IA (Eco) Evaluation Help

[Eastcoast93]

Hello there,

I'm taking Economics SL and we have to hand in our Internal Assessment Commentary 1 very soon. I am pretty much done with it, i just need some tips and advice on the evaluation part of it.

My article deals with taxes that have been imposed on cigarettes in the US. I have a negative externalities diagram and an effect of taxation diagram so far.

In my IA i mention the following things:

1. Demerit goods

2. Negative externalities of consumption

3. Taxation by government and its effects

4. Full cost of pollution is not covered by the price of the good itself

5. Inelastic good, so demand isn't reduced very much when prices rise

My teacher claims that evaluation is the hardest and only difficult part about the IA itself. I agree with this. I don't really know where to begin or what to say.

The only thing I came up with so far is the following:

1. Economic theory works as consumption is decreased by increasing prices, markets shrink

2. Stakeholders- Consumers and Producers lose- Government wins- I was thinking of showing this in a diagram somehow, would a consumer surplus (decreasing) diagram be good for this?

Does anybody have some tips or further points I should/ could mention whilst evaluating the taxation of tobacco goods?

Help would be really appreciated.

Thank you,

Greetings

[Summer Glau]

Try to think about where you have made assumptions in your IA. For example, you said that cigarettes are an inelastic good. Could cigarettes also be an elastic good? What could make them elastic? You could say something like : Cigarettes are an inelastic good because ___________. However, cigarettes are also _______________ in which case the price elasticity of demand would be elastic. You don't have to necessarily show two diagrams with an inelastic and elastic demand curve, just show one but make sure you mention both possibilities (if you think there are two possibilities)

Basically try to find assumptions you've made, and think: Is my analysis always true/correct?

Hope this helps.

[mobelle]

Where did you find this article? because I've been looking for something similar for my IA in Economics but I can't find anything that I can use, I've been searching the economist website like crazy!

[Summer Glau]

I suggest you don't use The Economist for your IA articles because it does most of the analysis for you, which means that there's not much of your own input you can put in!

News websites are usually good, like Reuters, BBC News, etc.

Check out for more sources.

[Keel]

Does anybody have some tips or further points I should/ could mention whilst evaluating the taxation of tobacco goods?

Another thing to say would be how far the tax actually shifts MPC, because if it does not shift it to where MSC=MB then there is still dead weight loss. If the tax is too high and shifts MPC so far to the left that it surpasses the point where MSC=MB then there is still inefficiency in the market.

You should also say that the tax may not be the most effective way. If the government started a mass campaign to increase the awareness of the affects of smoking, this will shift MB left to MB₁ where the quantity sold and bought is the same as the quantity where MSC=MB.