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The travel and tourism industry Extract A Marginal productivity of cabin crew Cabin crew are responsible for loading passengers and providing in-flight meals - Edexcel - A-Level Economics A - Question 6 - 2021 - Paper 1
Question 6
The travel and tourism industry Extract A Marginal productivity of cabin crew Cabin crew are responsible for loading passengers and providing in-flight meals. Uni... show full transcript
Worked Solution & Example Answer:The travel and tourism industry Extract A Marginal productivity of cabin crew Cabin crew are responsible for loading passengers and providing in-flight meals - Edexcel - A-Level Economics A - Question 6 - 2021 - Paper 1
Step 1
Explain the likely impact of diminishing marginal productivity of labour on cabin crew staffing levels. Refer to Extract A in your answer.
Answer
Diminishing marginal productivity refers to the phenomenon where increasing the number of workers results in smaller increases in output. In the case of cabin crew for airlines, if United Airlines decreases the number of cabin crew members, they may initially maintain efficiency, but as the number of crew members continues to decrease, the existing crew may become overstretched, leading to a decline in service quality and potentially compromising safety.
By streamlining cabin crew staffing, United Airlines could achieve cost savings and potentially reallocate resources more effectively. However, they must carefully consider the balance between cost reduction and maintaining a standard of service that meets customer expectations.
Step 2
Examine the likely impact of Thomas Cook’s plan to reduce their airline emissions (Extract B), in the context of the social optimum position. Use an appropriate externalities diagram in your answer.
Answer
Thomas Cook's initiative to reduce airline emissions represents an attempt to address negative externalities associated with air travel, namely carbon emissions. By adopting more fuel-efficient practices, the company can mitigate its environmental impact, which aligns with achieving a more socially optimal equilibrium where the social costs of emissions are minimized.
In an externalities diagram, we typically illustrate the social cost curve above the private cost curve. The vertical distance between these curves represents the external costs. Thomas Cook's actions effectively move the private cost curve downward towards the social cost curve, promoting more effective allocation of resources and possibly altering travel consumer behavior toward more sustainable choices.
Step 3
With reference to Extract C, assess whether Thomas Cook’s failure was caused by the managerial-centric approach.
Answer
Thomas Cook’s managerial-centric approach seems to have significantly contributed to its failure. The directors’ focus on short-term profit growth, evidenced by the £75 million cost savings target, showcased a prioritization of immediate financial gain over long-term stability. This strategy neglects the risks and potential downturns associated with the evolving travel industry, such as market shifts caused by factors like Brexit and changing consumer preferences.
Moreover, the lack of a sustainable turnaround strategy indicates a reactive rather than proactive management style. This management approach may have led to insufficient crisis management when faced with adversity, ultimately culminating in the company’s collapse as it failed to secure necessary support from government and investors.
Step 4
With reference to Extract C, discuss the proposed government subsidy to prevent Thomas Cook from trading its shut-down point.
Answer
The proposed government subsidy of £150 million to aid Thomas Cook in navigating its financial difficulties raises significant concerns about the ethics of using taxpayer money to bail out failing businesses. While supporters may argue that such a subsidy could protect thousands of jobs and prevent travel disruption for numerous customers, skeptics may contend that it sets a dangerous precedent.
Investing public funds in a company that has repeatedly faced mismanagement issues could imply that poor business practices are tolerated if sufficiently large. This could lead to complacency among corporate leaders and a lack of accountability, as they might assume that government intervention will always be available to rescue them from failure.
Step 5
With reference to Extract C, briefly outline and evaluate the decision by Jet2 to increase capacity and flight routes.
Answer
Jet2's decision to increase capacity and flight routes can be interpreted as a strategic response to market demands in the wake of Thomas Cook’s exit. By seizing the opportunity to fill the void left by the collapse of a major competitor, Jet2 can expand its customer base and potentially increase market share.
This strategy could lead to economies of scale, reducing per-unit costs, and improving overall financial performance. However, rapid expansion entails risks, such as overcapacity and potential service degradation if not managed correctly. Ultimately, Jet2's success depends on executing this expansion effectively while ensuring that service quality remains high.