micro case studies

Question 1

give an example of a minimum price scheme

Answer 1

Alcohol minimum price Scotland 2018

Question 2

give an example of a subsidy

Answer 2

from 2013-2022, the US spent on average $17.6bn on agricultural subsidies

Question 3

give an example of a maximum price

Answer 3

• venezuela’s maximum price on food

- OFGEM gas price limits

Question 4

example of government restrictions on demerit goods

Answer 4

HFSS regulations restricting the advertisements of high fat sugar and salt products

Question 5

give an example of barriers to entry

Answer 5

patents for pharmaceutical companies on their drugs are 20 years

Question 6

give the supermarket market shares of 2022

Answer 6

TESCO - 27.9%
Sainsburys - 16.6%
ASDA - 14.4%
Morrisons - 9.9%
ALDI - 7.8%

Question 7

how much has each supermarket’s market share changed since 2017?

Answer 7

TESCO - down 0.2%
Sainsburys - down 0.9%
ASDA - down 1.2%
Morrisons - down 1%
ALDI - up 1.6%

Question 8

give an example of Monopoly exploitation

Answer 8

Google search - 89% market share

pays Apple $15bn a year to be main search engine on their products

Question 9

give an example of where firms act in societies interest

Answer 9

Body Shop doesnt test their products on animals

Question 10

give an example of how regulators control firms

Answer 10

water industry is controlled by OFWAT by introducing RPI + K meaning water companies can only raise their prices by the rate of inflation (RPI) + the amount of investment they put in (K)

Question 11

give an example of privatisation

Answer 11

royal mail 2014

Question 12

what were the downsides of this privatisation (royal mail)

Answer 12

• more than 12,000 jobs were lost from 2014-2018

- customer complaints of late deliveries increased by 51% from 2014-2018

Question 13

what is the CEO to average worker pay ratio in the UK

Answer 13

201:1

Question 14

give an example of a horizontal merger/intergration

Answer 14

the proposed merger between National Express and Stagecoach which would lead to them being the largest bus and coach provider

Question 15

how many vehicles and workers would the proposed merger have?

Answer 15

• 40,000 vehicles

- a workforce of approximately 70,000 people

Question 16

what is an example of managerial economies of scale in the proposed merger?

Answer 16

-about 50 jobs were to be expected to be cut from head offices, IT and corporate departments

Question 17

what were stagecoach and national express’s market share in 2020?

Answer 17

• Stagecoach - 26%

- National express - 7%

Question 18

what is an example of internal growth?

Answer 18

ASDA planning to roll out a number of ASDA On the Move stores at petrol stations owned by the Issa brothers (who also own Asda)

Question 19

what is an example of an oligopolistic market increasing in contestability and price competition

Answer 19

-the current supermarket price war was caused by discount supermarkets entering such as Aldi - incumbent firms such as Tesco and now Sainsbury’s have launched Aldi price match schemes showing price competition

Question 20

when was the water industry privatised?

Answer 20

1989 under thatcher

Question 21

how is the water industry an example of a natural monopoly?

Answer 21

most water and sewerage companies are regional monopolies as they have dedicated pipelines where household consumers cant choose to switch their supplier

Question 22

how has regulation of the water industry (RPI+K) led to better quality?

Answer 22

• there was £44bn worth of investment by water companies from 2015-2020
• overall drinking water quality was 99.96% in 2020

Question 23

how have the water companies been effected by X-ineficiency

Answer 23

-almost 3 billion litres of water leaked every day

Question 24

how does Ofwat regulate the monopoly other than the RPI+K?

Answer 24

• Ofwat sets wholesale price limits for each water company

- sets performance targets such as leakage reduction, reducing pollution incidents etc.

Question 25

what is an example of Ofwat having regulatory capture?

Answer 25

- Ofwat has been criticised by MPs and experts for allowing investors and senior executives to enrich themselves while failing to invest in crucial infrastructure - just 16% of rivers, lakes and coastal waters meet the "good ecological status"

Question 26

how much debt have water companies incurred since privatisation?

