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Question 6 The travel and tourism industry Figure 1: Package holiday market share of the six largest providers, booked by UK residents, 2019 Figure 2: Jet2 package holiday prices to Sorrento - Edexcel - A-Level Economics A - Question 6 - 2021 - Paper 1
Question 6
Question 6 The travel and tourism industry Figure 1: Package holiday market share of the six largest providers, booked by UK residents, 2019 Figure 2: Jet2 package... show full transcript
Worked Solution & Example Answer:Question 6 The travel and tourism industry Figure 1: Package holiday market share of the six largest providers, booked by UK residents, 2019 Figure 2: Jet2 package holiday prices to Sorrento - 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 a stage where adding more variable inputs (in this case, cabin crew) results in smaller increases in output. As the number of cabin crew members increases, each additional crew member contributes less to operational efficiency and passenger satisfaction. This may lead to an optimal staffing level where additional hiring neither benefits service quality nor efficiency. For instance, if airlines like United Airlines, as referenced in Extract A, overstaff their cabins, they could face increased costs without proportional increases in service or revenue.
Step 2
Examine the likely impact of Thomas Cook's plan to reduce their airline emissions (Extract B, line 6) on the social optimum position. Use an appropriate externalities diagram in your answer.
Answer
Thomas Cook's plan to reduce airline emissions is likely an attempt to shift the private cost closer to the social cost. The social optimum occurs where marginal social cost equals marginal social benefit. By implementing greener technologies and practices, Thomas Cook can reduce negative externalities.
An externalities diagram would show the original demand and supply curves, with the original equilibrium point intersecting the marginal social cost curve away from the social optimum. As emissions decrease, the marginal social cost curve shifts downwards, leading to a new equilibrium that reflects lower costs and greater social benefit.
Step 3
With reference to Extract C, assess whether Thomas Cook's failure was caused by the principal-agent problem.
Answer
The principal-agent problem arises when there is a conflict of interest between parties; in this case, between Thomas Cook's management (agents) and shareholders (principals). Management decisions to expand aggressively despite financial instability could indicate a misalignment of incentives. The failure to address operational challenges, as noted in Extract C, suggests poor accountability of management to stakeholders and compounded issues like the Brexit vote impacting business. Hence, while the principal-agent problem may have contributed, other factors like market conditions also played a significant role.
Step 4
With reference to Extract C, discuss the proposed government subsidy to prevent Thomas Cook from entering its shut-down point.
Answer
The proposed government subsidy mentioned in Extract C represents an attempt to stabilize a failing business. While this could prevent immediate closure and protect jobs, it may lead to moral hazard, allowing Thomas Cook to take on undue risks believing support will always be available. Furthermore, taxpayer money would be at risk if the company’s fundamental issues aren't addressed. It’s crucial to assess whether such subsidies genuinely lead to sustainable changes or simply prolong inevitable failure.
Step 5
With reference to Extract C, provide evidence to support the decision by Jet2 to increase its capacity.
Answer
In Extract C, the decision by Jet2 to increase capacity can be supported by their market strategy in light of Thomas Cook's collapse. Jet2 may recognize a gap in the market due to reduced competition, aiming to attract former Thomas Cook customers. The analysis of market trends and booking patterns could provide evidence of increased demand, thus justifying the expansion. Such strategic agility in response to market changes reflects Jet2's intent to capitalize on shifting customer preferences and behavioral changes post-Thomas Cook.