A farmer-owned dairy cooperative has 600 members. It negotiates with supermarkets on behalf of its members, who previously sold milk separately at prices th...
Question 1 Report
A farmer-owned dairy cooperative has 600 members. It negotiates with supermarkets on behalf of its members, who previously sold milk separately at prices that often failed to cover costs.
(a) Explain one possible benefit of the cooperative for its members. [2]
(b) State two factors that could limit the cooperative's market power. [2]
Answer Details
(a) The cooperative bargains as a larger supplier on behalf of 600 members. [1] This stronger bargaining position may secure a higher milk price or more stable contracts from supermarkets, increasing members' income. [1]
(b)
- Supermarkets may have alternative suppliers. [1]
- Imported milk may be available. [1]
Either factor reduces the cooperative's power because supermarkets can switch away rather than accept its preferred price. Other valid limits include high supermarket buying power or the cooperative producing only a small share of total supply.
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