A2 Economic Evaluation

what is the best way to evaluate in A2 economics (unit 3)

Definitely WEESTEPS.

Check this out: http://www.tutor2u.net/blog/index.php/economics/comments/exam-technique-for-a2-economics-weesteps-to-evaluation

Really helps me gain those extra marks. It's a good basis for any question.

Wider Context
Efficiency
Equality
Scope
Time
Effectiveness
Prioritisation
Scale or Magnitute

Yeah, I've heard about WEESTEPS but can you please briefly show how to use it in the following question (taken from Jan 13 paper) and do I use it in every paragraph?

Using the data and your economic knowledge, assess methods that could be used by the UK government and the EU to promote competition in the supply of domestic gas.

Okay.. The concentration ratio of the Gas markets show there's a sort of Oligopoly type structure. If I remember correctly there are 6 main suppliers. One point which can be made is for you to analyse about how the Gas markets work, how competition is already there assuming there's no collusion with the Kinked demand theory. These firms are interdependent yadayada.. include Prisoners Dillema/Game theory and how their dominant strategy is to maintain the Nash equilibrium. Although collusion is a potential problem.

Evaluation:
A way the government can use to promote competition is the enforcing of their Competition Act of 1998/Enterprise Act of 2002. Stronger regulation from organisations such as the OFT & CC (http://www.competition-commission.org.uk/about-us) to defend against horizontal/vertical mergers between large firms. We see this as firms with monopolistic characteristics are not efficient (Monopoly diagram MC=MR). This diagram suggests firms will increase price whilst reducing output. They become less productive & not allocatively efficient (Also a possibility of x-inefficieny as the inelasticity suggests there's not much incentive to produce on their ATC curve).

Increased regulation however may lead to firms leaving the market as seen in the banking industry when policies were fist implemented. It takes away a lot of freedom from firms and therefore might be seen as government failure when there's increased bureaucracy and potential costs, it may be seen as governments working against firms. The regulators are meant to act in the public interest so the regulation of firms will help everyone essentially as Gas is a necessity and competition is deemed to keep prices low.

The government can also try and make the markets contestable by punishing strategic barriers to entry such as predatory pricing from incumbent firms to allow entrants into the markets. Although it is argued that according to 'Contestable market theory' the threat of competition is enough to make incumbents act as though they're in a perfectly contestable market (refer to contestable market diagram Price/Quantity set where AC=AR). Firms will have to accept Long-term normal profits however Allocative efficieny is achieved and acts in the public interst (which is the whole reasoning behind the promotion of competition/ it's the priority). The extent to which this type of regulation would be effective is if there's no regulatory capture and the regulators are able to enforce such rules. Also any gentlemens agreement type of collusion should be heavily fined so firms operate accordingly. The removal of Beauracratic/legal barriers to entry should allow new firms to easily enter the market.

However a downside to this whole operation is that incumbent firms would have the experience (brand loyalty) and economies of scale to have an advantage over their competitors. The effects would therefore possibly be seen in the long-term.

Always talk about the negatives of your initial points to maximise those marks and bring in any of your own knowledge to back up your points. Sorry this was long. The WEESTEPS doesn't have to be in order but aslong as you remember the different steps you should have a lot to write and refer to for your evaluation marks. Bear in mind this is just one point.

How do you structure your 25 marker?