The UK energy market Figure 1: UK retail electricity and gas real price indices, 2004-2015 Figure 2: UK retail electricity and gas supply: market share by company, 2016 (a) With reference to Figure 1, explain one likely reason for the overall trend in the real prices of gas and electricity - Edexcel - A-Level Economics A - Question 6 - 2018 - Paper 1

The measures to increase competition in the UK energy market include creating a database to help customers switch suppliers and making smart meters more accessible. These initiatives are likely to improve consumer choice and may drive down prices through increased competition among suppliers. However, the effectiveness of these measures might be limited due to the existing dominance of large energy companies, which could resist changes that threaten their market position. Moreover, consumers may still be reluctant to switch suppliers if they perceive the switching process as cumbersome or if they are not well-informed about their options.

Regulating energy suppliers' profits, as indicated in Extract B, is likely to provide some benefits for consumers by capping excessive profits and ensuring more stable pricing. This could lead to fairer rates for consumers and greater overall satisfaction. However, such regulation may disincentivize suppliers from investing in infrastructure or innovation, as their profit margins will be restricted. Consequently, when profits are limited, suppliers may focus on minimizing costs, potentially leading to lower service quality, less innovation, and inadequate responses to changing consumer needs.

One reason for the change in price elasticity of demand for energy is the increasing integration of renewable energy sources, which often leads to lower long-term costs and potentially more inelastic demand as consumers become reliant on these sources. A second reason may be changing consumer attitudes towards energy consumption, driven by environmental awareness; as consumers become more conscientious of their energy usage, they may respond differently to price changes, potentially making demand less elastic if they view energy as a necessity for modern living.

To reduce labour immobility in the energy sector, businesses could implement training and apprenticeship programs aimed at equipping workers with skills that are in high demand. This would help address the skills shortage highlighted in Extract C. Additionally, the government could collaborate with educational institutions to promote careers in the energy sector, targeting young people with information on job opportunities and required qualifications. Policies that provide financial incentives for relocation or skills development could further assist in reducing labour immobility.