There are several ways to evaluate when completing economics questions, including:
This means looking at alternative explanations for the data being considered, or considering alternative remedies and policies. For example, ‘road pricing may not be as effective as increasing parking charges in reducing urban congestion’.
It does not really matter which policy is the most effective – it simply enables you to present an alternative view or policy, and get a discussion going!
Consider the assumptions
This means raising doubts about the assumptions made in the data or analysis, or changing the ceteris paribus rule – the assumption that everything else remains constant. For example, ‘if the multiplier effect is much larger than assumed the effect of an injection into the economy will also be greater’.
Or, ‘if demand is less elastic, then the result will be very different’.
Assess the degree of significance
This means commenting on the likely significance of the change or event being considered. For example, ‘the increase in the balance of trade deficit is relatively small, and it may only be a temporary issue for government’.
Assess limitations of remedies or policies
This might mean, for example, questioning the reliability of data upon which policies decisions have been made, or raising the issue of information failure.
Discuss possible conflicts or constraints
When assessing remedies or policies, evaluative marks can be earned by considering the unintended consequences of policy decisions (conflicts) or the limitations which prevent the policy or remedy working (constraints).
For example, ‘a consequence of expansionary fiscal policy might be the unintended effect of raising the rate of inflation’ – or, ‘the fall in house prices might put downward pressure on interest rates, which reduces rates for savers and may have a negative effect on those pensioners who rely on investment income from saving.’
It is always important to remember that the transmission mechanism for any policy change may be slow, and will create a time lag between implementation and effect.
Similarly, changes in policies or the implementation of a new remedy may have a weak effect on the behaviour targetted. For example, the effect of a minimum price on alcohol may have a very weak effect on the behaviour of drinkers.