3.1.3 Demergers

Question 1

Demerger

Answer 1

A firm that decides to spit into separate firms.

Question 2

Impact of demerger: consumers

Answer 2

-Increases the level of competition in the market and therefore lower the prices and increase the choice for consumers.

Question 3

Impact of demerger: workers

Answer 3

-Workers could lose their job.
-Workers could be forced to move location.

Question 4

Impact of demerger: businesses

Answer 4

-Reduces market share and monopoly power in a market.
-> This might make the business less profitable.
BUT - it might become more profitable if it becomes more efficient (it is likely to sell off its least profitable or its loss-making parts).