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A State-Ranker’s Guide to Writing 20/20 Economics Essays

So, you want to know how to improve your preliminary and HSC economics essay...

Cory Aitchison

State Ranker & 99.95 ATAR

1. Introduction to this Guide

So, you want to know how to improve your preliminary and HSC economics essay writing? Look no further! In this guide, I’ll be covering key tips to help YOU smash the structure, amaze with your analysis, conquer the contemporary, and ultimately master the mystery of maximising your marks.

My name is Cory Aitchison, currently one of the Economics tutors at Project Academy . I completed the HSC in 2018, achieving a 99.95 ATAR as well as two state ranks — 6th in economics and 12th in chemistry. Graduating from Knox Grammar School, I also topped my grade in economics and was awarded Dux of the School for STEM. Believe it or not, at the beginning of Year 11 I initially struggled with economics due to the transition in conceptual thinking required in approaching economic assessments in comparison to my other subjects such as English. However, through Year 11 and Year 12, I built up key tips and strategies — that I’ll be sharing with you in this guide — to help me not only consistently achieve top marks in my internal assessments, but to ultimately go on to achieve the results I did in the HSC.

2. The Correct Way to Write

First off, you need to understand something: HSC economics essays are NOT english essays! They aren’t scientific discussions, nor geography reports, nor historical recounts. They’re unique and often quite different from other essays that you might’ve done previously in high school. The style of writing and approach to answering questions can be confusing at first, but follow these tips and you’ll be ready in no time:

Phrasing should be understandable and concise

Unlike some subjects where sophisticated phrasing is beneficial to getting marks, HSC economics essays should emphasise getting your point across with clarity. This means don’t run your sentences on for too long, be aware of any superfluous words, and make sure you actually understand yourself what you’re trying to say in a sentence.

For example:

GOOD: “An increase in interest rates should lead to decreased economic growth.”

NOT GOOD: “As a result of a rise or increase in interest rate levels from their previous values, the general state of economic activity in the domestic economy may begin to decrease and subsequently indicate the resultant situation of a decrease in economic growth.”

“Understandable” does not mean slang or lacking in terminology

Just because you want to get a point across, doesn’t mean you should resort to slang. In fact, using economic terminology is a strong way to boost your standing in the eyes of the marker — if you use it correctly! Always make sure you use full sentences, proper English grammar, and try and incorporate correct economic terms where possible.

GOOD: “This was a detrimental outcome for the economy.”

NOT GOOD: “This was a pretty bad outcome for the economy.”

GOOD: “The Australian Dollar depreciated.”

NOT GOOD: “The Australian Dollar decreased in value.”

Analysis should be done using low modality

Modality just refers to the confidence of your language — saying something “will” happen is strong modality, whereas saying something “might” happen is considered low modality. Since a large portion of economics is about applying theory, we have to make sure that we are aware that we are doing just that — talking about the theoretical, and so we can’t say for sure that anything will happen as predicted.

Some useful words include:

May, Might, Should, Could, Can theoretically

Don’t use words like:

Must, Will, Has to, Always

3. How to use Statistics

“What’s most important is that this contemporary is used to bring meaning or context to your argument…”

Using contemporary (statistics) can often seem straightforward at first, but using it effectively is usually harder than it looks. Contemporary generally refers to applying real-world facts to your analysis to help strengthen (or weaken) the theoretical arguments. This can include many different statistics or pieces of information, including:

• Historic economic indicators, such as GDP, inflation, GINI coefficients, exchange rates, or unemployment rates
• Trends or economic goals, such as long-term GDP growth rates, or the stability band for inflation
• Names of economic policies, such as examples of fiscal or microeconomic policies
• Specifics of economic policies, such as the amount spent on infrastructure in 2017

Whatever statistics you deem relevant to include in your essay, what’s most important is that this contemporary is used to bring meaning or context to your argument — just throwing around random numbers to show off your memorisation skills won’t impress the marker, and in fact might appear as if you were making them up on the spot. Rather, your use of contemporary should actively improve your analysis.

GOOD: “Following a period of growth consistently below the long-term trend-line of 3%, the depreciation of the AUD to 0.71USD in 2017 preceded an increase in economic growth to a 10-year high of 3.4% in 2018.”

NOT GOOD: “Economic growth increased by 1 percentage point in 2017 to 2018”

NOT GOOD: “GDP was $1.32403 trillion in 2017”

GOOD: “The 2017 Budget’s Infrastructure Plan injected $42 billion into the economy — up 30% from 2016’s $31 billion, and 20% higher than the inflation-adjusted long-term expenditure.”

NOT GOOD: “The 2017 Budget’s Infrastructure Plan injected $42 billion into the economy”

That in mind, don’t think that these statistics have to be overly specific. As long as the general ideas gets across, it’s fine. You don’t need to say “$1,505,120” — just “$1.5 million” will suffice.

Ask yourself: if I get rid of the contemporary from my paragraphs, does the essay still have enough content?

Further, don’t get roped into the “contemporary trap” — where you fall into the mindset that “if I memorise all these statistics, my essay will get good marks”. Including numbers and contemporary at the expense of having a robust theoretical explanation and analysis will definitely be detrimental in getting you top marks. Particularly in trial exams and the HSC when you’ve got all these numbers floating in your head, it can be tempting to try and include as many as you can (often just because you can!). To avoid this, always try and focus your arguments on analysis and syllabus content first, contemporary second. Ask yourself: if I get rid of the contemporary from my paragraph, does the essay still have enough content?

4. Must Have Insightful “However”s

If you really want to extend your analysis and show the marker that you know your stuff, including insightful “however”s is a strong way to do it. What I mean by this is that for each of your paragraphs, try and include a counterpoint that highlights the flexible nature of economic theory. There are broadly two kinds of “however”s:

Theoretical “However”s

These are counterpoints that are based on theory — often there will be theoretical limitations for many of the concepts you come across in economics. It’s always important to include these limitations as it reinforces your knowledge of the actual content of economics.

“Although the Budget and fiscal policy can be effective at stimulating economic growth, it is also restricted by the “implementation time lag” limitation since it is only introduced annually.”

Contemporary “However”s

These are counterpoints that are based on contemporary — highlighting how although something should happen theoretically, this isn’t usually what is observed in reality. This can be particularly powerful in that it combines your knowledge of theory with your analysis of contemporary.

“Despite the expansionary stance that the RBA adopted in 2012–2016 for monetary policy, Australia’s annual GDP growth rate has remained below the trend rate of 3% — against the theoretical expectations. This could be attributed to factors such as …”

5. How to Interpret the Question

When you first look at a question, before you even put pen to paper, you need to come up with a plan of attack — how can you ensure that you answer the question correctly, and give the markers what they want? There are three main points to look for when interpreting essay questions:

Knowing your verbs

As you may (or may not) know, NESA has a bank of words that they like to pull from when writing questions, and these words impact how they want their question answered. These verbs should help steer your analysis onto the right path. For example:

Explain: “Relate causes and effects”

To answer these questions, you have to demonstrate a thorough understanding of how theory and events impact each other and the economy. This verb particularly emphasises the idea of a process — you need to be able to make clear links as to how each step leads to the next, rather than just jumping to the outcomes.

Analyse: “Draw out and relate implications”

These questions usually wants you to investigate the connections between different aspects of economic theory. Generally this involves showing a holistic understanding of how different areas (such as micro- and macroeconomic policies) come together to make a cohesive impact on the economy. It usually helps to think back to the syllabus and how the points are introduced when figuring out which ideas to link together.

Assess/Evaluate: “Make a judgement based on value/a criteria”

These require you to not only critically analyse a topic but also come to a conclusion given the arguments you provided. This type of question usually gets you to make a judgement of the effectiveness of some economic theory — such as the ability for economic policies to achieve their goals. Make sure you actually include this judgement in your answer — for example, say things like “strong impact”, “highly influential”, “extremely detrimental”.

Discuss: “Provide points for and/or against”

Similar to assess, discuss wants you to provide arguments towards and against a particular topic. Although it doesn’t require a specific judgement to be made, it does place greater emphasis on showing a well-rounded approach to the argument — providing relatively equal weightings towards both the positive and negative sides of the discussion.

Linking to the syllabus

When trying to understand what the question wants from you, I found the best way to approach it is to consider what points in the syllabus it is referring to (To do this, you need to have a solid understanding of the syllabus in the first place). Once you’ve located it, try drawing upon other topics in the vicinity of that dot point to help you answer the question.

For example, if the question mentions “trends in Australia’s trade and financial flows”, then you know from the syllabus that you probably need to talk about value, composition and direction in order to get high marks. Further, it may also be worth it to bring in ideas from the Balance of Payments, as this is the next dot point along in the syllabus.

Digging into the source

For essay questions that provide a source for you to include in your answer, this is another goldmine from which you can discern what the marker really wants. If the source mentions microeconomic policy, it probably wasn’t on accident! Even if it may not be obvious how to link that to the question immediately, try and draw upon your knowledge and implications and see if there’s a different angle that you might be missing.

6. Putting it All together — Structuring your essay

My essays usually consisted of four main parts: an introduction, a background paragraph, body paragraphs, and a conclusion.

Introduction

Your introduction should not be long. I rarely wrote an introduction longer than three sentences.

