IB Economics Paper 3: The HL Policy Paper

What Paper 3 asks of you

Paper 3 is the policy paper, sat by Higher Level students only. Like the other papers, it is based on all units of the syllabus.

• 1 hour 45 minutes, 60 marks. A calculator is allowed.
• Two questions, both compulsory. There is no choice: you answer all the questions.
• Each question is worth 30 marks and is built on its own set of data and text about a real economy.
• Weighting: 30% of the final grade at Higher Level.

Each question works through a series of short parts, usually worth 1 to 4 marks each: defining terms, reading and calculating from the data, drawing or explaining a diagram, and explaining what the figures show. It ends with a 10-mark part asking you to recommend a policy for the economy in the data and justify it.

So the paper is not two halves, one of maths and one of policy. Calculation and explanation run through both questions, and the two recommendation parts together are worth 20 of the 60 marks. In the first sessions in 2022 the IB set an adjusted, shorter version of this paper; the papers from 2024 onwards follow the structure above.

The data and calculation parts

The cover of the paper sets two rules: give each numerical answer exactly, or rounded to two decimal places, unless the question asks for something else; and show all of your working.

Habits that protect the marks (our advice):

• Write the formula before substituting, so the method is visible even if the arithmetic slips.
• Show every step. The paper requires it.
• Follow the rounding rule above unless the question sets another.
• State units and signs. A negative YED means an inferior good; dropping the sign discards the interpretation.
• Interpret the result. A calculation is often followed by a part asking what it means. "PES is 0.6, so supply is price-inelastic: producers cannot respond quickly, so a demand rise mostly raises price rather than quantity."

The calculation areas to have fluent:

Practise these until they are automatic. Fluency in the routine calculations buys you thinking time for the recommendation.

The 10-mark recommendation

Each question ends by asking you to recommend a policy that the government in the data could use to address a stated problem, using the data and your knowledge of economics. You are not asked to explain a policy in general; you are asked to choose one for this economy and defend the choice.

A strong recommendation does five things (our framework, not an IB rule):

1. Diagnose the problem precisely. Name the market failure, the macroeconomic condition, or the constraint, using the data. "Unemployment is high" is not a diagnosis. "Unemployment is structural, since the text describes obsolete skills in a declining sector" is.

The diagnosis governs everything after it: a policy that treats cyclical unemployment will not fix structural unemployment.

2. Set out the realistic options. Two or three genuine candidates, each stated as a policy, not a wish: "a targeted retraining subsidy", not "improve education".

3. Analyse the leading option with a full chain and a diagram. Cause → mechanism → consequence, exactly as on the other papers. Show the intended effect on the diagram and label the change.

4. Weigh the trade-offs. Cost and how it is financed; time lags; who bears the burden; unintended consequences; whether the government has the information and capacity to implement it. Use the figures in the data where they help.

5. Recommend, with the condition attached. State which policy you choose, why it beats the alternatives for this economy, and under what circumstances your answer would change:

A targeted retraining subsidy is preferable here because the unemployment described is structural, so demand-side stimulus would raise inflation without re-employing these workers. If the data showed a demand shortfall instead, the ranking would reverse.

What a strong answer shows

Common ways students lose marks

• Giving a bare number with no working and no interpretation.
• Ignoring the rounding rule on the paper.
• Recommending a policy without first diagnosing the problem.
• Writing a general essay on a policy instead of using the data provided.
• Ignoring cost, financing and time lags entirely.
• Discussing several policies evenly and never recommending one. The question asks for a recommendation.
• Spending so long on the first question that the second, worth the same 30 marks, is rushed.

How to prepare

This is our suggested approach. With 105 minutes for two questions of 30 marks each, aim for roughly 50 minutes per question, and keep about 15 of them for its 10-mark recommendation.

Drill the calculations until they are mechanical, because that is a practice problem with a finite list. Then practise full questions from data, short parts and recommendation together, because the recommendation draws on the figures you have just worked out.

For each topic, be able to answer: what problem does this diagnose, which policies address it, what does each cost, and under what conditions does the ranking change?

Practise this

The Policy Lab in the portal is built for the recommendation parts of this paper: it presents a scenario, makes you diagnose it, weigh the realistic options and commit to a recommendation with a condition attached. It is Higher Level only, in line with the paper itself.

Not the topic you were looking for? Describe what you are stuck on in your own words and we will take you to the notes that answer it.