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Explain the likely impact of diminishing marginal productivity of labour on cabin crew staffing levels - Edexcel - A-Level Economics A - Question 6 - 2021 - Paper 1
Question 6
Explain the likely impact of diminishing marginal productivity of labour on cabin crew staffing levels. Refer to Extract A in your answer. Examine the likely impact... show full transcript
Worked Solution & Example Answer:Explain the likely impact of diminishing marginal productivity of labour on cabin crew staffing levels - 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.
Answer
The diminishing marginal productivity of labor indicates that as more cabin crew members are added, the additional output generated by each new hire becomes less significant. In the context of airline staffing, this suggests that after a certain point, hiring additional cabin crew might not effectively enhance service quality or operational efficiency. Consequently, airline management must carefully evaluate staffing levels to maintain cost-effectiveness while ensuring optimal service delivery.
Step 2
Examine the likely impact of Thomas Cook’s plan to reduce their airline emissions on the social optimum position.
Answer
Thomas Cook's plan to reduce airline emissions is likely to address the negative externalities associated with air travel. By implementing cleaner technologies and improving efficiency, the plan could shift the social optimum towards a more sustainable model. An externalities diagram would illustrate the reduction in social costs as emissions decrease, thus showing a movement towards achieving a better equilibrium between private and social costs. This could ultimately lead other airlines to adapt similar practices, benefiting the industry.
Step 3
Assess whether Thomas Cook’s failure was caused by the principal-agent problem.
Answer
The principal-agent problem occurs when the interests of the management (agents) diverge from those of the shareholders (principals). In the case of Thomas Cook, there is evidence suggesting that management decisions were not aligned with long-term shareholder value. Poor strategic decisions, such as inadequate responses to market changes, may have contributed to the company's failure, indicating a classic principal-agent problem where management's focus on short-term survival undermined the overall health of the company.
Step 4
Discuss the proposed government subsidy to prevent Thomas Cook from exiting its shut-down point.
Answer
The proposed government subsidy aimed at preventing Thomas Cook from exiting the market might provide immediate relief but raises questions about long-term effectiveness. While the subsidy could temporarily stabilize the company and protect jobs, it does not address the underlying issues causing financial distress. Assessing the long-term viability of the business model is crucial to ensure that taxpayer money is invested wisely without merely postponing inevitable market corrections.
Step 5
Evaluate the likely impact of Jet2’s expansion process on the travel and tourism market.
Answer
Jet2's expansion is likely to increase competition within the travel and tourism market. This expansion could lead to lower prices for consumers as Jet2 seeks to attract more customers and gain market share. In addition, an increase in capacity may improve accessibility to various destinations, enhancing the overall travel experience. However, it could also pressure competitors to lower prices and innovate, potentially leading to a market shake-up that benefits consumers but challenges existing operators.