First sentence: Answer the question (thesis)

Try and answer the question, while including the main key words of the question in your answer. Don’t directly restate it — instead, try and add meaning to it in a way that represents what you’re trying to get across in your essay.

For example: if the question was “Assess the impact of microeconomic policy in improving economic growth in Australia”, my first sentence might be “Microeconomic policy has had a significant impact in increasing aggregate supply and thus long-term economic growth in Australia since the 1960s”.

Next sentences: Introduce your arguments/paragraphs

In this part, it’s fine to almost list your paragraphs — there’s no need to do a whole sentence explaining each. That’s what the paragraphs themselves are for.

For example: using the same question as above, my next sentence might be “Although trade liberalisation may have been detrimental for short-term growth in manufacturing, policies such as competition policy and wage decentralisation have been highly effective in fostering economic growth in Australia”.

Background Paragraph

The aim of a background paragraph is threefold: to get across the main theory that underpins your argument; to establish the economic context for your argument; and to show the marker that you “know your stuff”.

For example, if the essay was on monetary policy, you may want to describe the process of Domestic Market Operations (how the reserve bank changes the cash rate) in your background paragraph, so that you don’t need to mention it each time you bring up changing stances. Further, it may be good to showcase the current economic climate — such as GDP growth rate and inflation — to give context to your analysis in your essay.

Some ideas for what to include in this paragraph include:

• Key theory such as DMOs or the rationale for macroeconomic policies
• Economic indicators that provide context to the time period that you’re working in, such as growth rates, inflation, unemployment rates, exchange rates, cash rates, etc.
• A brief description of the recent Budget (if talking about fiscal policy), including the stance and outcome

Bear in mind that this paragraph shouldn’t be too long — it isn’t the focus of your essay! Instead, aim for around 100–150 words at most. At this point in your essay, it may also be good to include a graph (more on this later).

Body Paragraphs

There’s no set rule for how many body paragraphs to include in your essay — I generally aim for at least 4, but there’s no real limit to how many you can (or should) write! Unlike english essays, it’s totally acceptable to just split a paragraph in two if you feel like the idea is too large to be written in one paragraph (as long as each paragraph makes sense on its own).

When writing a paragraph, I usually follow this structure:

Topic sentence

This is where you answer the question, and outline your argument or idea for this paragraph. If you are doing a discuss/assess/evaluate essay, try and make your judgement or side obvious. For example: “Trade liberalisation has been detrimental in its impact on economic growth in manufacturing industries”.

These sentences are where you bring together the theory and contemporary to build up your argument. Remember, the theory should be the focus, and contemporary a bonus. Try and weave a “story” into your analysis if you can — you should be showing the marker how everything fits together, how causes lead to effects, and ultimately bringing together relevant economic concepts to answer the question. Feel free to also include graphs here when they help strengthen your argument.

Fit in your “however” statements here. For discuss questions, this however section may take up a larger part of the paragraph if you choose to showcase two opposing arguments together.

Link your argument back to your overarching thesis, and answer the question. Following on from your “however” statement, it can often be a good idea to use linking words such as “nevertheless”, “notwithstanding”, or “despite this” to show that taking into account your arguments presented in the “however” statement, the overarching idea for the paragraph still remains.

Like the introduction, your conclusion should not be overly long. Rather, it should briefly restate the arguments made throughout your essay, and bring them all together again to reinforce how these points help answer the question.

Aggregate Demand / Supply Graph

Graphs are a great way to add extra spice to your essay — not only does it help strengthen your explanations of economic theory, it also makes it look like you wrote more pages than you actually did! Graphs, such as aggregate demand graphs, business cycle graphs, and Phillips curves, can be great in reinforcing your ideas when you mention them in your essay. They usually come either in background paragraphs or body paragraphs, and it’s usually best to draw them about a quarter to a third of the page in size. It’s also good practice to label them as “Figure 1” or “Graph 1”, and refer to them as such in your actual paragraph.

Although they can be beneficial, don’t try and force them either. Not all essays have appropriate graphs, and trying to include as many as you can without regards for their relevance may come across negatively in the eyes of the marker.

8. How to Answer Source Questions

If your essay question involves a source, try and refer to it multiple times throughout your essay. For example, this can be in the background paragraph and two of your body paragraphs. Rather than just adding in an “…as seen in the source” to one of your sentences, try and actively analyse it — show the marker that you understand why they included it, and how it actually helps strengthen your arguments.

9. Plan You Essay

Don’t be afraid to use the first page of your answer booklet as a planning page. Taking a couple minutes before you answer the question to lay out your scaffold for body paragraphs is a great first step to helping ensure that you actually end up answering the question to the best of your abilities. It also serves as a great reminder to keep checking as you finish each paragraph to ensure that you actually wrote what you intended. Just make sure to make it clear to the marker that those scribbles on the page are just a plan, and not your actual essay!

10. How to Prepare for Essays in the Exam

I find it much better to prepare paragraphs and ideas that you can draw upon to help “build up” a response during the exam itself.

Don’t go into the exam with a pre-prepared essay that you are ready to regurgitate — not only are there too many possibilities to prepare for, but it’s also unlikely that you’ll actually answer the question well with a pre-prepared response.

Instead of memorising sets of essays before the exam, I find it much better to prepare paragraphs and ideas that you can draw upon to help “build up” a response during the exam itself. What I mean by this, is that in your mind you have a “bank of different paragraphs” and ideas from all the topics in the syllabus, and when you read the exam, you start drawing from different paragraphs here and there to best formulate a response that answers the question. This allows you to be flexible in answering almost any question they can throw at you.

On top of this, ensure you have a solid foundation in both the theory and contemporary — knowing what statistics or topics to include in your essay is useless knowledge unless you have the actual content to back it up.

Now that you know the basics of how to write a good HSC economics essay, it’s time to start practising! Have a go, try out different styles, and find what works best for you. Good luck!

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How to Write a Good Economics Essay

Last Updated: March 7, 2023 References

This article was co-authored by Emily Listmann, MA . Emily Listmann is a private tutor in San Carlos, California. She has worked as a Social Studies Teacher, Curriculum Coordinator, and an SAT Prep Teacher. She received her MA in Education from the Stanford Graduate School of Education in 2014. This article has been viewed 127,354 times.

A good economics essay requires a clear argument that is well-supported by appropriately referenced evidence. Research your topic thoroughly and then carefully plan out your essay. A good structure is essential, as is sticking closely to the main essay question. Be sure to proofread your essay and try to write in formal and precise prose.

Preparing to Write Your Essay

• For example a question such as “Discuss the macroeconomic consequences of rising house prices, alongside falling interest rates” could be divided into 2 parts: 1 part could be on the effects of rising prices, and 1 on the effects of falling interest rates.
• In this example you could begin by discussing each separately and then bringing the 2 together and analysing how they influence each other.
• Be sure to keep the question at the forefront of your mind and don’t veer off topic. [1] X Research source

• Be sure that you understand all the key terms that you are being asked about.
• Try to keep your reading focussed closely to the essay question.
• Don’t forget to look at any lecture or class notes you have made.
• 3 Come up with a thesis statement . A thesis statement is the main argument you will make in your essay. It should be 1-2 sentences long and respond to the essential question that’s being asked. The thesis will help you structure the body of your essay, and each point you make should relate back to the thesis.

• Once you have put together a list of key points, then try to add in some more detail that brings in elements from your research.
• When you come to write out your essay, you can develop a paragraph based on each point.

• All of the evidence and explanation will be in the main body of the essay.
• Order the key points in the body of your essay in such a way that they flow logically.
• If you are writing a longer essay, you can break the main body into different sections. [2] X Research source
• If you have a word limit, be sure to take this into account when you are planning.
• Allocate yourself a rough number of words per section.
• The introduction and conclusion can be just a paragraph each.

Writing the Essay

• What your essay is about.
• What material you will cover in the essay.
• What your argument is. [3] X Research source

• Having this stated clearly at the start can help you to stay focussed on the question as you work your way through the essay.
• Try writing out this one or two sentence statement and sticking it up in front of you as you write, so it’s stays at the forefront of your mind.

• Try to begin each paragraph with a sentence that outlines what the paragraph will cover.
• Look at the opening sentence of each paragraph and ask yourself if it is addressing the essay question. [5] X Research source

• Try to engage with arguments that run counter to yours, and use the evidence you have found to show the flaws.
• It might help to imagine someone reading the essay, and anticipating the objections that he might raise.
• Showing that you have thought about potential problems, and you can make an argument that overcomes them, is a hallmark of an excellent essay. [6] X Research source
• If there is conflicting evidence, discuss it openly and try to show where the weight of the evidence lies. [7] X Research source
• Don’t just ignore the evidence that runs counter to your argument.

• In the conclusion you can add a few sentences that show how your essay could be developed and taken further.
• Here you can assert why the question is important and make some tentative suggestions for further analysis.

Proofreading and Making Revisions

• As you read through it, think about how closely you stick to main overarching question.
• If you notice paragraphs that drift off into other areas, you need to be tough and cut them out.
• You have a limited number of words so it’s essential to make every one count by keeping tightly focussed on the main question.

