dependent on rice cultivation, which provides employment for nearly 40% of the labor force. Rice is not only a dietary staple but also a culturally significant commodity. However, Solana's domestic rice farmers face significant pressure from large-scale exporters in neighboring countries, where production costs are lower due to favorable climates and advanced irrigation technologies.
In recent years, the Solanian government has prioritised food security and the protection of rural livelihoods. To achieve this, they have moved away from free trade in the rice sector. In , following a period of high import volumes that depressed local prices, the Ministry of Agriculture introduced a strict import quota on rice. This policy aimed to stabilize domestic prices and encourage local production, though it sparked debates regarding its impact on urban poverty and international trade relations.
IB Economics Topic 2. Microeconomics Questionbank
Practice IB Economics Topic 2. Microeconomics with authentic exam-style questions for both SL and HL students. This question bank focuses on the exact syllabus content for 2. Microeconomics and mirrors Paper 1, 2, 3 style where relevant.
Get instant solutions, detailed explanations, and build confidence with questions aligned to IB examiner expectations.
Using the text/data provided and your knowledge of economics, recommend a policy which could be implemented by the government of Nepal in order to promote sustainable economic growth.
The Albanian government’s US$200 million highway project is expected to raise national income through the Keynesian multiplier, assuming the marginal propensity to consume (MPC) is 0.8. Calculate the total increase in national income that could result from this project.
Using the data in Table 2, calculate the price elasticity of demand (PED) for Albania’s tour packages when the price increases from EUR 400 to EUR 450.
Using the data in Table 1, calculate the absolute change in the unemployment rate between 2021 and 2022.
[2]
(e)
Define the term “progressive tax.”
[2]
(f)
Using an AD/AS diagram, explain how an increase in government spending on infrastructure could affect real GDP in Albania.
[4]
(g)
Using information from Table 1, calculate the approximate percentage change in Albania's Gini coefficient between 2021 and 2022. Show your working.
[2]
(h)
Using information from the text, explain how a persistent trade deficit might impact Albania’s economic growth.
[4]
(i)
Using the text/data provided and your knowledge of economics, recommend a policy which the government of Albania could implement in order to reduce unemployment.
[10]
400000
In recent years, Tunisia’s trade openness has facilitated increased exports of olive oil, which account for a significant share of its agricultural sector. The government has also introduced a new tourism tax of 8 Tunisian dinars (TND) per arrival, aiming to raise tax revenue to address budget deficits. Meanwhile, the Ministry of Finance has implemented expansionary fiscal policy by injecting TND 200 million into infrastructure development. The marginal propensity to consume (MPC) in Tunisia is estimated at 0.75.
Table 1: Tourism data for Tunisia
Year
Average Price of a Tourist Package (TND per package)
Number of Tourist Arrivals
2022
400
850000
2023
450
Table 2: Selected macroeconomic data for Tunisia
Year
Real GDP (billion TND)
Nominal GDP (billion TND)
Unemployment Rate (%)
2019
105
120
15.0
2020
100
Table 3: Distribution of income in Tunisia (estimated figures)
Indicator
Value
Gini coefficient
0.38
Income share of top 10%
30%
Income share of bottom 40%
22%
(a)
Using the information from Table 1, calculate the price elasticity of demand (PED) for Tunisia’s tourist packages between 2022 and 2023.
The government of Tunisia increases infrastructure spending by TND 200 million. If the marginal propensity to consume (MPC) is 0.75, calculate the potential overall increase in real GDP (Keynesian multiplier effect).
[2]
(c)
Using the data in Table 2, calculate Tunisia’s real GDP growth rate between 2021 and 2022.
[2]
(d)
Assuming ceteris paribus, calculate the change in the equilibrium quantity of olive oil traded if a rightward shift of demand increases quantity from Q0=500 million litres to Q1 million litres.
(e)
Define the term “progressive tax.”
[2]
(f)
Using an AD/AS diagram, explain how the introduction of the tourism tax might affect Tunisia’s short-run aggregate supply (SRAS), assuming tourism businesses face higher costs per visitor.
[4]
(g)
Using the information from Table 3, calculate the income ratio between the top 10% and the bottom 40% of income earners in Tunisia.
[2]
(h)
Using the information from Table 3, explain how income inequality could pose a challenge to Tunisia’s economic growth.
[4]
(i)
Using the information provided, recommend a policy that could be introduced by the government of Tunisia to reduce unemployment.
[10]
2023
The following tables provide data on Solana’s macroeconomic indicators and the domestic rice market.
Table 1: Selected Economic Data for Solana (2022–2023)
Indicator
2022
2023
Population (millions)
34.2
35.0
Nominal GDP ($ billions)
240
252
Rice Sector Value ($ billions)
28.8
30.5
Rural Unemployment Rate (%)
6.2
5.8
Food Security Index Score (0-100)
54
58
Table 2: Quarterly Domestic Rice Market Data in Solana
Price per Tonne ($)
Domestic Quantity Demanded (thousand tonnes)
Domestic Quantity Supplied (thousand tonnes)
120
1 000
200
150
850
350
180
700
500
210
550
650
Table 3: Solana Rice Trade Policy Data (2023)
Indicator
Value
World Price (Pw)
120 per tonne
Import Quota Limit
500 thousand tonnes
Resulting Domestic Price
150 per tonne
Note: Assume Solana is a small open economy and a price-taker in the global rice market.
Use the diagram below for the relevant part.
(a)
Using the data in Table 2 and Table 3, calculate the percentage change in the domestic price of rice in Solana resulting from the implementation of the import quota.
Using the information in Table 2, calculate the price elasticity of supply (PES) for Solana’s domestic rice when the price increases from 120 to 150 per tonne.
[2]
(d)
Calculate the change in total quarterly consumer expenditure on rice in Solana after the quota is implemented. Show your working.
[2]
(e)
Define the term "quota."
[2]
(f)
Using the diagram provided, explain the effect of an import quota on domestic production and the volume of imports in Solana.
[4]
(g)
Using the data in Table 2 and Table 3, calculate the import penetration ratio (imports as a percentage of total domestic consumption) before and after the quota was introduced. Show your working.
[2]
(h)
Explain two reasons why the government of Solana might choose to protect its domestic rice industry from foreign competition.
[4]
(i)
Using the information provided, evaluate the impact of using an import quota to protect the rice industry in Solana. Recommend whether the government should maintain the quota or transition to a different policy.