Answer 26

when privatised in 1989, there was no debt. now water companies have borrowed over £50bn

Question 27

how has competition increased in the water industry?

Answer 27

- in 2017, the UK govt introduced competition into the industry at retail level for businesses - businesses can now choose their water providers the same way they choose energy or telecom providers - this had let to new entrants such as EverFlow, Castle Water and ConservAqua

Question 28

what are some of the motivations for businesses to switch retail water supplier?

Answer 28

- reductions in water bills - more accurate water metering and billing (estimated 70% of bills are innacurate) - customer service

Question 29

how much has total capital investment for water companies decreased?

Answer 29

16% since privatisation yet dividends paid to shareholders have continued to grow

Question 30

how have externalities increased in water industry?

Answer 30

- frequent spillages of raw sewage | - surfers are 3 times more likely to have anti-biotic resistant e-coli in their gut than other people

Question 31

how has the price of water bills changed since privatisation?

Answer 31

-there has been a 40% real terms rise in household water bills since privatisation to 2019

Question 32

should the water industry be nationalised? YES

Answer 32

YES - public sector businesses more likely to achieve socially optimum outcome as private firms don't care about externalities - less need to charge higher prices to pay dividends to shareholders

Question 33

should the water industry be nationalised? NO

Answer 33

- puts a stress on government finances - government wont be able to invest as much as private firms would - no profit maximising incentive to improve efficiency - Govt would focus on short term, political decisions

Question 34

what are some conclusion points for nationalisation of water industry?

Answer 34

- is increased regulation more of an effective decision? | - which ownership would provide the greatest sustainability?

Question 35

do Unions actually lead to an increase in wages?

Answer 35

-on average, a unionised worker earns almost a 12% higher wage than a ununionised worker

Question 36

how much has dominos profit increased?

Answer 36

over doubled from 2013 to 2018

Question 37

how has gas demand fallen?

Answer 37

in the last 20 years, due to increased efficiency of gas usage, demand has fallen roughly 25%

Question 38

how have gas bills increased?

Answer 38

according to bbc, gas bills have had more than a 50% increase

Question 39

what is the energy price limit and how has it increased?

Answer 39

Ofgem place a price cap on a unit of gas, however, in february 2022, they increased the price cap by 54%

Question 40

how has the price limit led to energy companies going bust?

Answer 40

in the first two months of 2022, 3 energy firms went bust due tot he increase in wholesale prices in the EU. this is because they cannot pass the higher wholesale costs onto consumers due to the price cap, meaning they have to stomach the costs, which not all firms can do

Question 41

how much has the market share of Aldi and lidl increased since 2017?

Answer 41

as of april 2022, there market share has increased from 10.7% in 2017 to 15.4%

Question 42

how has the number of stores for aldi grown?

Answer 42

since 2013, the number of Aldi stores has almost X2

Question 43

how much has online retail sales increased for supermarkets since 2013?

Answer 43

it has more than tripled - it practically doubled from 2019 to 2021 due to pandemic

Question 44

how many workers does tesco employ?

Answer 44

around 340,000

Question 45

how are aldi and lidl so much cheaper?

Answer 45

the average basket for aldi and lidl are about £9 on cheaper than waitrose, this is because: - smaller range of items (bulk buying) - smaller ratio of staff to customers - higher MRPL - shorter opening hours (avoids unsocial hours payments) - relatively small marketing spend (fixed cost)

Question 46

what is the average financial cost for poor mental health in the finance and real estate industry

Answer 46

estimated to be over £3000 on average

Question 47

how much does deloitte estimate is lost for UK employers over costs related to burnout or mental health issues?

Answer 47

around £45 billion each year

Question 48

for a 4 day week, how much would productivity have to increase to prevent a drop in output?

Answer 48

-about a 16% increase, says the SMF