• Think about how you use the evidence too. Do you critically engage with it, or do you merely quote it to support your point?
• A good analytical essay such discuss evidence critically at all times.
• Even if the evidence supports your argument, you need to show that you have thought about the value of this particular piece of data.
• Try to avoid making any assumptions, or writing as if something were beyond dispute. [10] X Research source

• Remember an academic essay should be written in a formal style, so avoid colloquialisms.
• Avoid contractions, such as “don’t”, or “won’t”.
• Try to avoid paragraphs that are more than ten or fifteen lines long.
• Think about how it looks on the page. [12] X Research source

• Always include a bibliography, but don’t include references to things you haven’t read or didn’t inform your argument. [13] X Research source
• Your teacher will know if you just add a load of titles into your bibliography that are not evidenced in the body of your essay.
• Always follow the bibliography format used by your department or class.

Community Q&A

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• ↑ http://www.economicshelp.org/help/tips-economic-essays/
• ↑ http://www.writing.utoronto.ca/advice/planning-and-organizing/organizing
• ↑ http://carleton.ca/economics/courses/writing-preliminaries/academic-essay-writing/
• ↑ https://www.economicsnetwork.ac.uk/archive/lse_writing/page_11.htm
• ↑ http://homes.chass.utoronto.ca/~mcmillan/writing.pdf
• ↑ https://www.royalholloway.ac.uk/economics/documents/pdf/essaywriting-departmentofeconomics.pdf

About This Article

Before you begin writing your economics essay, make sure to carefully read the prompt so that you have a clear sense of the paper's purpose and scope. Once you have read the prompt, conduct research using your textbook and relevant articles. If you cannot find research materials, ask your instructor for recommendations. After your research is done, construct a 1-2 sentence thesis statement and begin outlining your main ideas so that your essay will have a clear structure. Make sure to leave time to write a draft and revise your work before it is due. If you want to learn more, like how to cite the sources you used for your essay, keep reading the article! Did this summary help you? Yes No

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Mastering the Art of A-Level Economics Essay Writing: Tips and Techniques

25 oct mastering the art of a-level economics essay writing: tips and techniques.

One of the paramount aspects of excelling in A-levels Economics is the mastery of the art of essay writing. Many economics students harbor two major fears when confronted with essay-type questions: the specter of time running out and the apprehension of failing to employ the correct writing style. It’s imperative to recognize that your writing style significantly influences your final grade.

In this comprehensive guide, we will explore various key points pertaining to writing styles in economics, how to enhance your skills, and delve into the significance and distinctive features of each technique.

The Significance of a Pristine Writing Style

The A-level economics examination paper encompasses essay writing and case study questions, with the former carrying more substantial weightage. In these essay responses, students are tasked with the critical challenge of articulating their ideas effectively, and herein lies the essence of a sound writing style.

Let’s introduce you to the invaluable “Three Tip Rule” to bolster your essay writing skills.

Tip 1: Precision

Precision in writing equates to crafting concise, straightforward sentences. Embrace the judicious use of full stops to avoid lengthy, convoluted sentences that might impede readability. Moreover, resist the temptation to nestle multiple ideas within a single sentence; this practice can mar clarity and comprehension. In exceptional cases where complexity is warranted, judiciously employ transition words to navigate through intricate notions seamlessly.

Tip 2: Perfection

Aptly chosen, the term “perfection” is emblematic of an area where students can gain easy marks in economics: precision through definitions and diagrams. Economists thrive on precision, and mastering the definitions of key terms is undeniably beneficial. By wielding definitions and diagrams effectively, students can elucidate complex concepts with clarity and finesse.

Tip 3: Be Focused

Another indispensable facet of the writing style in economics lies in unwavering focus on keywords. Upon perusing the question, swiftly underline the pivotal keywords that will shape your argument. This practice keeps your responses aligned with the core tenets of the question, fostering logical cohesion and making your answers more compelling. Furthermore, engender fluency in your writing by establishing thoughtful connections between these pivotal keywords.

Additionally, revisit the question periodically during your writing process. This perpetual reassessment ensures that your essay remains germane, as it reaffirms your focus on the quintessential issues under examination.

Mitigating Common Writing Challenges

Notably, not all students are naturally predisposed to writing fluency, or they may grapple with time management during examinations. Several common challenges arise in essay writing, which, if not addressed, can impede both performance and completion within the allocated time frame.

The Dreaded Time Crunch

The torment of running out of time during an examination is an omnipresent nightmare for many students. Picture yourself in the examination hall, with only ten minutes left to conclude your essay while you linger on the introductory paragraph.

To avert this predicament, it is essential to strategize before you put pen to paper. The practice of preliminary essay planning through techniques such as mind mapping or outlining key points offers a profound advantage. Dedicate the initial fifteen minutes to delineating fundamental ideas for each essay section, thus providing a solid framework for the ensuing writing. Consistently revisit the question during the writing process to uphold focus and forestall the inclusion of extraneous details that may consume precious time.

The Peril of Irrelevance

Failing to answer the question at hand can be a costly error in essay writing. Tangential responses squander valuable time and yield suboptimal outcomes. Precision is paramount; employ memorized definitions or pertinent points with diligence.

To preempt irrelevance, repeatedly scrutinize the question. This practice ensures that your writing remains closely aligned with the question’s specific parameters. Even if you momentarily veer off course, vigilant reassessment allows you to swiftly self-correct and maintain a pointed response.

Mastering These Skills: The Road to Success

As the adage goes, practice makes perfect. Proficiency in these writing skills is cultivated over time and demands dedicated engagement with the subject material. Once you have navigated the breadth of the syllabus outline, undertake the task of practicing as many questions as you can independently.

However, many students may grapple with the subtleties of their writing and may remain oblivious to inherent mistakes. Others may necessitate additional guidance to elevate their writing proficiency. Fortunately, an invaluable resource is readily accessible: JCEconomics by Anthony Fok.

JCEconomics, spearheaded by the esteemed Anthony Fok, stands as a premier economics tuition center in Singapore. Anthony Fok is renowned for his unwavering commitment to his students, providing them with personalized support and comprehensive instruction. His pedagogical approach incorporates real-life examples, elucidating economic concepts with exceptional clarity. By engaging with JCEconomics, students gain access to a wealth of resources and individualized attention, positioning them for success in A-level Economics .

In summation, the ability to craft compelling economics essays is a hallmark of A-level success. By assimilating the principles of precision, perfection, and focus, students can refine their writing style to earn higher marks. Moreover, proactively addressing common writing challenges, such as time management and relevance, is indispensable for optimal performance. When embarking on this academic journey, remember that practice and guidance are your greatest allies. With these resources at your disposal, your mastery of A-level Economics essay writing is well within reach.

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How to Write Economics Essay: Your Ultimate Guide

Did you know that the global economic crisis of 2008, triggered by the collapse of Lehman Brothers, led to a profound reevaluation of economic policies worldwide? This crisis demonstrated the enormous influence that economics wields, and the critical role it plays in shaping our lives. Whether it's analyzing the causes and consequences of financial meltdowns, evaluating market trends, or understanding the impact of government decisions on our wallets, writing an essay on economics is the gateway to exploring these complexities.

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In this comprehensive guide, the expert team at our business essay writing service will explore the definition of an economics essay. We'll provide you with helpful tips on selecting the perfect economics essay topics to captivate your audience, and we'll delve into the essential structure required to craft a winning paper. We'll share expert insights and more to help you master the art of economic essay writing. Whether you're a student seeking academic success or a curious mind eager to explore economic concepts, join us on this enlightening journey.

Definition of an Economics Essay

So, what is economics essay all about? This type of writing is more than just an academic piece. It's a medium for you to articulate your understanding of economic theories, concepts, and real-world applications.

It's an opportunity to analyze and evaluate economic issues, providing well-researched arguments and evidence to support your perspective. Economics essays often demand critical thinking, data analysis, and the ability to communicate complex economic ideas effectively.

These essays can cover a wide range of topics, from macroeconomic policies to microeconomic market dynamics, and they serve as a platform to showcase your knowledge and insights into the world of economics.

In this guide, we'll walk you through the nuances of crafting an economics essay that not only conveys your expertise but also engages your readers.

Selecting the Right Economics Essay Topics

When it comes to choosing the ideal essay topics for economics essay, consider it a strategic decision rather than a random choice. The right topic should not only align with your academic requirements but also ignite your intellectual curiosity.

One approach is to stay informed about current economic events. For instance, exploring topics such as the economic impact of global trade tensions, the rise of e-commerce, or income inequality in the modern era can lead to engaging and relevant essays. And, if you find the task of essay writing daunting, you can always consider professional help - yes, we also offer assistance for those looking to buy essays on economics.

Alternatively, you can delve into timeless economic theories and concepts. Topics like the economic implications of the Keynesian theory, the role of the Federal Reserve in stabilizing the economy, or the economic consequences of globalization offer a wealth of essay possibilities.

Don't forget to think about your audience. Are you writing for economics enthusiasts, your professors, or a broader readership? Tailoring your topic to the interests and knowledge level of your audience is essential. Specialized readers may appreciate in-depth analyses of economic models, while a more general audience might prefer topics like the economics of sustainable agriculture or the financial challenges of college students.

Understanding the Structure of an Economics Essay

Once you've chosen your economics essay topic, the next crucial step is to master the art of structuring your essay effectively. The structure of your essay plays a pivotal role in conveying your arguments and analysis in a logical and persuasive manner.

