3.4.6 - Monopsony COPY

Question 1

This is more for application but how does the UK get away with paying junior doctors so low ?

Answer 1

The NHS controls over 90% of the UK healthcare market! The NHS is pretty much the only place you can get a job as a doctor.

Which means the NHS can force down wages to as little as £12/hour - it knows the junior doctors will have no choice but to accept, otherwise they’ll go unemployed.

Question 2

What is a monopsony

Answer 2

• When there is only one buyer in the market. - This will allow the buyer to use its monopsony power and negotiate for lower prices as they know the seller isn’t receiving demand from elsewhere.
• A monopsonist is a price maker and will drive down prices from suppliers.

Question 3

Examples of pure non monopsony

Answer 3

NHS - Only place for doctors and nurses to go.
Network rail - They are the only one who are buying railway tracks so the suppliers who create railway tracks may be forced to push down their prices.

Question 4

In summary what will a maximum wage lead to ?

Answer 4

A maximum wage set BELOW equilibrium creates excess demand, or a shortage - the lower wage Wmax increases quantity demanded because workers are more cheaper to hire, but decreases the quantity supplied because big shot workers are less willing to work for these lower wages.
- This will help reduce inequality