micro case studies Flashcards
give an example of a minimum price scheme
Alcohol minimum price Scotland 2018
give an example of a subsidy
from 2013-2022, the US spent on average $17.6bn on agricultural subsidies
give an example of a maximum price
- venezuela’s maximum price on food
- OFGEM gas price limits
example of government restrictions on demerit goods
HFSS regulations restricting the advertisements of high fat sugar and salt products
give an example of barriers to entry
patents for pharmaceutical companies on their drugs are 20 years
give the supermarket market shares of 2022
TESCO - 27.9% Sainsburys - 16.6% ASDA - 14.4% Morrisons - 9.9% ALDI - 7.8%
how much has each supermarket’s market share changed since 2017?
TESCO - down 0.2% Sainsburys - down 0.9% ASDA - down 1.2% Morrisons - down 1% ALDI - up 1.6%
give an example of Monopoly exploitation
Google search - 89% market share
pays Apple $15bn a year to be main search engine on their products
give an example of where firms act in societies interest
Body Shop doesnt test their products on animals
give an example of how regulators control firms
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)
give an example of privatisation
royal mail 2014
what were the downsides of this privatisation (royal mail)
- more than 12,000 jobs were lost from 2014-2018
- customer complaints of late deliveries increased by 51% from 2014-2018
what is the CEO to average worker pay ratio in the UK
201:1
give an example of a horizontal merger/intergration
the proposed merger between National Express and Stagecoach which would lead to them being the largest bus and coach provider
how many vehicles and workers would the proposed merger have?
- 40,000 vehicles
- a workforce of approximately 70,000 people
what is an example of managerial economies of scale in the proposed merger?
-about 50 jobs were to be expected to be cut from head offices, IT and corporate departments
what were stagecoach and national express’s market share in 2020?
- Stagecoach - 26%
- National express - 7%
what is an example of internal growth?
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)
what is an example of an oligopolistic market increasing in contestability and price competition
-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
when was the water industry privatised?
1989 under thatcher
how is the water industry an example of a natural monopoly?
most water and sewerage companies are regional monopolies as they have dedicated pipelines where household consumers cant choose to switch their supplier
how has regulation of the water industry (RPI+K) led to better quality?
- there was £44bn worth of investment by water companies from 2015-2020
- overall drinking water quality was 99.96% in 2020
how have the water companies been effected by X-ineficiency
-almost 3 billion litres of water leaked every day
how does Ofwat regulate the monopoly other than the RPI+K?
- Ofwat sets wholesale price limits for each water company
- sets performance targets such as leakage reduction, reducing pollution incidents etc.
what is an example of Ofwat having regulatory capture?
- 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”
how much debt have water companies incurred since privatisation?
when privatised in 1989, there was no debt. now water companies have borrowed over £50bn
how has competition increased in the water industry?
- 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
what are some of the motivations for businesses to switch retail water supplier?
- reductions in water bills
- more accurate water metering and billing (estimated 70% of bills are innacurate)
- customer service
how much has total capital investment for water companies decreased?
16% since privatisation yet dividends paid to shareholders have continued to grow
how have externalities increased in water industry?
- frequent spillages of raw sewage
- surfers are 3 times more likely to have anti-biotic resistant e-coli in their gut than other people
how has the price of water bills changed since privatisation?
-there has been a 40% real terms rise in household water bills since privatisation to 2019
should the water industry be nationalised? YES
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
should the water industry be nationalised? NO
- 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
what are some conclusion points for nationalisation of water industry?
- is increased regulation more of an effective decision?
- which ownership would provide the greatest sustainability?
do Unions actually lead to an increase in wages?
-on average, a unionised worker earns almost a 12% higher wage than a ununionised worker
how much has dominos profit increased?
over doubled from 2013 to 2018
how has gas demand fallen?
in the last 20 years, due to increased efficiency of gas usage, demand has fallen roughly 25%
how have gas bills increased?
according to bbc, gas bills have had more than a 50% increase
what is the energy price limit and how has it increased?
Ofgem place a price cap on a unit of gas, however, in february 2022, they increased the price cap by 54%
how has the price limit led to energy companies going bust?
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
how much has the market share of Aldi and lidl increased since 2017?
as of april 2022, there market share has increased from 10.7% in 2017 to 15.4%
how has the number of stores for aldi grown?
since 2013, the number of Aldi stores has almost X2
how much has online retail sales increased for supermarkets since 2013?
it has more than tripled - it practically doubled from 2019 to 2021 due to pandemic
how many workers does tesco employ?
around 340,000
how are aldi and lidl so much cheaper?
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)
what is the average financial cost for poor mental health in the finance and real estate industry
estimated to be over £3000 on average
how much does deloitte estimate is lost for UK employers over costs related to burnout or mental health issues?
around £45 billion each year
for a 4 day week, how much would productivity have to increase to prevent a drop in output?
-about a 16% increase, says the SMF
