Saturday, January 2, 2010

Mastering The Art of Evaluation

As EAL Economics candidates are aware, Unit 1 (Market) and Unit 3 (Business Economics) examination will be held on the 13th and 29th of this month. Therefore this post is dedicated to those students who, at this stage still find great difficulty to produce convincing evaluation

To be honest, this skill is not that hard to master, so long as the following techniques at the bottom are strongly adhered to:

(1)Contradiction. I often tell my students that this approach is something like “debating with yourself” You’re about to disagree with almost the entire texts that you have provided in earlier explanation BUT with solid reason. Let me give you an example

Example 1:
Explanation: An increase in the costs of production resulting from higher rubber prices will be passed on to end consumers in the form of higher price

Evaluation: However, considering that the automotive industry is so price competitive, passing on the rise in production costs to car buyers may not be such a wise business decision. This is because cost of rubber is insignificant as a proportion of total costs. It would be better for the car manufacturer to focus on cost efficiency to preserve profitability

Example 2:
Explanation: The government may consider an increase in tax onto cigarettes. By making cigarettes more expensive, people will be deterred from consuming it. This will, perhaps over time reduce the number of cases of smoking-related diseases

Evaluation: Clearly, government failure is inevitable in this case. Higher tax will cause tobacconists and retailers to smuggle in cheap cigarettes. By then, government will suffer from lower tax revenue. Also instead of bringing down number of smokers, the government actually increases it since smokers substitute towards cheap cigarettes

(2) Short run vs. long run implication. Using this technique, candidates will have to analyse and compare the outcome between two time periods. Sometimes the outcome has to be brainstormed while some other time, evidence from the extract can be used to support

Example 1
Explanation: By building more new roads and enlarging the existing one, congestion in certain areas in UK can be lessened. Journeys will be smoother and speedier. Working people will be able to reach workplace earlier and more jobs can be done by the end of day. As for logistic firms, smoother and speedier journey can help to reduce operation costs due to less petrol wastage having caught in heavy jam

Evaluation: However, the positive impact can only be felt in the short run. As road users begin to feel that there is more road space, they will be encouraged to travel more and possibly own more cars. As such in long run heavy congestion will arise once again and cycle may repeat itself. The problem is said to be remain unresolved but deferred to some near future

Example 2
Explanation: To achieve higher level of productivity, UK government can continue to increase public investment onto crucial sectors like education and healthcare. With more educated workforce, complex instructions can be understood and easily executed. Meanwhile, healthier workforce means that lesser absenteeism and at end of day more works could have been done

Evaluation: Expansionary policy is more of a short run solution to increase level of productivity among Britons. Considering the ailing government finances due to giant scale of banks bailout, such spending will just push the UK government and its people into deeper debt in future. Maybe the present administration can look into areas such as further deregulation or lowering of income tax to increase the working incentive. Furthermore the desirable impact could be felt much faster since it does not take years to ‘build’, like the hospitals and schools

(3) Magnitude. I consider this as the easiest technique to be mastered by candidates. It is often use when there is an element of quantitative. It is best to start the sentence with “It depends on…..”

Example 1
Explanation: Increase in the price of cigarettes due to tax will most likely work to reduce the level of cigarette consumption

Evaluation: However, it depends on how large is the hike in tax and thereby the price of cigarette. If it is insignificant, we may not get the desirable impact

Example 2
Explanation: Increase in the demand of rice will cause the price of rice to increase

Evaluation: However it depends on how large is the increase in demand. Also, one has to consider the price elasticity of supply for rice. If it is highly inelastic, the price of rice will likely to sky-rocket

(4) Criticise the data. Best to use when the question provides lots of statistics. Candidates will have to look at the weakness of the data provided. It could be statistics provided are contradicting one another. It could also be a situation where only certain information is provided which makes it difficult to arrive at conclusion

Example 1
Explanation: From Figure 1, it can be observed that there are 7 flights (created by myself) that share the same ticket price. Hence we can claim that price fixing is present

Evaluation: Again from Figure 1, there are 4 other flights on similar destinations that do not share the same ticket price. Thereby, it could be misleading to claim that price fixing is clearly presence. Besides, the data provided is only for the trips in August 2009 between British Airways and Company X. It would have been much better if ticket prices for similar destinations between more airline firms operating in UK are shown