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IB PAPER 1 MARKET FAILURE - Essay Example

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Market failure is normally a societal perspective of what should or can be done to better the situation. Market failure always prompts for immediate…
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IB PAPER 1 MARKET FAILURE
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IB PAPER 1 MARKET FAILURE

Download file to see previous pages... The big six have a great monopoly against smaller producers. The big six maximize profits while passing the cost to the consumer. There occurs a market failure because of the stranglehold caused by big producers. According to The Guardian Tuesday18 October 2013, the big six energy companies supply 99% of British households and make massive profits from a stitched-up market. They control almost all the markets energy supply. The guardian states that consumers are not supposed to pay high prices for energy bills while shareholders pocket greater profits from the situation.
The market failure in Britain’s energy supply creates an environment which calls for aggressive competition from alternative energy sources.it also creates the need to diverge to more eco-friendly sources of energy other than fossil fuel energy. Completion amongst the big firms sometimes drives energy prices down.
On the other hand competition from the big six producers ensures that there is no fair share of the market for the smaller producers in the market .market rules also make it complex and imposed excessive costs and terms of trade make it hard for the small players.
The effect on the energy suppliers is that they always reap big profit margins since there will always be demand for energy. Their domination will ensure that smaller players remain less dominant in the market. Consumers will be forced to pay the high tariffs the producers impose as long as no alternative low cost energy sources are exploited.
The competitive market and the interest of consumers can well be met by actions that reduce barriers to engage in energy supply market by the government (complex red tapes, high cost, and terms of trade).the big six Britain producers of energy reaps the most profit from the market failure that exist thus the companies end up maximizing their profit ...Download file to see next pagesRead More
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