Welcome to the 86th edition of our Newsletter EdGenie's 📜 Sunday Scroll...

Every Sunday I send out actionable tips, tricks and real-world application insights from my 15 year experience coaching students to achieve As and A*s in their Economics A Levels via EdGenie.

Hey Genies, 👋

Let's clear something up:

Your evaluation isn't just "the other side of the argument."

This is a massive misconception that’s costing you marks.

❌ This won't get you maximum marks:​

If your analysis says:

​"Higher taxes on sugary drinks reduce consumption and therefore improve public health."
Your evaluation shouldn't simply say:
​"However, businesses might suffer lower profits."

That's not the best evaluation; it's just a separate argument.

✅ Do this instead:​

Directly challenge the analysis you've made.

For example:

​"However, the effectiveness of higher taxes depends significantly on the price elasticity of demand for sugary drinks. Evidence shows these products are highly price inelastic due to consumer addiction and brand loyalty. In fact, there has only been a small reduction (around 10%) in sugary drink consumption despite tax increases. Thus, the desired health improvements may be far less significant than expected, reducing the effectiveness of this policy."

See the difference?

Your evaluation must be:
✅ Relevant to your analysis
✅ Supported with real-world evidence (or from case study)
✅ Explained in-depth

This is exactly what we drill into our students at EdGenie:

Real evaluation, genuine depth, no shortcuts.

If you’re tired of generic feedback and want guidance that actually moves you from a C to an A*,EdGenie is here.

Let’s get it right. Let's get those top grades. 🔥
You've got this.
Emre 🧞‍♂️

🧨 Price War Incoming
Asda has launched aggressive price cuts to win back market share, signalling the start of a possible UK supermarket price war.
📉 Profit Sacrifices
Asda and Tesco are willing to take hits to annual profits to fund price reductions and remain competitive.
🛒 Market Reactions
Investors were spooked, wiping over £4bn off the value of Tesco, Sainsbury’s, and M&S shares.
🧠 Strategic Signals
Tesco’s CEO, Ken Murphy, said the sector is too competitive to ‘blink’, implying the need to stay strong on pricing strategy.
📊 Profit Margins Compared
Tesco has the strongest margin (4.6%) compared to Sainsbury’s (3.2%) and Asda (under 3%), giving it more room to manoeuvre.
🪙 Asda’s Debt Burden
Asda’s £3.8bn net debt and high finance costs may limit its ability to maintain deep discounts long-term.
🏷️ Rollback Campaign
Asda relaunched its “rollback” campaign, cutting prices on nearly 10,000 products—about a third of its range.
🤝 Supplier Struggles
Analysts suggest Asda may struggle to gain supplier support for price cuts due to weak recent performance and strained relationships.
💡 Past Lessons from Discounters
Aldi and Lidl disrupted the market after 2008 by undercutting the "fat oligopoly," forcing traditional players to adapt.
⚖️ Inflationary Constraints
Rising employment and energy costs, along with a packaging levy, may limit the depth of discounts across all supermarkets.
📈 Food Prices Still Rising
Despite talk of price cuts, food inflation was 3% in March and is expected to rise—suggesting consumers may just see slower price increases, not actual reductions.
🧭 Asda’s Turnaround Vision
Executive chair Allan Leighton aims to re-establish a 5–10% price gap between Asda and rivals, hoping to rebuild the brand's budget reputation

Q. To what extent should firms such as Asda prioritise gaining market share over short-term profit maximisation?
A. Gaining market share helps firms increase sales volumes → exploit economies of scale → lower average costs in the long run. For Asda, this could restore its low-price identity and win back customers from Aldi and Lidl. However, it involves a short-term profit sacrifice, which may alarm investors and reduce retained profit for reinvestment. With high debt and interest costs, profit losses could threaten financial viability. If rivals like Tesco retaliate, the market share gains may be temporary. Yet, a stronger market position improves long-term pricing power and competitiveness. Ultimately, market share may be worth pursuing if supported by efficiency gains and a clear turnaround plan.

Q. Assess whether a firm such as Tesco is right to avoid initiating aggressive price cuts in response to competitors
A. Tesco’s strategy reflects caution in a competitive oligopoly. Avoiding price cuts protects its 4.6% margin and prevents a destructive price spiral. Game theory shows price leadership risks mutual losses → triggering low payoff equilibrium. Instead, Tesco focuses on targeted price reductions, brand loyalty (Clubcard), and superior supply chain management. This avoids margin erosion and preserves dynamic efficiency. However, if Asda gains market share rapidly, Tesco risks losing customers. Not acting may signal weakness, inviting pressure. But with rising costs and investor expectations, holding back from a full-scale price war maintains financial health. So, avoiding aggressive cuts is likely optimal unless market share starts slipping significantly.

Q. Explain how non-price competition might allow supermarkets like Tesco to maintain market share
A. Non-price competition lets Tesco retain customers without cutting prices. Strategies include loyalty schemes (e.g. Clubcard), wider product ranges, strong branding, online delivery, and customer service. These create brand attachment and reduce price sensitivity. Tesco also uses promotions on selected lines to create value perception without cutting prices across the board. These tactics sustain market share while preserving profit margins.

Q. Using cost and revenue analysis, explain why high levels of debt may limit a firm’s ability to engage in a price war.
A. High debt increases fixed costs through interest payments → raising break-even output. Firms like Asda face tighter cash flows, so lowering prices reduces revenue without proportionate cost savings. Price cuts compress margins and risk operating losses. With £3.8bn in debt, Asda must cover finance costs first, limiting scope to sustain long-term price reductions. Thus, financial constraints hinder aggressive pricing strategies.

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→ Join EdGenie 🧞‍♂️: Transform your A-Level Economics essays and exam marks (genuinely) with our comprehensive on-demand learning platform. This carefully curated course blends engaging content with effective exam techniques, the same ones that have empowered over 1,000 of my students to achieve an A or A* over the last 13 years.