Theme 3.4.6 Flashcards
(12 cards)
Define monopsony
The sole employer of labour in a given profession
AO2 - Cuts to junior doctor pay & NHS
In 2016, UK health secretary Jeremy Hunt announced changes in how junior doctors will be paid :
Longer working hours
Cut overtime pay for doctors working nights
Cut pay to £12/h
NHS controls 90% of UK healthcare market, giving them the power to force wages down
Give another example of a monopsony
Network Rail
How do supermarkets demonstrate monopsony power?
Supermarkets collude together to act as a monopsonist and offer farmers lower prices for their food -> farmers have no choice to accept
Explain how a monopsony can reduce its wages it pays its workers
A monopsony is when there’s only one buyer in the market (e.g the NHS is the only buyers of doctors in the UK). A monopsony can reduce the wages it pays its workers and the workers will have no choice but to accept , because they have nowhere else to work.
Define national minimum wage
The lowest wage employers can hire a worker for
AO2 - National Minimum Wage 2025
Aged 18-20 : £10 (increased from £8.60)
Aged 21+ : £12.21 (increased from £11.44)
What are the costs and benefits of a monopsony to consumers
Lower prices and increase in CS if monopsonist passes on cost savings.
Restrictions in supply and/or less choice of suppliers leave the market or cut output.
Fall in quantity if suppliers reduce the quality of their products as a result of being squeezed by the monopsonist
What are the costs and benefits of a monopsony to the monopsonist
Higher profits by being able to buy at lower prices. This reduces its C.O.P and is likely to lead to an increase in overall output because of a downsward shift in its marginal cost curve.
Whilst overall output is likely increase, supply of inputs over which the firm has monopsony power will fall. Increase in produce surplus
What are the costs and benefits of a monopsony to employees
Some employees may question the ethics of their employers.
Employers of suppliers may face uncertainty about jobs.
Employees of monopsonist may see an increase in jobs available due to the reduction in costs. However is less if supplied then the monopsonist will see a fall in output which may lead to job losses.
What are the costs and benefits of a monopsony to supplier
Fall in price for goods supplied therefore fall in revenue and profit .
Less is supplied due to a fall in price.
Fall in their producer surplus given the lower price they receive.
May cause some firms to leave the industry if firms make less than normal profit in the long run.
