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Using the information provided, explain one externality that arises in the food delivery market - Edexcel - A-Level Economics A - Question 1 - 2022 - Paper 3
Question 1
Using the information provided, explain one externality that arises in the food delivery market. (b) With reference to Extract B, examine whether the demand for del... show full transcript
Worked Solution & Example Answer:Using the information provided, explain one externality that arises in the food delivery market - Edexcel - A-Level Economics A - Question 1 - 2022 - Paper 3
Step 1
Explain one externality that arises in the food delivery market
Answer
An externality in the food delivery market is the negative impact of increased delivery vehicle traffic on urban congestion and pollution. As food delivery services grow, more vehicles are needed to transport meals, resulting in increased traffic congestion, which can lead to longer delivery times and greater emissions of greenhouse gases. This externality affects other urban residents who suffer from reduced air quality and increased travel time due to congested roads.
Step 2
Examine whether the demand for delivered food is price inelastic and income elastic
Answer
Demand for delivered food is often considered price inelastic, meaning that changes in price have a relatively small effect on the quantity demanded. Many consumers view food delivery as a convenient service that they are willing to pay for despite price increases. Conversely, demand can also be income elastic, as higher incomes may lead to more frequent use of delivery services. Consumers with increased disposable income may be more likely to opt for delivery rather than cooking at home, indicating a strong relationship between income levels and demand for food delivery.
Step 3
Discuss the likely effects of increasing integration within the food delivery market
Answer
Increasing integration within the food delivery market may lead to significant changes in competition and pricing. As companies like Just Eat and Deliveroo merge or collaborate, they can achieve economies of scale, potentially lowering costs and prices for consumers. However, such integration could also create monopolistic behaviors, diminishing choices for consumers and possibly leading to higher prices in the long term. Furthermore, integrated firms may focus more on profitability rather than ethical concerns, leading to reduced quality of service or treatment of delivery workers.