The Economics Internal Assessment (IA) is worth 20% of your overall grade at Higher and Standard Level and is split into 3 separate 750-word commentaries on different sections of the course (micro, macro, trade and international development). It is based on published extracts from the news media and requires you to apply your economics knowledge to evaluate the events described or a policy response to them. Below we explain how you can structure your Economics IA in 8 key steps:
1. Cover page
Make sure that you have a cover page at the start of your assignment. This will help the examiner place your assignment in context by giving an outline of the article you have chosen. This can be as simple as the example below, but doing this for each assignment keeps you work looking professional, making a good first impression on the examiner.
2. Introducing your article
Introduce your article at the start of your IA, including a copy of it in full. Some schools will choose articles for you, some will suggest them to you, whilst others still will give you free reign to choose. If you do get to choose which article to pick, try to choose a reputable source. For example:
- Financial Times
- The Economist
- Sunday Newspaper (The Times, The Telegraph, The Guardian)
- BBC News
- The New York Times
All are reputable sources which will report in detail and use the economic language you need to succeed in your IA. It may be that the article contains multiple sections that reference different economic theories, but decide on one and focus on this. You can state in your commentary that you are focusing on a particular section of the article at the start.
3. Key terms
Highlight key terms that you will need to pick out in your commentary. You should aim to define 2 of these, using definitions that you know will score you 2 marks in the exam. A textbook definition will be fine for this; however, when you use your key terms make sure that they are in full sentences and flow elegantly. A good example of this would be:
This commentary will apply the concepts of externalities and demand to explain how “health issues” have resulted in “motorists shunning diesel cars”.
Negative externalities of consumption are external costs of consumption incurred by consumers not taken into account by the free market price, whilst demand is the quantity of a good or service consumers are willing and able to purchase at a given price, in a given market, ‘ceteris paribus’.
The definitions flow logically from the previous sentence where the terms were used. Also ensure that you use Economic language (consumption and demand) rather than general terms (spending). This will give the examiner confidence that you are an accomplished economist.
After defining your key terms you will need to introduce the diagrams you are going to use. These do not count towards the word count but are one of the first things the examiner sees when marking your IA, so make sure they are top notch! Firstly, make sure the diagram is neat – this can be done using PowerPoint or by hand (I was recommended the former). Furthermore, make sure it has a title stating the figure number and explaining what is shown (an example of this is shown below). Also make sure that all axes are labelled, with units relevant to your article. If the article is talking about cars in the Eurozone, use euros and number of cars; if it refers to the Colombian coffee industry, use Colombian pesos and kilograms of coffee. Pay especially careful attention when labelling exchange rate diagrams, as these can be tricky!
You must also include labels for all of the lines you draw (demand, supply, marginal cost etc) so that the examiner knows what they are referring to. If you shift these, use D1 or S + tax to show the original line has shifted. Also ensure all prices and quantities you refer to in your analysis are labelled, using either P and P* (as seen below) or P0 and P1. Finally, you could include a shaded region or letters to reference particular areas of the graph later on. Below we show you a diagram depicting a consumption externality that does all of these things:
After drawing the diagram, you need to explain what is going on. Aim for an audience who has not studied Economics but has good general knowledge. Get another teacher, your parent or sibling to read the commentary and see if they broadly understand it (as long as your parents are not Economics teachers!). There are various ways to set out diagram explanations, but we recommend starting with the following:
- 1 sentence explaining what happens in the diagram
- State your axes labels and units
- Initial equilibrium (price and quantity)
- Describe the shift that is occurring
- New equilibrium (price and quantity)
It is important when explaining a change in equilibrium to talk about why the equilibrium changes as well as how it changes. Also take this opportunity to quote from the text. A good example referring to why the socially optimal equilibrium is different from the free market equilibrium that quotes from the text is written below:
The market for diesel cars has a socially optimal equilibrium where MSB=MSC, and Q* quantity of diesel cars are bought and sold at price P* [how]. However, as diesel cars cause “health issues”, they have external costs, in the form of costs to the health service, which are not reflected in the free market price [why]. Therefore, the free market equilibrium is where MPB=MPC, and a higher Q quantity of diesel cars are bought and sold at a higher price P [how].
Here you can see that the commentary addresses both how and why the equilibria are different.
6. Link the diagram to the content of the article
This shows that you understand both the article and what you have drawn and can be done in a number of ways. You could use quotes to back-up the shifts you have made in the text, as we have above. Alternatively, you could point to statistics referenced in the article that match the effect on price and quantity you have shown in the diagram.
This will take up the majority of your IA and if you have done the basics right could score you that elusive level 7. Your aim is to evaluate a policy that has been or could be used to solve a problem raised in the article. For example, a central bank may lower the interest rate to stimulate economic growth, or a government may subsidise farmers to make them more competitive. Here, we suggest that you use the SLAP approach:
- Long term vs. short term
- Pros and cons
Who is involved in your scenario? Often this will be: consumers, producers, government, taxpayers, society, employees or foreign countries. Look at the situation from each point of view and establish whether your policy benefits them. Also think about the priorities of society; for example, raising taxes for the rich damages those on high incomes, but may redistribute to the larger majority living on lower incomes.
Long term vs. short term
In all economic trade-offs, there will be different effects in the short and long term. For instance, subsidising firms will promote production in the short term, but may limit competition and innovation in the long term. Consider, again, which of these is prioritised by the public, and perhaps why. If the government faces an election in the coming year, they are likely to prioritise short term gain over long term prosperity, but the opposite will be true for a depoliticised central bank who is not voted into office and can concentrate entirely on long term economic stability.
You may have made unrealistic assumptions when drawing your diagram, such as the size of any price or quantity shifts, the elasticity of demand and supply, the availability of alternatives, perfect information, or the type of market a firm was operating in. Relate these assumptions back to what happened in real life, asking yourself if the situation described in the article matched with what your diagram predicted.
Pros and cons
An evaluation can also weigh up the advantages and disadvantages of a policy. This could incorporate a stakeholder analysis, evaluate the long term and short term effects, and recognise any assumptions you make. Often, the simplest routes are the best, and I have definitely succeeded using a pros and cons structure before.
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At the end of your analysis, try to provide a conclusion to your IA. This may be suggesting a particular policy or explaining why, if a policy was implemented, it did/did not work. You can strengthen your conclusion by including an “it depends on” statement. If your policy is appropriate under certain circumstances, you can include this in your conclusion. For example, it may be that investment in technology is the best policy, but this depends on prior education being in place to train workers to use this technology. This would be particularly important in an international development IA where workers in developing countries may not have access to this education.
We hope the framework above helps you to structure your Economics IA and we wish you the best of luck when writing!