An essay about economics typically consists of three primary sections: the introduction, the main body, and the conclusion. Let our expert finance essay writing service explore each of these elements in more detail:

1. Introduction: The introduction serves as the gateway to your essay. It's where you set the stage, introduce your topic, and present your thesis statement. Think of it as your opportunity to engage your readers' attention and lay the foundation for what follows. For instance, if your essay discusses the economic impact of renewable energy adoption, your introduction might begin with a compelling statistic or a thought-provoking question related to the subject.

2. Main Body: This is where you delve into the heart of your essay, exploring the relevant economic concepts. The main body consists of several paragraphs, each dedicated to a specific aspect of your topic. Here, you present your arguments, analyses, and evidence to support your thesis statement. In the case of the renewable energy essay, you could have separate sections discussing its environmental benefits, economic implications, and potential challenges. Make sure to use clear headings and subheadings to structure your content logically.

3. Conclusion: The conclusion provides closure to your essay. Summarize your key points, restate your thesis statement, and offer insights or implications based on your analysis. In the renewable energy essay, your conclusion might emphasize the importance of transitioning to renewable energy sources and its potential long-term benefits for both the economy and the environment.

Tips for Writing an Economics Essay

Crafting an outstanding essay economics goes beyond just presenting information. It requires a combination of research skills, critical thinking, and effective communication. Here are some essential tips from our PRO essay writer service to elevate your writing:

1. Conduct Thorough Research: Before you start writing, gather relevant data and information from reputable sources. The quality of your research will directly impact the strength of your arguments.

2. Develop a Clear and Concise Argument: Your essay should present a well-defined thesis or central argument. Ensure that your position is clear from the outset and that each section of your essay supports this argument.

3. Incorporate Real-World Examples: Economics is all about real-world applications. Include concrete examples and case studies to illustrate economic concepts and theories. Whether you're discussing supply and demand or market structures, real examples can make your essay more relatable and engaging.

4. Proper Citation and Referencing: Accurate citation and referencing are crucial. Use a recognized citation style (such as APA, MLA, or Chicago) to give credit to the sources you've used. This not only adds credibility to your essay but also avoids issues with plagiarism.

5. Address Counterarguments: Acknowledging and addressing counterarguments demonstrates a deeper understanding of the topic. It also makes your essay more well-rounded and persuasive. Consider potential objections to your thesis and provide reasoned responses.

6. Maintain Clarity and Conciseness: Avoid unnecessary jargon or complex language. Ensure that your writing is clear and concise, making it accessible to a broad audience. If someone who is looking to buy essays on economics were to read your work, they should easily grasp your points.

How to Start Your Economics Essay

The beginning of your paper is your opportunity to grab your readers' attention and set the stage for the insights you'll provide. Here's how to start your essay effectively from our economics essay writing service experts:

1. Crafting an Engaging Introduction: The introduction is your chance to captivate your audience. You can start with an interesting fact or statistic related to your topic. For example, if your essay is about the economic impact of automation, you might begin with a startling statistic about job displacement due to automation in recent years.

2. Formulating a Strong Thesis Statement: Your thesis statement should be concise and crystal clear. It should convey the main argument or point you'll be making in your essay. Using the economics essay examples on automation, your thesis statement might be: 'Automation, while boosting productivity, presents significant challenges in the labor market, requiring innovative approaches to address unemployment and skill gaps.'

3. Hooking the Reader: In addition to your introduction, consider using a hook—a thought-provoking question or a compelling anecdote related to your topic. This can further engage your readers and draw them into the essay. For instance, after your initial statistic, you could pose a question like, 'But how will society adapt to this technological revolution?'

Structuring the Main Body of Your Essay

The main body of your economics essay is where the substance of your arguments and further analysis resides. Proper structuring is essential to ensure that your points are conveyed in such a way that they flow logically and persuasively. Here's how to effectively craft the main body of your economics essay:

1. Organizing Your Ideas Logically: Ensure that the sequence of ideas in your essay flows logically. Start with the main idea, such as the most important or fundamental concepts, and then progress to more complex or detailed points. For example, if your essay discusses the impact of government taxation policies on economic growth, begin with an overview of taxation principles before delving into specific policies.

2. Using Clear Headings and Subheadings: Break down your main body into sections with clear headings and subheadings. Each section should address a distinct aspect of your topic. These headings serve as signposts for your readers, making it easier for them to navigate through your essay. In the taxation essay, you might have sections like 'Taxation Principles,' 'Historical Tax Policies,' and 'Effects on Economic Growth.'

3. Providing Evidence to Support Your Arguments: Every point you make in your essay should be supported by evidence. Use data, statistics, academic research, or real-world examples to back up your claims. For example, when discussing the effects of taxation policies on economic growth, you can include data showing the correlation between changes in tax rates and fluctuations in GDP growth.

4. Addressing Counter Arguments: Acknowledging and addressing counter arguments demonstrates a nuanced understanding of the topic. Anticipate potential objections to your thesis and provide reasoned responses. If critics argue that lower taxes always lead to higher economic growth, for instance, you can present evidence that suggests otherwise.

Writing a Compelling Conclusion

The conclusion of your economics essay serves as the final opportunity to leave a lasting impression on your readers. A well-crafted conclusion should tie all the elements of your essay together and provide a sense of closure. Here's how to write a compelling conclusion:

1. Summarizing Key Points: Begin your conclusion by summarizing the key points and arguments you've presented in the main body of your essay. This recap reinforces the main takeaways for your readers.

2. Restating the Thesis Statement: Reiterate your thesis statement, but do so in a way that emphasizes the significance of your argument. This reinforces the central point of your essay.

3. Offering Insights or Implications: Take your essay a step further by offering insights or implications based on your analysis. Consider the broader significance of your findings. In the case of an essay on taxation policies and economic growth, you might discuss the potential policy changes that could promote economic growth while maintaining revenue.

4. Encouraging Further Thought: Conclude your essay by encouraging further thought or research on the topic. Suggest potential areas for future exploration or highlight any lingering questions. This not only demonstrates your depth of understanding but also leaves room for ongoing dialogue.

The Importance of Revision

Revision is a critical, often underestimated, phase in the process of writing a good economics essay. It's during this stage that your essay transforms from a rough draft into a polished, cohesive, and well-organized piece. Here's why revision is of paramount importance:

1. Enhancing Clarity: Revision allows you to review all your paragraphs for clarity in addressing the essay question. It's an opportunity to ensure that your ideas are expressed in a straightforward and comprehensible manner. Consider whether your arguments and explanations are easy to follow. If not, make the necessary revisions to improve clarity.

2. Polishing Grammar and Style: Revision is your chance to correct grammatical errors, typographical mistakes, and awkward sentence structures. A well-edited essay not only conveys professionalism but also ensures that your message is not overshadowed by writing issues.

3. Strengthening the Structure: During revision, you can evaluate the overall structure of your essay. Check whether your introduction effectively sets the stage, the main body logically flows from one point to the next, and your conclusion provides a satisfying resolution. Adjust the structure as needed to improve the overall flow and coherence of your essay.

4. Refining Arguments: Careful revision enables you to scrutinize your arguments and evidence. Consider whether the points you've made are adequately supported by data, examples, and analysis. If you find any gaps or areas for improvement, make the necessary adjustments.

5. Seeking Feedback: It's often beneficial to seek feedback from peers, professors, or writing tutors during the revision process. Fresh perspectives can highlight areas for improvement that you might have missed.

However, if you find the prospect of revising your work overwhelming or time-consuming, there's a convenient solution: you can simply ask for our assistance and say, ' write my essay online .' Our professional writers are here to ensure your essay is not only solid and well-structured but also error-free and ready to make a strong impact.

Final Thoughts

Mastering how to write an economics essay is a journey that demands dedication, research, and careful planning. Whether you're a student, a budding economist, or someone curious about the world of economics, embrace the challenge of essay writing with enthusiasm. Your research papers have the power to inform, inspire, and impact our understanding of this complex and ever-evolving field. So, keep writing, keep revising, and keep exploring the world of economics through the lens of your academic writing. And remember, there's support available if you ever choose to pay for essay to meet your academic goals!

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Why I Chose to Study Economics: A Student Shares Her Story

Just before my senior year of high school, I decided on a whim that I wanted to take the AP Economics course that my high school offered. Going into it, I had next to no knowledge about any economic topic.

At the time, my older sister, who was in college, had taken an economics course and told me that she found it interesting. This was definitely a contributing factor to my decision, since my older sister and I have always shared a lot of common interests.

Kaitlyn Hoevelmann took an economics class in high school and never looked back. Now, she enjoys putting her double major in economics and journalism to work at the St. Louis Fed. Learn about our diverse career and internship opportunities.

I felt drawn to the subject, and I was lucky that my school had the resources to offer the class.

Economics immediately became my favorite subject after that. I looked forward to class every day and joined Future Business Leaders of America (FBLA) to compete in the economics category. First, I had to take a test for the district level, and the people with the top scores would be sent to the state competition.

I had to take the test only a few months into the semester—we spent all of that time studying macroeconomics, and the test covered both macroeconomics and microeconomics, so I spent hours outside of school reading books and taking practice tests to try and learn as much as I could in a condensed amount of time.

I attribute the beginning of my persistent interest in economics to these moments spent learning on my own late at night or between homework assignments. I ended up placing in the district competition and qualifying for state, where I took another test and placed in the top 10.

