Assessment 1: Business Economics

Running Head: BUSINESS ECONOMICS 1
Assessment 1: Business Economics
Name
Affiliation

BUSINESS ECONOMICS 2
Assessment 1: Business Economics
1A. Supply and Demand
Question 1
When starting a new business, there are usually two expenses that the business owner is
bound to possess. These include fixed costs and variable costs. Fixed costs usually do not vary
with the sales volume while variable costs do. From the case study, Amazon Fresh would have
considered sales and marketing costs as a fixed cost and packaging costs as a variable cost.
Amazon Fresh is a grocery delivery company, which has been delivering various perishable and
non-perishable foods to its customers in parts of New York, Los Angeles, New Jersey and was
recently launched in United Kingdom. To buy the company`s products, consumers use the
Amazon Fresh app to carry out online shopping. There are several service categories, which are
provided by the company depending on the choice of the customers. Customers can choose
either an attended delivery where foods are delivered in plastic bags or an unattended delivery
where groceries are delivered to the doorstep of the consumer in tote bags with controlled
temperature. Before starting a new business in Australia, sales and marketing costs would be the
best fixed costs to be considered by Amazon Fresh. Since the company sells its products through
online shopping, promoting and marketing its business in a new market should be the major
target. More so, online shopping is steadily growing in the Australian supermarket industry and
there is already another company that is to say Woolies and Coles, which is performing
excellently in online shopping. Amazon Fresh therefore needs to invest more in promoting its
services to out compete the already existing company. For example, the company usually offers
free delivery to customers who spend more than 50 dollars on purchase in other countries where

BUSINESS ECONOMICS 3
it is operating its business from. It may also be an effective strategy that can be used by Amazon
Fresh to attract a large market share (Ward, 2014).
Digital marketing is one of the most effective strategies that are increasingly forming the
basis of the efforts employed by new businesses to attract numerous customers. This is carried
out through paid advertising that enable the business to be visible for keyword terms related in a
major search engine. After carrying out the initial marketing and gaining some significant sales,
Amazon Fresh will then have to acquire existing leads and potential customer databases so as to
put more investments in email-marketing so as to distribute its products to the highly-targeted
emails (Bragg, 2019).
Since variable costs occur depending on the volume of sales, Amazon Fresh would have
also considered the increase in packaging costs, which may occur if multiple numbers of
customers in Australia embraces its services. The company delivers its products in plastic bags
and temperature-controlled tote bags. To out compete the excellently performing companies in
Australian Supermarket Industry such as Woolies and Coles, Amazon Fresh would have used
unique, eye catching and perishable foods preservative packaging materials. In terms of shipping
and packaging, delivery is also a key business cost that varies depending on the volume of sales.
Apart from packaging, Amazon Fresh would have also considered delivery as a variable cost.
Transport and packaging costs usually increase as the business` sales increase. Conversely, the
company would have put into consideration the fact that its packaging as well as delivery costs
would increase if its sales had increased (Peavler, 2017).
1B. Pricing
Question 3