What is evaluation?
Evaluation means weighing up an argument.
In other words, taking an existing argument and deciding whether it is weak (or strong).
How do you come up with evaluation points?
- Memorise the general outline of some key evaluation points but apply them to the specific question.
- Look for weaknesses in the chain of reasoning. What can go wrong with your analysis?
I will show you four examples of evaluation paragraphs for 25 mark questions:
- Price elasticity of demand;
- Government’s level of information;
- Time lag;
- Consumer confidence.
Example 1 – price elasticity of demand
Here is an example 25 mark question. I’ll summarise the analysis, then write out a full evaluation point.
Question 1: Evaluate microeconomic policies to reduce healthcare waiting lists. (25 marks)
Policy 1: tax cigarettes.
Analysis summary: Tax —> Higher business costs —> Supply shifts left —> Higher price, reduced quantity —> Improved health—> Reduced healthcare waiting list / less of a negative externality —> Social welfare increases.
Evaluation: However, this depends on the price elasticity of demand (PED) for cigarettes. Demand may be price-inelastic for cigarettes, because of some consumers being addicted. One estimate of the PED for cigarettes in developed countries is -0.36, suggesting highly price-inelastic demand. So even if the tax increases the price of cigarettes, demand may not fall as much. So the health of consumers may not improve, so NHS waiting lists may not be reduced and the over-consumption of cigarettes remains.
Alternative evaluation points:
- Ways for firms to avoid paying the tax (e-cigarettes);
- Design of the tax (some items excluded – threshold).
Example 2 – government’s level of information
Policy 2: Subsidy for healthy food
Analysis summary: Subsidy —> Lowers business costs —> Supply shifts right —> Lower price and higher quantity in equilibrium —> More healthy food consumed makes consumers healthier. PLUS consumers may switch away from unhealthy food. [We can also then link this to reduced healthcare waiting lists]
Evaluation: However, this depends on the government’s level of information. The government may lack information about the size of the external benefit from eating healthy food. It could be difficult to estimate the exact effect of eating one more portion of fruit on “quality adjusted life years” and hence on NHS waiting lists. So the government could overestimate the size of the externality. As a result, the subsidy may be set too high. In this case, there may be government failure. The cost to the government from the subsidy could outweigh the other gains in welfare, leading to an overall welfare loss.
Other points:
- Unintended consequence – firms may become dependent on the subsidy;
- Cross elasticity of demand (XED): Close or distant substitutes?
Example 3 – time lag
Here is another 25 mark question for macroeconomics.
Question 2: Evaluate policies to increase the rate of economic growth (25)
Policy 1: Government spending on high speed rail (such as HS2)
Analysis summary: Government spending on high speed rail —> workers can reach more locations (reduced geographical immobility) —> firms can hire from a wider pool of workers, so can choose more productive workers —> higher productivity —> LRAS shifts right —> Economic growth.
Evaluation: However, this depends on the time frame. Building infrastructure projects may take a long time, because of planning restrictions and difficulty sourcing inputs. For example, large sections of HS2 are built underground due to environmental concerns, which takes more time. As a result, the worker mobility and productivity benefits may take decades to be realised. So LRAS does not shift right in the short run. With increasing government spending on HS2 shifting AD right but without the increase in LRAS, HS2 may lead to a rise in the inflation rate, without as much of an increase in the long-run economic
growth rate.
Other points:
- Infrastructure may be placed in areas it isn’t needed;
- Working from home.
Example 4 – consumer confidence
Policy 2: Lower interest rates
Analysis summary: Lower central bank interest rates —> lower cost of borrowing and reward for saving at high street banks —> consumers borrow more to consume and save less —> consumption rises —> aggregate demand shifts right —> economic growth.
Evaluation: However, this depends on the level of consumer confidence. Consumer confidence may be low in a downturn. For example, during the Great Depression, the unemployment rate in the US reached 25%, contributing to low consumer confidence as
households fear losing their incomes. As a result, even if interest rates fall, consumers may not be willing to spend more. So consumption and AD may not rise, so interest rates falling may not lead to economic growth.
Other points:
- Effective lower bound (liquidity trap);
- Whether commercial banks pass on lower interest rates.
Next steps for improving evaluation
Exercise:
- Practise writing out the other eight evaluation points suggested throughout this document.
- *Suggested answers to be added once the evaluation points are completed.*
Final thoughts:
- There are multiple ways to evaluate. This just shows one way of doing so.
- Adapt evaluation points to the particular question topic or extract.
- Practise coming up with evaluation points for lots more different essay topics.
- Conclusions are also required for 25 markers but are not covered here. See separate
blogposts and videos for examples of full 25 mark essays for each exam board, including conclusions.
More model answers and resources for A-Level Economics students
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