A-Level Edexcel Economics A Market Structures: With reference to Figure 1, brie

Question

With reference to Figure 1, briefly explain the market structure that describes the UK branded coffee shop market.

The UK branded coffee shop market is primarily characterized by an oligopolistic structure. This is evident from the concentration of major players such as Starbucks, Costa Coffee, and Caffè Nero, which dominate the market with significant shares. According to Figure 1, Starbucks leads the market with 13%, followed closely by Costa Coffee at 30%. The presence of a few firms that control a large portion of the market leads to limited competition, and companies often engage in non-price competition through branding and product differentiation. The remaining market share is fragmented among various smaller brands, indicating that while a few key players exist, there is still some competition in the market.

(b) With reference to Figure 3 and other information provided, discuss the price and promotional strategies that Starbucks may use.

Starbucks utilizes a premium pricing strategy, as indicated in Figure 3. Their prices for espresso drinks, such as the Espresso Double at £2.00, are positioned higher compared to competitors like Greggs and McDonald’s. Additionally, Starbucks promotes their brand through various means, such as loyalty programs and seasonal product offerings. This premium positioning not only differentiates them from cheaper alternatives but also cultivates a perception of quality and exclusivity. Starbucks could also implement promotional strategies like happy hour discounts, special offers for loyalty card users, and collaborations with other brands to attract customers and encourage repeat purchases.

(c) Examine the advantages of using an indirect tax as a means of reducing the use of disposable coffee cups.

Implementing an indirect tax on disposable coffee cups can yield several advantages. Firstly, it serves as a financial incentive for consumers to reduce their usage of single-use cups, as they may opt for reusable alternatives instead. Secondly, the revenue generated from this tax can be utilized to enhance recycling infrastructure and promotion of sustainable practices. Moreover, an indirect tax aligns with the principle of discouraging negative externalities; it acknowledges the environmental cost associated with disposable cups and encourages businesses to adopt eco-friendly alternatives. As consumers become more conscious of their environmental impact, the taxation can effectively drive behavioral change toward more sustainable consumption patterns.

With reference to Figure 1, briefly explain the market structure that describes the UK branded coffee shop market - Edexcel - A-Level Economics A - Question 1 - 2018 - Paper 3

Worked Solution & Example Answer:With reference to Figure 1, briefly explain the market structure that describes the UK branded coffee shop market - Edexcel - A-Level Economics A - Question 1 - 2018 - Paper 3

With reference to Figure 1, briefly explain the market structure that describes the UK branded coffee shop market.

With reference to Figure 3 and other information provided, discuss the price and promotional strategies that Starbucks may use.

Examine the advantages of using an indirect tax as a means of reducing the use of disposable coffee cups.

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