I decided sometime during the school year that I wanted to major in economics in college. When I was admitted into the University of Missouri’s (Mizzou) journalism school, I decided to double major in economics and journalism. Since then, I have had a great deal of fun taking different economics courses in school, and I have had many brilliant economics professors to look up to and learn from.

I also have enjoyed my position as a peer learning assistant for an introductory economics course at Mizzou designed for journalism students. In this position, I have held office hours for students to come to me for help, graded assignments and hosted review sessions.

I find the subject complex and challenging, and it is my personal mission to understand as much as I can and constantly learn more. It feels like each question and topic I face is a puzzle that needs to be solved, and I enjoy putting the pieces together.

Another experience that led me to study economics—and to the St. Louis Fed in particular—is when I went there on a field trip with my AP Economics class. We visited the Economy Museum and heard from an economist.

Based on the beautiful lobby, the friendly atmosphere and the great work that is done here, I knew the first step in my career would be getting accepted into the summer internship program at the Fed . I reached this goal in 2019, the summer after my sophomore year at Mizzou.

I’d like to someday dedicate my career to making economics more understandable and accessible to people, since it’s incredibly important in everyday life to understand the economy and the way it works.

More to Explore

Editor’s note: Kaitlyn has written about a range of economics topics. Check out her work:

• What’s a Countercyclical Capital Buffer?
• The Economic Costs of the Opioid Epidemic
• How Payday Loans Work

Plus, listen to our Women in Economics podcast to hear real stories about prominent professionals making their marks in the field of economics.

Kaitlyn Hoevelmann was a Public Affairs writer at the St. Louis Fed.

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This blog explains everyday economics, consumer topics and the Fed. It also spotlights the people and programs that make the St. Louis Fed central to America’s economy. Views expressed are not necessarily those of the St. Louis Fed or Federal Reserve System.

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Economics Essay Examples

Ace Your Essay With Our Economics Essay Examples

Published on: Jun 6, 2023

Last updated on: Jan 31, 2024

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Are you struggling to understand economics essays and how to write your own?

It can be challenging to grasp the complexities of economic concepts without practical examples.

But don’t worry! 

We’ve got the solution you've been looking for. Explore quality examples that bridge the gap between theory and real-world applications. In addition, get insightful tips for writing economics essays.

So, if you're a student aiming for academic success, this blog is your go-to resource for mastering economics essays.

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What is an Economics Essay?

An economics essay is a written piece that explores economic theories, concepts, and their real-world applications. It involves analyzing economic issues, presenting arguments, and providing evidence to support ideas. 

The goal of an economics essay is to demonstrate an understanding of economic principles and the ability to critically evaluate economic topics.

Why Write an Economics Essay?

Writing an economics essay serves multiple purposes:

• Demonstrate Understanding: Showcasing your comprehension of economic concepts and their practical applications.
• Develop Critical Thinking: Cultivating analytical skills to evaluate economic issues from different perspectives.
• Apply Theory to Real-World Contexts: Bridging the gap between economic theory and real-life scenarios.
• Enhance Research and Analysis Skills: Improving abilities to gather and interpret economic data.
• Prepare for Academic and Professional Pursuits: Building a foundation for success in future economics-related endeavors.

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If you’re wondering, ‘how do I write an economics essay?’, consulting an example essay might be a good option for you. Here are some economics essay examples:

Short Essay About Economics

A Level Economics Essay Examples

Here is an essay on economics a level structure:

Band 6 Economics Essay Examples

Here are some downloadable economics essays:

Economics essay pdf

Economics essay introduction

Economics Extended Essay Examples

In an economics extended essay, students have the opportunity to delve into a specific economic topic of interest. They are required to conduct an in-depth analysis of this topic and compile a lengthy essay. 

Here are some potential economics extended essay question examples:

• How does foreign direct investment impact economic growth in developing countries?
• What are the factors influencing consumer behavior and their effects on market demand for sustainable products?
• To what extent does government intervention in the form of minimum wage policies affect employment levels and income inequality?
• What are the economic consequences of implementing a carbon tax to combat climate change?
• How does globalization influence income distribution and the wage gap in developed economies?

IB Economics Extended Essay Examples 

IB Economics Extended Essay Examples

Economics Extended Essay Topic Examples

Extended Essay Research Question Examples Economics

Tips for Writing an Economics Essay

Writing an economics essay requires specific expertise and skills. So, it's important to have some tips up your sleeve to make sure your essay is of high quality:

• Start with a Clear Thesis Statement: It defines your essay's focus and argument. This statement should be concise, to the point, and present the crux of your essay.
• Conduct Research and Gather Data: Collect facts and figures from reliable sources such as academic journals, government reports, and reputable news outlets. Use this data to support your arguments and analysis and compile a literature review.
• Use Economic Theories and Models: These help you to support your arguments and provide a framework for your analysis. Make sure to clearly explain these theories and models so that the reader can follow your reasoning.
• Analyze the Micro and Macro Aspects: Consider all angles of the topic. This means examining how the issue affects individuals, businesses, and the economy as a whole.
• Use Real-World Examples: Practical examples and case studies help to illustrate your points. This can make your arguments more relatable and understandable.
• Consider the Policy Implications: Take into account the impacts of your analysis. What are the potential solutions to the problem you're examining? How might different policies affect the outcomes you're discussing?
• Use Graphs and Charts: These help to illustrate your data and analysis. These visual aids can help make your arguments more compelling and easier to understand.
• Proofread and Edit: Make sure to proofread your essay carefully for grammar and spelling errors. In economics, precision and accuracy are essential, so errors can undermine the credibility of your analysis.

These tips can help make your essay writing journey a breeze. Tailor them to your topic to make sure you end with a well-researched and accurate economics essay.

To wrap it up , writing an economics essay requires a combination of solid research, analytical thinking, and effective communication. 

You can craft a compelling piece of work by taking our examples as a guide and following the tips.

However, if you are still questioning "how do I write an economics essay?", it's time to get professional help from the best essay writing service -  CollegeEssay.org.

Our economics essay writing service is always ready to help students like you. Our experienced economics essay writers are dedicated to delivering high-quality, custom-written essays that are 100% plagiarism free.

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Understanding the Art of Economics

An argument in defense of free market capitalism in concern with the 2008-2009 recession and the structure of the United States’ economic system. This piece debunks Keynesianism and reveals major logical fallacies in the leftist school of thought. This paper is intended for American citizens, particularly those belonging to the academic and economics communities.

“The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups” (Hazlitt 2). These words, written by lauded economist Henry Hazlitt in his book,  Economics in One Lesson  (1946), are very relevant in today’s United States. Facing one of the worst economic crises in modern history, the nation is scurrying to find solutions to the mounting problems created by the collapse of the housing market. The Obama administration is passing massive stimuli and bailouts and is calling for more government intervention and regulations in order to control a market that they believe ran wild to create this mess. They are attacking capitalism by blaming it for the current problems, yet they fail to realize that it was anti-capitalist policies that inflated the crisis and that their currents actions are only furthering the damage. Their misguided response to the recession is the result of a failure to foresee the long term and widespread effects of certain policies; it is a failure in understanding what Hazlitt calls the “art of economics.” Upon an examination of history, economic laws, and the causes of this market downturn, it is clear that capitalism is not to blame, but it is the move away from it that has caused the problems the United States faces today. It is also evident that the interventionist policies currently being pushed by the left wing will only make things worse in the long run.

In order to decipher the causes of today’s problems, it is important to understand major economic theories as well as the policies that fall under them. A major driver behind the logical fallacies held by the current administration is the misunderstanding of what capitalism really means. As defined by Merriam-Webster dictionary, capitalism is “an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market” (Merriam-Webster). As clearly stated in the definition (and upheld by free market economists such as Ludwig Von Mises, Murray Rothbard, and F.A. Hayek), capitalism is against government intervention in the markets. Instead, it calls for the private sector to solve market problems with very little restraints from the government; it calls for a free market. 

A sizeable portion of the left wing is currently blaming free markets and capitalism for the issues that the United States is facing today. Many of these critics are believers in the Keynesian school of economic thought, a branch-off of capitalism, which opposes free markets and calls for the government to regulate the private sector. What they fail to realize is that the market during which the housing bubble arose and burst was far from free. Furthermore, an examination of economic data from the past few decades reveals that it was predominantly anti-capitalist parts of the market that created and inflated the problems that have led to the current recession. These malignant entities include the Keynesian-supported Federal Reserve (the central bank of the United States), large government sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac, and regulatory laws that dictated certain market outcomes. They in no way fall under capitalist theory and so, it is unjust to blame current economic problems on free markets (Sloss 1).

Among the most destructive and distortive government interventions leading up to the economic downturn were the actions of the Federal Reserve (the Fed). Established in 1913, the central bank’s primary purposes were to ensure market stability and stop bank runs. The institution has been given immense power in order to carry out these functions, namely the abilities to set the interest rate and control the inflationary and deflationary processes of the currency by printing money and serving as the backbone to the fractional reserve banking system (the main process through which United States currency is created.) Despite the colossal power in the hands of the Fed, it has failed to successfully fulfill its purpose. It has not created market stability as the United States economy has experienced recurring bubbles throughout the past century and it has not been able to prevent bank runs as they too have occurred in recent history (Kaufman 1).

