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Teaching activity

In the News Teaching Activity – is the price of getting your nails done going to rise? (Apr 2024)

Elizabeth Veal

15th April 2024

Nail technicians earn a measly £7 an hour for their work, well below the minimum wage, so they have tried to unite to push their prices up last week.

It sounds like price-fixing or collusion in the nail bar industry, but companies are not obliged to increase their prices – each can make its own decision. The Competition and Markets Authority does not seem concerned either and is not planning to investigate. Nail Tech Org, the organisation promoting the ‘National Nail Price Increase’ date, believes it is offering good advice to nail bar owners who need a sustainable business model. The market could be described as monopolistic competition with contestability. If one nail bar pushes up its prices too high, it may well lose customers to competitors. However, recently nail bars have seen their costs rise significantly and it may be necessary for many to increase their prices to avoid shutting down. Expect to pay more for lovely nails in future!

Manicure price rise: Are you happy to pay more for your nails? - BBC News

1 What are the features of the nail bar industry that suggest it is a monopolistically competitive market?

2 Using the information in the article, identify the costs for nail bars that are fixed and the costs that are variable. Using a cost and revenue diagram, analyse how a rise in fixed costs is likely to affect the profits of a nail bar.

3 Discuss whether the ‘National Nail Price Increase’ should be investigated as a case of price fixing/collusion by the CMA?

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Elizabeth Veal

Liz has taught Economics for over 25 years, including several years as Head of Economics at leading schools.

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