Edexcel A-Level Economics A2 3.3.1 2g Demergers Reasons for Demergers Impact of Demergers on Businesses Workers and Questions

Practise Edexcel IAL Economics 3.3.1.2g by explaining why firms demerge and evaluating effects on businesses, workers and consumers.

Exam points

define a demerger as separation into businesses and identify core-business focus as a reason
analyse lower LRAC, reduced diseconomies, managerial focus, specialisation and lower X-inefficiency after demerger
evaluate demerger outcomes using scale below MES, vertical-integration costs, legal or IT costs, redundancies and stakeholder effects

[Maximum number: 1]

In 2022 the pharmaceutical company GlaxoSmithKline (GSK) demerged from the consumer health business Haleon. GSK's shareholders believed that the businesses would be able to work more successfully as separate companies.

Which one of the following is the most likely reason why GSK decided to demerge from Haleon?

To benefit from external economies of scale

To diversify the business

To achieve diseconomies of scale

To focus on its core business

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Edexcel A-Level Economics A2 3.3.1 2g Demergers Reasons for Demergers Impact of Demergers on Businesses Workers and Questions question 1