So... you have chosen an article to base your economics internal assessment ("IA") on and are moving to the next step of planning your IA. This article sets out a seven-step process that you can use to make writing your IA that little bit easier.
Find a newspaper article (*on a weekly basis) and record the website address and date of the article.
The article that we will analyse in this example can be found here.
Highlight the relevant text for your application
Outline key terms to be defined.
*Define the necessary terms if not clear
- Market Failure – inefficient allocation of resources
Demerit good – plastic bags creating a negative externality of consumption
Merit good – biodegradable bags or cloth bags creating a positive externality of consumption
- Welfare loss
- Government Intervention:
command and controlled method – Banning
Free-market-oriented – indirect taxation on plastic bags
Subsidy to promote the positive externality
Outline key Economic theory to be used
- Market Failure – existence of externalities
- Demerit good – the consumption of plastic bags leads to a negative externality of consumption, the external cost is unhealthy oceans and fishing grounds, destroying the natural habitat, environmental damage to trees and environment (Reference to the quotes from the article):
- A fishing hub near the mouth of the Copper River, is dependent on healthy oceans. She said a plastic bag ban would help reinforce that message in the community. It would also help clean things up.
- She said it’s not unusual to see plastic grocery sacks stuck in trees or bushes along the highway leading out to the landfill, 17 miles from the city center.
- He often goes hunting for rabbits along the road. Bags and plastic foam clamshell boxes dot the landscape. “They’re everywhere.”
- Explanation of the diagrams and short overview of short-run and long-run effects of this externality to the society
- Government Intervention – use of the command and controlled method – banning ( direct regulation) to diminish the negative externality
- Discussion on the short-run and long-run pros and cons of the banning – government intervention in the market: Use of quotes from the article to support discussion:
- He said the biggest challenge has been trying to get Cordova’s sizable transient population to understand the upcoming ban
- Cordova’s one-year lag was to give businesses time to adapt to the change,
- Enforcement will be through the police department, with violators facing a fine of up to $1,000. But interim city manager and Police Chief Mike Hicks said it’s unlikely the maximum fine would be imposed. He said most retailers have been receptive to the change.
- “I don’t think we’re going to have any problems with people switching over,” he said. “I think it’s going to go just fine.”
- Comparison to alternative policies as outlined in the article: a Fairbanks tax on plastic bags was considered
- Discussion on direct regulation impact vs use of indirect taxation ( free-market method) so compare and contrast pros and cons of the banning with the indirect taxation
- Be clear on the meaning of Fairbanks ( see here for further information: https://en.wikipedia.org/wiki/Fairbanks,_Alaska)
- Use of quotes from the article to support discussion:
A Fairbanks tax on plastic bags was considered by the City Council in 2009, but community pushback forced the city to rescind the measure before it ever went into effect.
- Other alternative solutions – promotion of merit good – biodegradable bags and/ or reusable cloth bags e.g. through subsidy: Use quotes from the article:
- He’s been saving boxes and looking into buying reusable cloth bags for customers. But those are expensive, and customers would have to pay for them.
- This summer the store handed out 400 reusable bags hoping to target those customers. They were a hit.
- “We have a lot of people come through with the cloth bags,” Branch said. “It’s really is cool to see people embracing it.”
Draw at least two relevant diagrams (*these must be your own drawing and labeling)
- Negative externality of consumption ( plastic bags – external cost – environmental hazards) + effect of banning
- Imposition of a fairbanks tax ( indirect tax) on plastic bags in the negative externality of consumption diagram
- Positive externality of consumption (cloth bags) + use of subsidy to promote these further and support businesses and customers in the transition period
Economics IA graph example
Brainstorm some ideas for evaluation –
- impact of policies stated in the article
- impact on stakeholders in the short and long-run,
- suggest alternative policies,
- refer to Schools of Economic Thought