1. You owe me poster
Selecting a market & identifying price discrimination and explaining using diagrams….

2. Monopsony theory
½ lesson intro

3. Syllabus Aims
To be able to explain and evaluate the characteristics and necessary conditions for a monopsony to operate.
To be able to evaluate the potential costs and benefits of a monopsony to both firms and consumers.

4. Monopsony Theory Intro
Definition
A monopsony exists when there is only ONE BUYER in the market.
Obviously there are very few pure examples of this!
There are real examples of monopsonistic behaviour as companies can exploit their powers.
Mrs Gordon's notes

5. Monopsonist characteristics
The sole buyer in the market
Sellers ‘cannot’ sell their products to other firms outside the market – only to the monopsonist!
They are profit maximisers, who aim to minimise their costs, by paying their suppliers the lowest price possible.

6. Can you think of any examples of monopsonies?

7. Examples of monopsonies

8. More Examples of monopsonistic behaviour

9. Nuclear arms
Governments should be the sole buyers

10. NHS - monopsony
The NHS remains the world’s third largest employer, suggesting huge scope to make savings by reducing the pay

11. Highways Agency & Road construction
Principal contractor: Balfour Beatty Civil Engineering
£147 million

12. Video hit
China’s monopoly behaviour in Peru

13. Monopsony Theory Intro
Micro diagrams!
Draw me a D & S curve
In a competitive market, what would be the price & output?
Where do you think the price & output would be under a monopsonist? (Remember, their aim is to pay as little possible!)
Monopsonist would be below equilibrium price with lower units supplied….
Mrs Gordon's notes

14. Monopsony Equilibrium
Textbook p 337

15. A monopsonist has buying power in their market.
This buying power means that a monopsonist can exploit their bargaining power with a supplier to negotiate lower prices.
The reduced costs of purchasing inputs increases their potential profit margins.

16. Homework - research
Tutor2U – do a search on monopsony – collect one of the ‘articles’ on monopsony and analyse key issues.
Also find & make notes on ‘Monopsony – power in the market’ – from T2U