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Consider the Supermarket Industry. Tesco dominates the market with a 43% market share. Its closest rival is Sainsbury's with 19% of the market. Outline the potential costs and benefits of a merger between the two supermarkets.

Benefits: Economics of scale- shown on graph (movement to lower part of LRAC curve) can potentially pass on cost savings Profitability shared resources High tax revenue for the government Costs: Monopoly pow...
HV
Answered by Himesh V. • Economics tutor
2331 Views

Explain why average costs of a business may fall as it experiences growth.

A business may grow and experience lower average costs. This is due to economies of scale, which indicates that rising output results in lower costs. There are many types of economies of scale and it is impo...
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Answered by Gleb P. • Economics tutor
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Does currency devaluation lead to an increase in export revenue?

Let us assume a country with a fixed exchange rate such as Hong Kong. As devaluation only works when there is a fixed exchange rate, which is not governed solely by market forces (S&D). This allows for a...
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Answered by Gleb P. • Economics tutor
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Explain how government spending can lead to an increase in economic growth

Short run economic growth is known as Aggregate demand, otherwise known as GDP. Long run economic growth is known as Aggregate supply, otherwise known as real GDP. Government spending is a compenent of the a...
HH
Answered by Hassan H. • Economics tutor
5493 Views

Explain how an increase in interest rates may affect aggregate demand in an economy

The first thing to do is define aggregate demand and interest rates. The interest rate is the cost of borrowing and the benefit of saving—the extra money (expressed as a percentage) to be paid back on top of...
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Answered by Joe H. • Economics tutor
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