The Federal Reserve not only failed to stabilize markets and banks, but economists from virtually every school of thought, including Keynesians such as economist Paul Krugman, agree that it drastically inflated the housing bubble, the trigger of this economic crisis, with dangerously low interest rates (Krugman 1). They also agree that the reason that banks have suffered runs recently is due to the severe overleveraging which allowed banks to spend and lend a lot more money than they actually had in reserves. This overleveraging was a result of the fractional reserve banking system that the Fed upholds and hence, the central bank directly supported it as well.

While these facts are commonly accepted, Keynesians fail to realize or acknowledge that capitalists do not support central banking institutions at all. This means that in a truly capitalist market, the Fed would never have been able to create these instabilities because it would have never existed. Instead, the market would set the rate competitively. There would never be artificially low rates that prop up untenable parts of the market or excessively high rates that suppress growth because the economic principles of supply and demand would dictate the availability of credit at sustainable levels (Sandelin 55). The supply-demand mechanism is the fundamental cornerstone of microeconomics and it is one that economists from every school of thought agree with (Mankiw 65). With an excess of credit, rates would go down and with a shortage of credit, they would go up. This would lead to stable growth instead of a pattern of bubbles and stagnation similar to what the Federal Reserve has created throughout its existence. The same would hold true for the monetary supply because supply and demand would stop excessive monetary inflation or deflation.

 The failure of the Federal Reserve is very apparent and the reason behind why it has failed is even easier to understand: no being has enough knowledge to judge the entire market accurately. This is because the market has virtually limitless variables including the non-quantitative variable of emotion. It is impossible for the Fed (or anyone) to set the best rate for the market because it is impossible to know what it is. Throughout world history, from Sweden in the 1600s to the Soviet banks to the Federal Reserve, central banks have only distorted markets due to their inability to accurately gauge them.

While Keynesians agree with capitalists in blaming the Federal Reserve for inflating the housing bubble, they fail to comprehend that the entity is not conducive to free markets. Capitalists are opposed to the system because it has historically failed to work and free markets provide a better alternative. Keynesians, on the other hand are still standing by central bank theory, blaming the Federal Reserve’s failures on former Fed chairman Alan Greenspan. Greenspan has publically vouched for free markets throughout his career and the left has used this as a means to tie the central bank’s shortcomings during his tenure with free markets. In doing so, they have neglected the definition of capitalism and hence, adhered to a logical fallacy that Greenspan’s actions fell under the umbrella of free markets. In reality, a capitalist economy would never even have a central bank.

Ironically, Keynesianism is one the theories that actually supports the idea of central banks. Maynard Keynes, the founder of the theory, clearly wrote in favor of having a central banking institution which regulates the markets and the currency. He also called for the government to intervene in markets during downturns of the business cycle and to regulate it in order to keep it stable (Hazlitt). In an attempt to do this, Keynesians fought for years to expand the Federal Reserve as well as other governmental regulatory institutions. Unfortunately, those pushes only led to more problems as many of those decisions ended up contributing to the housing crisis by propping up bad parts of the market.

Fannie Mae and Freddie Mac are two of those organizations and they were arguably second to only the Federal Reserve in the impact they had on the housing bubble. By law, these Government Sponsored Enterprises (GSEs) were forced to make certain loans to the banks regardless of how the banks were using the money. This meant that if the banks made risky decisions with GSE money, their losses would be covered even if the money was lost because the government would not let Fannie Mae or Freddie Mac fail. The government essentially insured risk for free. This prompted banks to make risky moves because they had nothing to lose. These unwise decisions are what have led to the credit crunch and billions of dollars in assets which are now considered toxic (worth less than the properties they represent.)

Keynesians point the finger at banks for making those unsafe decisions, but the corporations really can’t be blamed because companies act in the interest of profits. Even with regulatory agencies, a business always tries to raise profits. It is a fundamental proponent of the market economy. Fannie Mae and Freddie Mac only encouraged foolish decisions by offering a guarantee to the banks. In a capitalist system, these companies would have known that there was no government backing and hence, would have acted more responsibly because any money they lost would not be reimbursed. Their risky behavior was a symptom of the government’s involvement in the market, not a failure of capitalism.

Not only did Fannie Mae and Freddie Mac encourage bad behavior from the banks by backing loans, but they also dipped into the collateralized debt obligation (CDO) market by investing in it and propping it up. The CDOs were very risky investments and there was also a bubble in that market that eventually burst and led to severe losses for many investors including the GSEs. Fannie Mae and Freddie Mac not only collected losses, but also made the CDO bubble worse due to the sheer volume of resources that they pumped into the market and the fact that they acted as a buyer of the unstable assets (House of Cards). When the market collapsed, it was again the government that was forced to bail out these GSEs, something that would not have happened in a free market. The better alternative- the capitalist option- would have been to have Fannie Mae and Freddie Mac completely in the private sector, like the education loan backer- Sallie Mae. Sallie Mae was once a GSE as well; however, it was privatized in 1997. Since then, the corporation has experienced a lot more growth and it has made wiser decisions without government backing. The quality of the student loan market has also improved, with more competition and better choices for borrowers. As a consequence of privatization, Sallie Mae is thriving and is far from facing the sort of problems that Fannie Mae and Freddie Mac are up against today (Jaffee 6).

Sallie Mae is not the lone case of a private enterprise outperforming and being better for consumers than its governmental counterpart. History has proven over and over again that the private sector is the best at creating sustainable and stable growth. It is the private sector under a laissez-faire (“hands free”) government that fueled the American industrial revolution and paved the way for the United States to emerge as an economic superpower in less than two centuries after its creation. It is also the free market approach that is currently boosting China and India to the frontier of the world economy.

Government intervention has never resulted in strong, long-lasting growth or prosperity because governments are not as efficient as markets in solving problems. They rely on bureaucracy and politicians to get things done; whereas, free markets revolve around concrete microeconomic principles. The laws of supply and demand dictate everything from labor to goods to services. The price mechanism would adjust itself until the market reaches equilibrium- the point where the demand curve and supply curve cross and also the point at which there is optimal surplus for the market. Taxes and regulations only skew these curves and create deadweight losses (losses of economic efficiency) in the market (Mankiw 163). Central banks and credit backers such as the GSEs encourage bad behavior and prop up failing institutions, making market conditions even less stable.

Throughout the last century, market distortions have increased considerably in the United States due to government intervention. As a result, market conditions have been less stable and deadweight losses have increased. From the Federal Reserve Act of 1913 to Herbert Hoover’s regulations and Franklin D. Roosevelt’s New Deal to Lyndon B. Johnson’s Great Society and George W. Bush’s massive government expansion, the United States has been far from capitalist for a long time. Unfortunately, it still continues to move away from the theory that made it the greatest nation in the world. The Obama administration is now pushing big government and market intervention at rates not seen since the New Deal. This country is far from capitalist and with every push away from it, economic conditions in the United States—as in every other nation that has moved away from it in the past- become worse.

The Great Depression is a clear example as to why moving away from capitalism creates more problems than it solves. It is one of the most infamous economic events in modern history, yet what many do not know is that it was government intrusions in the market and socialist (a stark contrast to capitalism) actions that made the depression so detrimental. The economic downfall began in 1929 with the stock market crash. Herbert Hoover, who had assumed the presidency months earlier, vouched for the free market, while at the same time acting against them (much like Greenspan did) by implementing regulations and price controls. His interventionist policies worsened the market crash and after four years of meddling in markets the economy remained weak and he lost the 1932 presidential election to Franklin D. Roosevelt. Often referred to as FDR, the new president was a supporter of Keynesianism. Under the influence of Keynes, Roosevelt passed the New Deal- a collection of government programs that he felt would help the market rebound. This massive market interference and job creation by the government was very similar to the recent stimuli and bailout plans proposed and enacted by the Obama administration and the Federal Reserve.

Although the effects of the Obama stimulus are yet to be seen, the New Deal led to severe losses in the market as it dipped drastically despite showing some signs of relief during the last year of Hoover’s presidency. The New Deal only took the market to new lows in terms of growth and led to the nadir of the Great Depression. It would take a world war and the restructuring of the world economy in order to get the United States out of the Depression. All FDR did was simply continue Hoover’s interventionist, big government policies, but at an exponentially greater level.

In contrast, Warren G. Harding acted very differently during the depression of the early 1920s. It is an economic period in American history that is often overlooked due to its short life, but in reality that crisis had the potential to be just as detrimental, if not worse than the Great Depression (Folsom 1). The difference was that Harding had faith in the free markets and allowed the economy to correct itself. As a result of his laissez-faire approach, the economy recovered in less than five years. Both depressions were in a span of about 10 years, meaning that market conditions and technology were very similar during both, but the outcomes were drastically different due to the differing approaches the government took in response to the downturns. The free market approach clearly worked, whereas the Keynesian approach only made things worse (Woods 1).

Not only did the New Deal extend and worsen the Great Depression, but it also created many new government programs that have turned into major problems. This includes, but is not limited to Fannie Mae and Freddie Mac. The New Deal may have seemed beneficial at first, but further scrutiny reveals problems in the approach. Governments throughout history from FDR and the New Deal to the Soviets to Japan in the early 1990s have tried to fix market problems only to make things worse.

