Evaluate to accumulate!
Unit 1: Markets and Market Failure
Key issues tested in these papers include:
- For a given market, should resource allocation be left to the price mechanism or should the government intervene?
- What would it be like if the free market allocated resources?
- What would it be like the government intervened?
· Which would be better? Why?
Which forms of government intervention are:
(iv) Do we need a range of government policies?
(v) Always be aware of the chance of government failure!
Common areas for testing:
- Commodity markets (oil, copper, gold) – with volatile prices and incomes / a case for stabilisation policies?
- Merit goods (health, education, training, museums) – value judgements / externalities / info failure
- Public goods (defence, policing) – few goods are pure public goods – quasi goods – how about private sector provision but government finance (e.g. prisons)?
- Demerit goods (cigarettes, heroin, gambling, alcohol) – a likely topic – externalities / info failure
- Agriculture – price support schemes, costs and benefits of subsidies
- The environment – pollution / resource depletion
- The arts (opera, ballet) and sports
Remember that many questions will ask you to consider inter-relationships between markets and also how market failure in one market might cause problems / opportunities in another
Unit 2: National Economy & Government Policy
(i) Discuss the causes of…unemployment / trade deficit / inflation / economic growth
(ii) Discuss the possible impact of… a rise in oil prices / a slowdown in another country / a fall in the exchange rate / a high level of consumer borrowing / a rise in business investment
(iii) Discuss the government policies likely to be most effective in ….reducing unemployment / improving productivity / reducing a budget deficit
(iv) Evaluate the case for and against …. A fall in the basic rate of income tax / a rise in interest rates
(v) To what extent is a fall in unemployment likely to cause a rise in inflation
How to construct a good answer
The key to doing well in the 12 and 25 mark questions is
(i) Using the data and your own knowledge
(ii) Evaluate the key stem words in the question
Always aim to draw a couple of useful bits of information from both the supporting chart / table or extract – preferably something useful from all three – make this clear in your answer e.g. “Chart 1 shows that….”
Build an analysis which gets to the core of the question
· Use aggregate demand and supply diagrams
· Consider likely multiplier and accelerator effects
· Be aware that many economic shocks e.g. higher oil prices / recession in Europe / emergence of China / higher taxes – have both demand and supply-side effects on the economy – this broadens your range of points in analysis
· Then really get stuck into the evaluation (see below)
Consider the “possible economic impact of a recession in the United States on the performance of the UK economy”
- How deep is the recession?
- How long does it last?
- How important is the USA as a trade partner?
- What might happen to interest rates in the USA and in the UK?
- What might happen to world oil prices and other commodity prices?
- How might UK exporters respond to offset the impact of a recession in the USA?
- Could a recession in the USA be of longer term benefit to both countries?
Evaluation can always consider
- Demand and supply-side effects
- Short term and longer term effects
- Importance of elasticities of supply and demand
- Possible response of monetary and/or fiscal policy
- Possible response of businesses and consumers to an event / policy
Phrases to avoid!
Examiners switch off completely when they read these!
- In summary
- To conclude
- In evaluation
- As I said before
Much better phrases to use!
- In the long run, the most effective policy is likely to be X because…
- The arguments are finely balanced but I believe that recent evidence for the UK supports X …
- A possible disadvantage of this policy is that …
Here is a paragraph that – on its own – could score 4 or 5 marks out of 12 – can you spot the evaluation phrases in it?
“Higher oil prices have the potential to inflict damage on the macroeconomic performance of the economy. But the evidence is that oil priced at $70 per barrel has not had the inflationary effects that many economists have predicted. Indeed the British economy is now less dependent on oil than it was twenty years ago. One might conclude by arguing that high energy prices will do much to steer businesses and consumers away from fossil fuels and that the long term environmental benefits will outweigh the short term risks to the economy”
At AS level, 16% of the marks available are for evaluation!
All the evaluation marks are question (d) of the data response question.
You CAN NOT get more than 13 out of 25 without demonstrating evaluation.