A causal chain skips an assumption when one step is true only under a condition you never wrote down. The fix is to ask “what must also be true for this link to hold?” after every arrow and write the answer in a few words.
This is a common reason why a correct idea earns less credit than expected. The examiner can only credit what is on the page.
What does a skipped assumption look like?
Here is a fictional case. A small café in an imaginary town, Kedai Kopi Senja, faces this question: Explain why the price of a cup of coffee may rise when the price of coffee beans rises.
A student writes: “Beans cost more, so the price of coffee goes up.”
The idea is right. The chain has only one arrow, and it hides three separate steps. The reader has to supply them.
How to find the hidden links
Write the chain as arrows first, then test each arrow.
- Start with the change: price of beans rises.
- Ask what it does to the firm: costs of production rise.
- Ask what the firm does: supply falls, because each cup is now less profitable to make at the old price.
- Ask what happens in the market: at the old price there is a shortage, so the equilibrium price rises.
Now test every arrow with “only if”. Costs rise only if beans are a real part of the cost.
Supply falls only if the café cannot fully absorb the cost. Price rises only if demand has not fallen by the same amount at the same time.
Worked example
Suppose beans make up 30% of the café’s costs and the bean price rises by 20%. Other costs stay the same.
Step 1, size the cost rise: 30% of costs rise by 20%, so total costs rise by 0.30 × 20% = 6%.
Step 2, link to supply: the café earns less profit on each cup at the old price, so it is willing to supply fewer cups at every price. The supply curve shifts to the left.
Step 3, link to the market: at the old price, quantity demanded is now greater than quantity supplied. The price rises until the market clears again.
Step 4, state the assumptions: this holds if demand stays unchanged, if beans are not cheap to substitute and if the café does not simply accept lower profit.
A full answer might read: “The rise in bean prices increases the café’s costs by about 6%, since beans are a large part of its costs. This reduces profit at the old price, so supply shifts left. Assuming demand is unchanged, there is a shortage at the old price, and the equilibrium price rises.”
You can test the 6% figure yourself with the percentage-base explorer, which shows the base at each stage.
The mistake to watch for
Mistaken answer: “Bean prices rise, which causes inflation, so prices rise in the whole economy.”
The student has jumped from one firm’s cost to economy-wide inflation.
A rise in one input cost changes the price of one product first. It becomes a general price rise only if many costs rise together, and that step is missing. Correct it by keeping the chain at the level the question asks: one market, one product.
A self-check you can do in two minutes
After writing a chain, go back and put a small tick or cross above each arrow.
- Can I name the reason this link works, not just the result?
- Did I say which other things stay the same?
- Is the link about the same market the question mentions?
Try it: fill the missing link
Chain: “Wages at a fictional textile firm rise, so the firm’s output falls.”
Missing link: higher wages raise costs of production, which reduces profit per unit at the old price, so the firm supplies less. It assumes the firm cannot raise productivity or pass the cost on to buyers at once.
Try it: what assumption is hidden?
Chain: “Incomes rise, so demand for cars rises.”
Hidden assumption: cars are a normal good, meaning demand rises when income rises. It also assumes prices and tastes do not change at the same time.
Where to go next
Practise applying the same habit to ratios in the ratios with interpretation limits tool, which also asks what evidence is missing. Keep your route organised with the Economics study route and build a stronger link between graphs and words in supply and equilibrium. The full Economics learning guide shows how the topics connect.
If you want someone to read your chains and ask “why?” at each arrow, online one-to-one Economics tuition includes a paid one-hour trial lesson where you can try it.