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More Monopsony issues
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2. Recap so far What is a monopsony?
Name me a monopsonist industry / business

3. Syllabus requirements
Students should be aware of the significance of monopsony power for businesses operating in a particular market for example, the impact of supermarket monopsony power on suppliers.
Students are not expected to use diagrams to explain monopsony.

4. Your task…. Find out what’s so wrong with supermarkets & farmers.
Logon to Tescopoly

5. Read worksheet & answer Q’s
Read Case study on supermarkets & farmers, p
Complete DR p341/342 Q’s
Explain using the examples of supermarkets, what is meant by a monopsony (2 marks)
Using examples from the data, analyse how a monopsonist might exploit its powers to raise its profits.
Deicuss whether the UK supermarket chains have exploited their power to the cost of both suppliers and consumers.
Photocopy from Andertain p

6. Benefits of monopsonies
In evaluation it is important to remember some of the possible advantages from monopsony power:
Improved value for money – for example the UK national health service can use its bargaining power to drive down the prices of routine drugs used in NHS treatments and ultimately this means that cost savings allow for more treatments within the NHS budget
Producer surplus has a value as well as consumer surplus – lower input costs will raise profitability which might be used to fund capital investment and research
A monopsonist can act as a useful counter-weight to the selling power of a monopolist
In most supply chain relationships – for example between supermarkets and their suppliers – the long term sustainability of an industry requires that both benefit – if there are no mutually beneficial gains from trade, ultimately trade and exchange will break down.
The growth of the Fair Trade label and organisation is evidence of how pressure from consumers can lead to improved contracts and prices for farmers in developing countries.

7. Problems of Monopsonies
Monopsony has all the inefficiencies that monopoly has, it’s just reversed.
Instead of monopolists collecting an exorbitant sum for a good, the monopsonist can get the good for “less” than it would in the free market.
It can dictate the type of good and all its respects unilaterally.
It has complete control of the market.

8. Homework
Revise for assessment next week