By passing the middlemen in the chain of distribution can lead to _________

Question analysis: The question asks about the effect of "bypassing" middlemen (wholesalers and retailers) in the chain of distribution. This means producers sell directly to consumers.

Concept: The chain of distribution is: Producer → Wholesaler → Retailer → Consumer. Middlemen perform jobs such as buying in bulk, storing, breaking bulk, transporting, and retailing. They also employ many people, such as shop attendants, drivers, warehouse workers, and porters.

Step-by-step reasoning:

• Option A: unemployment of labour. If middlemen are removed, the workers they employ (sales staff, storekeepers, transporters, and the traders themselves) lose their jobs. This is a well-known consequence of eliminating middlemen. It fits.
• Option B: artificial scarcity. Artificial scarcity is created when middlemen hoard goods. Removing them would reduce this, not cause it.
• Option C: high prices. Removing middlemen typically lowers prices, since there are fewer profit margins added along the chain. This is the opposite of the claim.
• Option D: increased government tax revenue. There is no direct link. If anything, fewer trading businesses could reduce tax revenue.

Answer: Bypassing middlemen removes the trading jobs they provide, so it can lead to a problem of unemployment of labour.

Exam tip: For "removing middlemen" questions, remember the pros and cons:

• Advantages: lower prices, no hoarding, and producers get closer to consumers.
• Disadvantage: unemployment among distributive workers.

If the question asks for a negative effect, pick unemployment.