With reference to Figure 1 and Extract A, explain one likely reason for the change in the four-firm concentration ratio of the supermarket sector between 2010 and 2015 - Edexcel - A-Level Economics A - Question 6 - 2017 - Paper 1

The monopoly power of supermarkets can significantly impact food suppliers by creating challenging conditions, such as reduced negotiating power. Suppliers may be forced to accept lower prices than they would in a competitive market, which can threaten their profitability and sustainability. Furthermore, the reliance on major supermarkets makes many suppliers vulnerable to the buying power of these giants, leading to potential loss of contracts or cancellation of orders with little notice.

For consumers, supermarket monopoly power can lead to higher prices and reduced choice. While some may benefit from lower prices due to fierce competition, the lack of competition could ultimately allow a dominant supermarket to inflate prices over time. Moreover, consumers might face fewer product options, as large supermarkets often prioritize their own-label products over those from smaller brands, which may reduce variety in the market.

Governments have several tools at their disposal to restrict monopoly power in the supermarket sector. One approach is the enforcement of antitrust laws to prevent anti-competitive practices and mergers that would increase concentration unnecessarily. Regulatory bodies can undertake thorough investigations into supermarket practices, particularly concerning price-fixing or supplier exploitation.

Additionally, the government might introduce legislation that promotes fair trading practices, ensuring supermarkets adhere to codes of conduct regarding how they manage relationships with suppliers. Increasing transparency in pricing and supply chain practices can also empower consumers and suppliers alike, fostering a more competitive market environment.

'Information gaps' represent a significant challenge for food suppliers, as the inability to accurately forecast demand can lead to excess stock and wastage. This not only affects suppliers' profitability but also impacts overall supply chain efficiency. If suppliers cannot effectively communicate their needs and capabilities to supermarkets, it creates a gap that can exacerbate existing inefficiencies.

On the other hand, 'irrational behaviour' often refers to the unpredictable actions of consumers, which can complicate the forecasting process. While irrational consumer behaviour does create challenges, it may not be as detrimental as the systemic issues related to information gaps. Suppliers may face increased difficulty in adjusting to sudden changes in consumer preferences due to these gaps, potentially leading to higher levels of waste and reduced market responsiveness. Thus, while both factors are significant, information gaps likely pose a more critical and pressing issue for food suppliers in the current supermarket landscape.