Theme 3: Business Behaviour and
the Labour Market
Essay Plans:
1. Evaluate the existence of a natural monopoly on consumer welfare:
Point 1: Natural monopolies can lead to lower prices due to economies of scale.
Limitation: Lack of competition may reduce incentives for innovation and efficiency.
Point 2: Natural monopolies can provide essential services at affordable prices.
Limitation: Consumers may face reduced choice and quality of service.
Point 3: Regulation can mitigate the negative effects of natural monopolies.
Limitation: Regulatory capture or inefficiencies may undermine effectiveness.
Point 4: Natural monopolies may benefit from economies of scope.
Limitation: Scope economies may not fully offset the drawbacks of monopoly power.
2. What are the negative effects of a natural monopoly on consumers:
Point 1: Consumers may face higher prices due to lack of competition.
Limitation: Higher prices may not always result if monopolies operate efficiently.
Point 2: Reduced choice and innovation may limit consumer welfare.
Limitation: Monopolies may innovate to maintain market dominance.
Point 3: Monopolies may provide lower quality goods or services.
Limitation: Quality may be maintained if regulated or incentivized.
Point 4: Monopolies may exploit market power to the detriment of consumers.
Limitation: Regulation or antitrust measures can mitigate exploitation.
3. Evaluate the advantages and disadvantages of a natural monopoly:
Point 1: Natural monopolies can achieve economies of scale.
Limitation: Lack of competition may lead to inefficiency.
Point 2: Natural monopolies provide essential services.
Limitation: Lack of competition can result in reduced quality or innovation.
Point 3: Regulation can mitigate the drawbacks of natural monopolies.
, Limitation: Regulatory capture or inefficiencies may undermine effectiveness.
Point 4: Natural monopolies may benefit from economies of scope.
Limitation: Scope economies may not fully offset the drawbacks of monopoly power.
4. Evaluate the disadvantages of a significant increase in national minimum
wage on a specific labour market such as social care workers:
Point 1: A significant increase in the national minimum wage can improve the
standard of living for social care workers.
Limitation: Increased labour costs may lead to job losses or reduced hours for
workers.
Point 2: Higher wages may attract more skilled workers to the social care sector.
Limitation: Increased demand for labour may outstrip supply, leading to recruitment
challenges.
Point 3: Improved wages can enhance job satisfaction and reduce turnover in the
social care workforce.
Limitation: Higher wages may strain the budgets of care providers, particularly in
the public sector.
Point 4: Increased labour costs may necessitate higher fees for social care services.
Limitation: Higher fees may be unaffordable for some service users or strain public
budgets.
5. In 2016, Apple's market share for smartphones in the UK was 28%. Evaluate
whether such a high market share for one company is in the consumer's
interest:
Point 1: Apple's high market share may result from superior product quality and
brand loyalty.
Limitation: Lack of competition may lead to reduced innovation and higher prices
for consumers.
Point 2: Dominant firms may invest in customer service and ecosystem integration,
enhancing consumer experience.
Limitation: Lock-in effects may limit consumer choice and flexibility in the long
term.
Point 3: High market share can lead to economies of scale and cost efficiencies,
resulting in lower prices for consumers.
Limitation: Reduced competition may lead to complacency and diminished
incentives for firms to innovate or improve efficiency.
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