For this reason it is important to think twice before supporting bigger government. It is time for Americans to realize that more socialism and more government will only mean more problems in the long run. Many policies of the Bush and Obama administrations in response to the current crisis are already starting to backfire. For example, the bailout of the “Big Three,” has not helped the auto industry much. Chrysler is expected to file for bankruptcy soon and GM has seen little improvement. It is important to note that in order to give these funds to these companies; the government hurt successful parts of the market by taxing them in order to pay for bailouts. Not only did this prop up bad parts of the markets and reward companies that made poor decisions, but it stopped basic microeconomics from being able to correct market problems. Letting unproductive parts of the market fail would mean that the successful competitors of those entities would simply grow to take over the market share. This would mean that although some jobs may be lost when a company fails, other competitors would end up expanding and rehiring many of those people. By propping up failing companies, some jobs may be saved, but the risk of those companies still failing remains. The cost of this is that successful companies are taxed and unable to grow, meaning that they cannot hire new workers. Their stagnation may end up costing the American taxpayers a great deal of money while worsening market conditions at the same time. It is time to rethink the role of government and to realize that the government propping up dying parts of the market has and will always harm markets in the long run.

Bailouts and stimuli may seem great at first glance, but they always come at a cost- one that future generations usually have to pay. The people pay for it through economic losses, taxes, and the loss of freedoms that comes with taxes and regulation. From a political standpoint, market intervention may be appealing because spending a lot of money and meddling in markets makes it seem like one is doing something valuable in the eye of the unknowing public. When the facts are analyzed though, it is apparent that this is just not true. Free markets are the most efficient way to solve market problems and they are the path to prosperity. History has proven it and sound economic principles clearly support it.

Capitalism has always been about free markets and recent failures caused by government intervention in markets cannot be blamed on it. It is as simple as that. True capitalism calls for limited government, not central banks and excessive market regulators. The United States has been drifting away from capitalism for decades, but it is time to realize that this shift has only created more problems. Moving back to the fundamentals of capitalism will once again usher in a prosperous time for this great nation. It is time to rethink the models of Keynes and to remember the great words of wisdom from the founding fathers and free market capitalists such as Henry Hazlitt, F.A. Hayek, and Murray Rothbard. It is time to rethink the art of economics and remember the ways of the past.

Works Cited

"Capitalism." Merriam-Webster. 15 Feb 2009 <http://www.merriam-webster.com/dictionary/capitalism>.

Carden, Art. "The Myths of Capitalism's History."  Mises Institute . 11 May 2009. Ludwig Von Mises Institute. 11 May 2009 <http://mises.org/story/3455>.

Colonna, Marina.  Money and Business Cycles . Brookfield, VT: Edward Elgar Publishing Limitied, 1994. Print.

DiLorenzo, Thomas. "The New Deal Debunked."  The Free Market: The Mises Institute Monthly  24.1111 2004 Web.11 May 2009. <http://mises.org/freemarket_detail.aspx?control=515>.

Feldstein, Martin. "The Tax Rebate Was a Flop. Obama's Stimulus Plan Won't Work Either.."  Wall Street Journal  06 August 2008 Web.10 May 2009. <http://www.nber.org/feldstein/wsj080708.pdf>.

Folsom, Burt. "Why the New Deal Failed."  Accuracy in Academia . 2002. Accuracy in Academia. 11 May 2009 <http://www.academia.org/campus_reports/2002/summer_2002_3.html>.

Galbraith, James.  Unbearable Cost: Bush, Greenspan and the Economics of Empire . New York, NY: Houndmills, 2006.

Hazlitt, Henry.  Economics in One Lesson . New York, NY: Harper and Brothers, 1946. Print.

Hazlitt, Henry.  The Critics of Keynesian Economics . Princeton, NJ: D. Van Nostrand Company, Inc., 1960. Print.

"House of Cards."  Hulu . CNBC. 14 Apr 2009 <http://www.hulu.com/watch/59026/cnbc-originals-house-of-cards>.

Jaffee, Dwight. "Reining in Fannie Mae and Freddie Mac."  Securities and Investment . 26 Apr 2005. Cato Institute. 11 May 2009 <http://www.cato.org/pubs/regulation/regv29n3/v29n3-3.pdf>.

Kaufman, Wendy. "IndyMac Collapse Fuels Fears About WaMu." 17 July 2008. NPR. 11 May 2009 <http://www.npr.org/templates/story/story.php?storyId=92642046>.

"Keynes, John Maynard." Gale Encyclopedia of U.S. Economic History. Vol. 1. Detroit: Gale, 1999. 534-536. Gale Virtual Reference Library. Gale. 11 May 2009 <http://go.galegroup.com/ps/start.do?p=GVRL&u=umd_um>.

Koppell, Jonathan. “Hybrid Organizations and the Alignment of Interests: The Case of Fannie Mae and Freddie Mac.” Public Administration Review 61.4 June 2001 468. Web. 10 May 2009. <http://search.ebscohost.com/login.aspx?direct=true&db=ehh&AN=5191103&site=ehost-live>.

Kregel, J.A.. "Post-Keynesian Theory: An Overview."  Journal of Economic Education  14.4 1983 32-43. Web.10 May 2009. <http://search.ebscohost.com/login.aspx?direct=true&db=ehh&AN=5422110&loginpage=Login.asp&site=ehost-live>.

Krugman, Paul. "Greenspan and the Bubble ."  Editorials/ Op. Ed. . 29 Aug 2005. The New York Times. 11 May 2009 <http://www.nytimes.com/2005/08/29/opinion/29krugman.html>.

Ladenburg, Thomas. "Herbert Hoover and the Depression." Digital History 2-3. 16 Feb 2009 <http://www.digitalhistory2.uh.edu/teachers/lesson_plans/pdfs/unit9_7.pdf>.

Lingle, Christopher. "The Return of the Keynesians."  Ideas on Liberty . March 2003. Foundation for Economic Education. 11 May 2009 <http://www.fee.org/pdf/the-freeman/feat11.pdf>.

Mankiw, Gregory. "The Market Forces of Supply and Demand." Principles of Microeconomics . 5th ed. 2008. Print.

Marglin, Stephen. "Why Economists Are Part of the Problem."  Chronicle of Higher Education  55.25 27 February 2009 B7-B10. Web.10 May 2009. <http://search.ebscohost.com/login.aspx?direct=true&db=ehh&AN=36792489&loginpage=Login.asp&site=ehost-live>.

Rothbard, Murray.  America's Great Depression . Auburn, Al: Ludwig Von Mises Institute, 1963. Print.

Sandelin, Bo.  A Short History of Economic Thought . 2. New York, NY: Routledge, 2008. Print.

Skousen, Mark. "Japan and the Macroeconomic Debate."  From the President's Desk: Ideas on Liberty . March 2002. Foundation for Economic Education. 11 May 2009 <http://www.fee.org/pdf/the-freeman/skousen0302.pdf>.

Sloss, Dakin. "Capitalism Did Not Fail: An Objectivist's Perspective."  The Stanford Progressive . May 2009. The Stanford Progressive. 11 May 2009 <http://progressive.stanford.edu/cgi-bin/article.php?article_id=343>.

Wilkinson, Will. "Obama's Self-Immolating Capitalism."  The Cato Institute: Individual Liberty, Free Markets, and Peace . 19 March 2009. Cato Institute. 10 May 2009 <http://www.cato.org/pub_display.php?pub_id=10058>.

Woodbury, Denise. "Economic Systems." Encyclopedia of Business and Finance. Ed. Burton S. Kaliski. Vol. 1. New York: Macmillan Reference USA, 2001. 275-278. Gale Virtual Reference Library. Gale. 11 May 2009 <http://go.galegroup.com/ps/start.do?p=GVRL&u=umd_um>.

Woods, Thomas. "Beware of Obamanomics."  LewRockwell.com . 2009. 10 May 2009 <http://lewrockwell.com/woods/woods112.html>.

Yellen, Janet (2009) "The Mortgage Meltdown, Financial Markets, and the Economy,"  The B.E. Journal of Economic Analysis & Policy : Vol. 9 : Iss. 3 (Symposium), Article 3. <http://www.bepress.com/cgi/viewcontent.cgi?article=2230&context=bejeap>

Articles copyright © 2024 the original authors. No part of the contents of this Web journal may be reproduced or transmitted in any form without permission from the author or the Academic Writing Program of the University of Maryland. The views expressed in these essays do not represent the views of the Academic Writing Program or the University of Maryland.

Marginal Analysis Managerial Economics

This essay about the application of marginal analysis in managerial economics explores how managers utilize incremental analysis to make informed decisions across various business domains, such as production, pricing, resource allocation, and investments. It highlights key principles governing marginal analysis and provides real-world examples, like a software development company’s decision to invest in additional server capacity. By systematically evaluating marginal benefits and costs, managers can optimize decisions, enhance efficiency, and drive organizational success.

How it works

Amidst the ever-evolving landscape of managerial economics, the art of effective decision-making stands tall as a linchpin for organizational triumph. Each managerial choice, whether it revolves around production levels, pricing strategies, or resource allocation, bears substantial consequences for the firm’s trajectory. In this dynamic milieu, marginal analysis emerges as a beacon of economic reasoning, offering a structured methodology for assessing the incremental benefits and costs associated with diverse decisions. By harnessing this analytical tool, managers can navigate complexities with clarity, ensuring that their choices are well-informed and aligned with the overarching goals of the organization.

