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The travel and tourism industry (a) Explain the likely impact of diminishing marginal productivity of labour on cabin crew staffing levels - Edexcel - A-Level Economics A - Question 6 - 2021 - Paper 1
Question 6
The travel and tourism industry (a) Explain the likely impact of diminishing marginal productivity of labour on cabin crew staffing levels. Refer to Extract A in yo... show full transcript
Worked Solution & Example Answer:The travel and tourism industry (a) Explain the likely impact of diminishing marginal productivity of labour on cabin crew staffing levels - Edexcel - A-Level Economics A - Question 6 - 2021 - Paper 1
Step 1
Explain the likely impact of diminishing marginal productivity of labour on cabin crew staffing levels.
Answer
The principle of diminishing marginal productivity suggests that as more cabin crew members are added, the additional output produced by each new hire will eventually decline. In terms of staffing levels, this could lead to an optimum number of cabin crew required to maintain efficient operations. Beyond this point, hiring more staff may result in redundancy and increased costs without a proportional increase in service quality or capacity. The management of staffing levels becomes critical in ensuring that the crew operates effectively without incurring unnecessary expenses.
Step 2
Examine the likely impact of Thomas Cook’s plan to reduce their airline emissions on the social optimum position.
Answer
Thomas Cook's initiative to reduce airline emissions addresses externalities associated with air travel, such as pollution. By implementing measures to lower emissions, the firm could align more closely with the social optimum, where the social costs of flying are reduced. An externality diagram would illustrate this by showing a rightward shift in the supply curve as costs decrease, potentially resulting in lower ticket prices and an increase in quantity consumed. Hence, if successful, this plan would contribute to a more socially optimal position for both consumers and the environment.
Step 3
Assess whether Thomas Cook’s failure was caused by the principal-agent problem.
Answer
Thomas Cook's demise can be attributed, in part, to the principal-agent problem where the interests of the owners (principals) diverged from those of the management (agents). If management made decisions that prioritized short-term profits over sustainable growth, this misalignment could lead to detrimental outcomes. The inability to effectively manage risks and respond to changing market conditions may indicate failures in governance, where management acted in their interests without adequate oversight, leading to the company’s eventual failure.
Step 4
Discuss the proposed government subsidy to prevent Thomas Cook from trading after its shut-down point.
Answer
The proposition of a government subsidy for Thomas Cook raises questions of economic justification. While it may prevent job losses and stabilize the market, it could also set a precedent for moral hazard, encouraging other firms to mismanage operations with an expectation of bailouts. This subsidy could assist in transitioning the business or protecting stakeholders, but it also requires careful consideration of fund allocation and long-term implications for market dynamics and competition.
Step 5
Provide a justified response to decisions by Jet2 in response to Thomas Cook’s collapse.
Answer
Jet2's decisions following Thomas Cook's collapse, such as expanding routes or increasing capacity, likely stem from an analysis of market opportunities that arise from reduced competition. This strategic move may allow Jet2 to capture a greater market share while enhancing customer service offerings. However, it also necessitates a careful assessment of operational capacity and demand forecasting to avoid overextending resources. Justifying such responses requires balancing growth opportunities against potential market saturation and maintaining service standards.