Photo AI
Question 6
6 (a) With reference to Figure 1, explain one likely reason for the overall trend in the real prices of gas and electricity. (b) With reference to Extract A, discus... show full transcript
Step 1
Answer
One likely reason for the overall trend in the real prices of gas and electricity from 2004 to 2015 is the increase in demand for energy. As the economy expanded during this period, more households and businesses required energy, which led to upward pressure on prices. Additionally, fluctuations in global energy markets, including the cost of commodity inputs like gas and oil, would have contributed to increasing retail prices.
Step 2
Answer
The measures proposed by the CMA, such as creating a database to assist consumers in switching suppliers and making it easier to compare energy usage, are likely to increase competition in the UK energy market. By facilitating informed choice among consumers, these measures can empower users to seek better deals, potentially driving down prices. However, the effectiveness may be limited by the inertia of customers who may still prefer to stay with familiar suppliers despite having options. Additionally, new entrants to the market must overcome significant barriers to establish credibility and trust with consumers.
Step 3
Answer
Regulating energy suppliers' profits to a cap of 1.25% can benefit consumers, as it prevents excessive pricing and promotes affordability of energy bills. For consumers, this means potentially lower prices in a market where energy costs were previously rising sharply. However, suppliers may view this cap as limiting their profitability, which could discourage investment in infrastructure and innovation that is essential for maintaining supply reliability. In the long run, it could lead to a reduction in competition if companies exit the market due to unsatisfactory returns.
Step 4
Answer
Price elasticity of demand for energy may change due to factors such as the availability of substitute goods and changes in consumer behavior. First, if more renewable energy options become available, consumers may have alternatives to traditional gas and electricity, increasing elasticity as they can switch providers more easily. Secondly, government initiatives aimed at promoting energy efficiency can lead to a change in consumer consumption patterns, making demand more responsive to price changes as consumers become more aware of their usage.
Step 5
Answer
Businesses can collaborate with educational institutions to develop tailored training programs that meet the specific needs of the energy sector, thereby encouraging workers to develop niche skills that are in high demand. Government initiatives, such as providing incentives for continuous professional development and facilitating apprenticeships in the energy sector, can help retain talent. Additionally, regulatory measures to ensure job security in the midst of industry changes can stabilize employment within the sector, thereby reducing labour mobility.
Report Improved Results
Recommend to friends
Students Supported
Questions answered
Nature of Economics
Economics A - Edexcel
How Markets Work
Economics A - Edexcel
Market Failure
Economics A - Edexcel
Government Intervention
Economics A - Edexcel
Measures of Economic Performance
Economics A - Edexcel
Aggregate Demand (AD)
Economics A - Edexcel
Aggregate Supply (AS)
Economics A - Edexcel
National Income
Economics A - Edexcel
Economic Growth
Economics A - Edexcel
Macroeconomic Objectives & Policies
Economics A - Edexcel
Business Growth
Economics A - Edexcel
Business Objectives
Economics A - Edexcel
Revenues, Costs & Profits
Economics A - Edexcel
Market Structures
Economics A - Edexcel
Labour Market
Economics A - Edexcel
International Economics
Economics A - Edexcel
Poverty & Inequality
Economics A - Edexcel
Emerging & Developing Economies
Economics A - Edexcel
The Financial Sector
Economics A - Edexcel
Role of the State in the Macroeconomy
Economics A - Edexcel