Marginal analysis, at its core, delves into the nuanced examination of incremental changes in benefits and costs stemming from specific decisions. It meticulously dissects the additional impact of altering a particular variable, be it production levels, pricing strategies, or resource allocations. For instance, a manufacturing firm might scrutinize the marginal cost of producing one more unit of a product or the marginal revenue garnered from selling an additional unit. By meticulously comparing these marginal values, managers can discern the desirability of different courses of action and pinpoint the optimal path forward.

To wield marginal analysis effectively, managers must adhere to several fundamental principles:

Marginal Benefit versus Marginal Cost: At the heart of marginal analysis lies the fundamental comparison between marginal benefits (MB) and marginal costs (MC). The guiding principle stipulates that an action should be pursued only if the marginal benefit exceeds the marginal cost. In essence, managers should continue expanding production or investment until the additional benefits from doing so equal the additional costs incurred.

Diminishing Marginal Returns: A cornerstone assumption underpinning marginal analysis is the principle of diminishing marginal returns. This economic tenet posits that as more units of a variable input (e.g., labor or capital) are added while keeping other inputs constant, the marginal benefit derived from each additional unit will eventually diminish. Consequently, managers must discern the point at which further increases in input lead to diminishing returns and adjust their decisions accordingly.

Sunk Costs: Marginal analysis disregards sunk costs, which are costs that have already been incurred and cannot be recovered. Instead, it focuses solely on the incremental costs and benefits associated with future decisions. By turning a blind eye to sunk costs, managers can avoid falling prey to the sunk cost fallacy, wherein they persist with a failing course of action merely because of past investments.

Marginal analysis finds multifaceted applications across various realms of managerial economics:

Production Decisions: In the domain of manufacturing and operations management, marginal analysis aids in determining the optimal level of output. By juxtaposing the marginal revenue (MR) generated from selling additional units with the marginal cost of production, firms can maximize profits.

Pricing Strategies: Marginal analysis informs pricing decisions by scrutinizing the marginal revenue obtained from selling one more unit at different price points and comparing it with the marginal cost. Through astute price discrimination techniques or dynamic pricing models, firms can augment profitability while capturing consumer surplus.

Resource Allocation: Whether it pertains to labor, capital, or other resources, managers rely on marginal analysis to evaluate the incremental benefits and costs associated with each allocation. By channeling resources toward their most productive uses, firms can bolster efficiency and overall performance.

Investment Decisions: Marginal analysis facilitates the evaluation of investment opportunities by juxtaposing the expected marginal revenue or returns with the marginal cost of investment. By funneling investments into projects with positive net present value (NPV) or marginal returns surpassing the cost of capital, firms can enhance shareholder value.

Decision-making under Uncertainty: Marginal analysis provides a structured approach to decision-making under uncertainty by considering the expected marginal benefits and costs based on probabilistic outcomes. Techniques such as decision trees or sensitivity analysis enable managers to navigate uncertainty and identify risk-mitigation strategies adeptly.

Consider the scenario of a software development company contemplating an investment in additional server capacity to accommodate burgeoning demand for its services. The company estimates that the cost of adding one more server is $10,000, while each additional server can yield an incremental revenue of $15,000 per year. Initially operating with five servers, the company conducts a marginal analysis to gauge the desirability of adding one more server:

• Marginal Cost (MC) = $10,000
• Marginal Revenue (MR) = $15,000

Given that MR exceeds MC ($15,000 $10,000), the company decides to invest in an additional server. However, it continues this meticulous analysis for subsequent server additions to ensure optimal resource allocation and profitability.

In summation, marginal analysis serves as a potent instrument for decision-making in managerial economics, enabling managers to methodically evaluate the incremental benefits and costs associated with diverse courses of action. By steadfastly adhering to the principles of marginal analysis and applying it judiciously across myriad business contexts, managers can optimize their decisions, fortify efficiency, and ultimately propel their organizations toward sustained success.

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Guest Essay

I’m an Economist. Don’t Worry. Be Happy.

By Justin Wolfers

Dr. Wolfers is a professor of economics and public policy at the University of Michigan and a host of the “Think Like an Economist” podcast.

I, too, know that flash of resentment when grocery store prices feel as if they don’t make sense. I hate the fact that a small treat feels less like an earned indulgence and more like financial folly. And I’m concerned about my kids now that house prices look like telephone numbers.

But I breathe through it. And I remind myself of the useful perspective that my training as an economist should bring. Sometimes it helps, so I want to share it with you.

Simple economic logic suggests that neither your well-being nor mine depends on the absolute magnitude of the numbers on a price sticker.

To see this, imagine falling asleep and waking up years later to discover that every price tag has an extra zero on it. A gumball costs $2.50 instead of a quarter; the dollar store is the $10 store; and a coffee is $50. The $10 bill in your wallet is now $100; and your bank statement has transformed $800 of savings into $8,000.

Importantly, the price that matters most to you — your hourly pay rate — is also 10 times as high.

What has actually changed in this new world of inflated price tags? The world has a lot more zeros in it, but nothing has really changed.

That’s because the currency that really matters is how many hours you have to work to afford your groceries, a small treat or a home, and none of these real trade-offs have changed.

This fairy tale — with some poetic license — is roughly the story of our recent inflation. The pandemic-fueled inflationary impulse didn’t add an extra zero to every price tag, but it did something similar.

The same inflationary forces that pushed these prices higher have also pushed wages to be 22 percent higher than on the eve of the pandemic. Official statistics show that the stuff that a typical American buys now costs 20 percent more over the same period. Some prices rose a little more, some a little less, but they all roughly rose in parallel.

It follows that the typical worker can now afford 2 percent more stuff. That doesn’t sound like a lot, but it’s a faster rate of improvement than the average rate of real wage growth over the past few decades .

Of course, those are population averages, and they may not reflect your reality. Some folks really are struggling. But in my experience, many folks feel that they’re falling behind, even when a careful analysis of the numbers suggests they’re not.

That’s because real people — and yes, even professional economists — tend to process the parallel rise of prices and wages in quite different ways. In brief, researchers have found that we tend to internalize the gains caused by inflation and externalize the losses. Those different processes yield different emotional responses.

Let’s start with higher prices. Sticker shock hurts. Even as someone who closely studies the inflation statistics, I’m still often surprised by higher prices. They feel unfair. They undermine my spending power, and my sense of control and order.

But in reality, higher prices are only the first act of the inflationary play. It’s a play that economists have seen before. In episode after episode, surges in prices have led to — or been preceded by — a proportional surge in wages.

Even though wages tend to rise hand in hand with prices, we tell ourselves a different story, in which the wage increases we get have nothing to do with price increases that cause them.

I know that when I ripped open my annual review letter and learned that I had gotten a larger raise than normal, it felt good. For a moment, I believed that my boss had really seen me and finally valued my contribution.

But then my economist brain took over, and slowly it sunk in that my raise wasn’t a reward for hard work, but rather a cost-of-living adjustment.

Internalizing the gain and externalizing the cost of inflation protects you from this deflating realization. But it also distorts your sense of reality.

The reason so many Americans feel that inflation is stealing their purchasing power is that they give themselves unearned credit for the offsetting wage increases that actually restore it.

Those who remember the Great Inflation of the ’60s, ’70s and early ’80s have lived through many cycles of prices rising and wages following. They understand the deal: Inflation makes life more difficult for a bit, but you’re only ever one cost-of-living adjustment away from catching up.

But younger folks — anyone under 60 — never experienced sustained inflation rates greater than 5 percent in their adult lives. And I think this explains why they’re so angry about today’s inflation.

They haven’t seen this play before, and so they don’t know that when Act I involves higher prices, Act II usually sees wages rising to catch up. If you didn’t know there was an Act II coming, you might leave the theater at intermission thinking you just saw a show about big corporations exploiting a pandemic to take your slice of the economic pie.

By this telling, decades of low inflation have left several generations ill equipped to deal with its return.

While older Americans understand that the pain of inflation is transitory, younger folks aren’t so sure. Inflation is a lot scarier when you fear that today’s price rises will permanently undermine your ability to make ends meet.

Perhaps this explains why the recent moderate burst of inflation has created seemingly more anxiety than previous inflationary episodes.

More generally, being an economist makes me an optimist. Social media is awash with (false) claims that we’re in a “ silent depression ,” and those who want to make America great again are certain it was once so much better.

But in reality, our economy this year is larger, more productive and will yield higher average incomes than in any prior year on record in American history. And because the United States is the world’s richest major economy, we can now say that we are almost certainly part of the richest large society in its richest year in the history of humanity.

The income of the average American will double approximately every 39 years. And so when my kids are my age, average income will be roughly double what it is today. Far from being fearful for my kids, I’m envious of the extraordinary riches their generation will enjoy.

Psychologists describe anxiety disorders as occurring when the panic you feel is out of proportion to the danger you face. By this definition, we’re in the midst of a macroeconomic anxiety attack.

And so the advice I give as an economist mirrors what I would give were I your therapist: Breathe through that anxiety, and remember that this, too, shall pass.

Justin Wolfers is a professor of economics and public policy at the University of Michigan and a host of the “Think Like an Economist” podcast.

The Times is committed to publishing a diversity of letters to the editor. We’d like to hear what you think about this or any of our articles. Here are some tips . And here’s our email: [email protected] .

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