ECO

Classified in Economy

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2(a) (i) Combined market share of the four largest Grocery firms is 76%

2(a) (ii) Oligopoly is where a few large firms dominate The market

2(a) (iii) Price competition is when a firm might reduce price to gain customers from rival firms, or, to make the groceries more Affordable (e.G. BOGOF offers etc)

Non-price Competition: Firm might advertise, use loyalty cards, offer online shopping, or Offer free delivery. They would do this because for example a loyalty card will Encourage people to shop with the same company and so get points or coupons Quality, product differentiation.

2(a) (v) Bulk buying due to this they are able to Negotiate lower prices for goods

2(a) (VI) Diseconomies of scale lead to higher unit Production costs so firms may pass these on to consumers through higher prices. Moreover Collusion means firms might agree to restrict competition between Themselves to make more profit by raising price which makes consumers worse off Or by reducing customer service product quality might not improve over time. However it depends on the level of collision, if any, in the oligopoly. Competition Between oligopolists can work in consumers’ favor e.G. Lower prices. Economies Of scale not diseconomies might be achieved by the firms which might lead to Reduced costs and prices. Consumers can benefit from collusion if it means Firms invest more due to greater certainty over future profit levels. It also Depends on Government regulation to protect consumers Collusion is illegal with High levels of fines if found guilty so firms are unlikely to carry out this Practice. Furthermore firms may even get permission to collude from regulatory Authorities e.G. Case of pharmaceutical companies in order to avoid duplication Of research - so consumers could gain improved product quality.

2(b) (i) Total revenue has fallen

2(b) (ii) new technology such as the internet so it is Easier or quicker or cheaper to send by email. Moreover new firms enter the Market so they offer consumers more choice or better customer service or lower Price

2(b) (iii) Correct option A

Oligopolies question Oligopolies can limit consumer’s Choice as there are only a few large firms in the industry so consumer choice Is limited. Sometimes the oligopolies produce identical goods and services for Example petrol so there is no substitute therefore there is a little choice. On The other hand it could be argued that Oligopolies not always limit consumer’s Choice as most oligopolies may increase choice if they focus on non-price Competition this is product differentiation, similar products with range of Features or brands for example additives to petrol to keep engine clean, make It more economical. In conclusion choice will be limited as number of producers Is small but they can act in different ways depending on the product. In petrol Market choice is limited but in soap powder market a few firms produce many Differentiated products.

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