The Irish government introduced a ‘Cycle to Work’ scheme to promote cycling. This provides tax incentives to encourage employees to cycle to and from work. This has led to a large increase in the demand for bikes. 1. Draw the equilibrium position in the bike market before the introduction of the ‘Cycle to Work’ scheme.
2. Illustrate what effect you think the ‘Cycle to Work’ scheme will have on the demand curve for bikes.
3. List three economic and three social effects that you think the increase in demand for bikes has had.
4. Name and explain two factors which you think infl uence the supply of bikes.
5. If the government increased VAT on bikes by 50% what effect do you think that this would have on the demand curve for bikes? Use a diagram to illustrate your answer.
4. Are all markets competitive? Not all markets are competitive. Some markets have very few or just one supplier. This can mean little or no real competition.
A monopoly exists where there is only one seller in the market. As a result, the seller has a lot of power over setting prices. A monopoly market is the opposite of a competitive market. Without competition, prices tend to be higher and there is less incentive to provide good customer service.
Example: Irish Rail has a monopoly on the supply of rail services in Ireland.
An oligopoly is a market that is dominated by a few very large suppliers. Competitors in oligopoly markets tend to avoid competing on price so that their profi ts are not reduced.
Example: In Ireland the electricity, mobile phone and crisp markets are examples of oligopoly markets.
