Students often ask me about how to evaluate in their A-level AQA Economics essays. While there are multiple possible approaches, there is a good way to start if you are unsure. This involves using the “depends on” approach.
For more AQA Economics A-level exam technique advice, check out this course here:
Structuring an Evaluation Paragraph
If you are unsure how to start, a solid way to do so is to state: “depends on”. Consider the following stages in evaluation:
- State “This depends on” some factor.
- Explain why your analysis depends on this factor.
- Either
- A) Pick a side – is the factor mentioned high or low, elastic or inelastic? What do you suspect is the case from theory or your own knowledge of the real world.
- Or B) Add further explanation of your evaluative point.
- Link back to the question. How does the evaluation point change or support your answer to the question?
Which factors can you choose for evaluation?
There are many different possible factors to choose from when evaluating. Some of these will be specific to the question. Here are a few typical examples from microeconomics and macroeconomics.
Microeconomics:
- Price elasticity of demand.
- Business objectives.
- What firms actually do with their profit.
- Short run versus long run.
Macroeconomics:
- Level of spare capacity in the economy.
- Short run versus long run.
- Current policy position (e.g. current level of interest rates or current size of budget deficit).
- Size of the multiplier effect.
Apply to an example essay
Let us apply this structure to an example 25-mark essay which I have made up:
Assess whether governments should put in place a sugar tax.
I will consider three different chains of analysis. For each analysis point, I will simply summarise the analysis and then go into detail about how you could evaluate each one. Of course when writing out the answer in full you should go into more detail for the analysis components.
Note for examples of macroeconomics evaluation, please see the article here:
Point 1 – Diagram for sugar tax
Sugar tax diagram means lower quantity, higher price, reducing the size of any negative externality e.g. in terms of increased use of health service. I might use a diagram like the one below to show the effect of a tax. In the exam this diagram would be fully explained.
Evaluation:
- The effect of a tax depends on the price elasticity of demand (PED) for the good being taxed. If the demand is price-inelastic, then the tax will lead only to a small fall in quantity and a larger rise in price. This would mean little effect on consumers’ health. Sugar can be addictive and so is likely to have an inelastic PED, meaning the tax on its own may have less direct benefits for consumer health.
Commentary: The evaluative factor identified is the price elasticity of demand. The effect of an inelastic PED is identified. Based on the theory that addictive goods are more likely to have an inelastic PED, a judgement is then made. Note you could make a judgement in the other direction, for example if you think firms will create more substitutes over time for sugary drinks, this will mean the PED will become less inelastic and more elastic in the long run compared to the short run.
Point 2 – Firms’ costs
Increased costs for firms leads to lower profits, employment and investment in sugar industries.
Evaluation:
- The effect on firms’ costs depends on whether firms change their products. Firms may switch to producing non-sugary drinks which do not face the sugar tax. This means the tax would not increase firms’ costs as much, so there would be less harm to profits and employment in the sugar industry. for example Coca-Cola could produce more sugar-free Coca-Cola, to avoid the sugar tax. Some firms are also increasing the use of sugar substitutes, such as stevia, in some soft drinks. So firms’ costs are likely to increase less as firms have shown they can adapt their products.
Commentary: Here the evaluation point is about whether firms change their product selection. The paragraph explains the effect of changing to non-sugary drinks on firms. Using data from the real world supports the idea that firms are likely to switch, then a judgement is made.
Points 3 – Inequality
A per-unit tax on sugar may increase poverty and post-tax inequality. The tax means consumers pay more for sugary drinks and the tax takes up a larger proportion of a poorer consumer’s income, compared to the income of a richer consumer.
Evaluation
- The effect on inequality may depend on what the government does with the revenue raised. For example, some of the revenue could go towards increased welfare payments for those on low incomes. This would mitigate any effect on inequality, while still incentivising sugar consumers to reduce their consumption (particularly those on high income). However at the moment the UK Government has a very large budget deficit of 14.5% of GDP in the year ending March 2021. Hence any tax funds raised are likely to go towards closing the budget deficit rather than increased welfare payments. This means inequality is likely to increase as a result of the tax.
Commentary: The key factor here is what the government does with the revenue. The paragraph explains why this matters and then uses real-world evidence on the budget deficit to come to a judgement.
Note for a source on the budget deficit figure, please see the link here.
Final Thoughts
This is just one way to evaluate, primarily designed as a way to get students started. There are other approaches that may be just as valid and several different evaluation points you could make for this question.
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