Photo AI
With reference to Figure 1 and Extract A, explain one likely reason for the change in the four-firm concentration ratio of the supermarket sector between 2010 and 2015 - Edexcel - A-Level Economics A - Question 6 - 2017 - Paper 1
Question 6
With reference to Figure 1 and Extract A, explain one likely reason for the change in the four-firm concentration ratio of the supermarket sector between 2010 and 20... show full transcript
Worked Solution & Example Answer:With reference to Figure 1 and Extract A, explain one likely reason for the change in the four-firm concentration ratio of the supermarket sector between 2010 and 2015 - Edexcel - A-Level Economics A - Question 6 - 2017 - Paper 1
Step 1
Explain one likely reason for the change in the four-firm concentration ratio of the supermarket sector between 2010 and 2015.
Answer
One reason for the change in the four-firm concentration ratio between 2010 and 2015 is the increase in market share of the leading supermarkets like Tesco and Sainsbury's. According to Figure 1, Tesco's market share increased from 28.6% to 30.5%, while Sainsbury's saw its share rise from 16.1% to 16.5%. This increased concentration indicates that these supermarkets have gained dominance over smaller competitors, potentially due to aggressive pricing strategies and marketing. As larger firms acquire more market share, it leads to consolidation in the industry, making it harder for smaller supermarkets to compete.
Step 2
Discuss the possible impact of supermarket monopoly power on both food suppliers and consumers.
Answer
Supermarket monopoly power can significantly impact food suppliers by reducing their bargaining power, leading to lower prices paid for products. This can drive smaller suppliers out of business and reduce competition. For consumers, while they may benefit from lower prices in the short term, over the long run, fewer suppliers could mean less choice and potentially higher prices as competition diminishes. Additionally, monopolistic practices may lead to lower quality products, as the motivation to enhance product standards diminishes when there's less competition.
Step 3
Examine measures the government might use to restrict the monopoly power of supermarkets.
Answer
The government might use several measures to restrict the monopoly power of supermarkets, including enforcing stricter competition laws to prevent anti-competitive behavior. They can also implement price controls to curb excessive pricing and promote transparency in pricing for consumers. Additionally, breaking up large supermarket chains or blocking mergers that would further consolidate market power could be effective. Moreover, introducing policies to support small and local businesses can enhance competition within the supermarket sector.
Step 4
Assess the ethical implications for Sainsbury's and Morrisons of the suggested merger between the two firms.
Answer
The suggested merger between Sainsbury's and Morrisons raises several ethical implications. One concern is the potential reduction in competition, which could harm consumers through higher prices and reduced choices. Additionally, the merger may lead to job losses, as overlapping roles are consolidated. This could have detrimental effects on employee welfare and local communities. On the other hand, proponents may argue that the merger could lead to greater efficiency and better resource allocation, potentially benefiting consumers in the long run. Overall, the ethical considerations revolve around balancing corporate interests with consumer welfare and community impact.