Business Economics Report: Demand and Supply Analysis for ASOS Plc

This report provides a microeconomic analysis of ASOS Plc, a prominent online retail business. It begins with an introduction to microeconomic concepts, focusing on demand and supply. The main body of the report offers an overview of ASOS Plc, discussing its business model and market position. The core of the report delves into the concepts of demand and supply, explaining the law of demand and supply, and illustrating shifts and movements along the demand and supply curves with relevant diagrams. The report examines factors influencing demand and supply, such as consumer income and external market forces. The conclusion summarizes the key findings, emphasizing the practical application of microeconomic principles to a real-world business context. The report references various books and journals to support its analysis.

Contemporary
Business Economics

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Overview of ASOS Plc company................................................................................................3
Understanding Demand...............................................................................................................3
Understanding Supply.................................................................................................................7
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12
Books and Journals...................................................................................................................12

INTRODUCTION
Microeconomics is the study of economic concepts which are related to an individual
business unit. The concepts are helpful in answering many complex and important questions of
that unit such as demand, supply, equilibrium, prices etc. The study of these aspects work as
guidelines and offer useful insights necessary for understanding (Browning and Zupan, 2020).
In this report two useful concepts related to Demand and Supply, along with different
aspects of these concepts are comprehended. The report goes on discussing these concepts in
relation with an online retail business of United Kingdom, ASOS plc.
MAIN BODY
Overview of ASOS Plc company
ASOS is a high level British retail and fashion brand. The company is the one that
undertakes business online and offer its consumers Fashion wear and cosmetics products. Now,
since the business is the one that holds business operations through online medium, it is
understandable that ASOS is not a very old company in market. It was founded in year 2000 and
since then it is continuously operational with all time positive and rising graph. The new age
technologies of internet and digital media, together with large scale engagement of consumers
over these mediums, has helped company to secure good and reasonable growth in all these
years. The scale and size of business operations of ASOS plc are remarkable. The company is
selling over 850 brands over its website and the shipping engagements of company are no less
than 196 countries across the world. The initial tagline of company was “Buy what you see on
Films and TV”, also its business operations were limited to such products only. It was the
thinking of management then and there in company that people will be attracted towards such
products. But buy the course of time, changing business environment and competition has
induced company to widen its operations.
Understanding Demand
Demand for a product and commodity is referred to the quantity of products which are
demanded by consumers at a given point of time and at given prices of product. It is the
willingness of buyers to purchase products of ASOS plc. It has to be noted that, the demand for
products of ASOS is combined of two factors, one is the willingness of buyers to go over the
website of company and place their specific orders for the brand of their choice, and second is

the their willingness to pay for it because without willingness to pay demand will be rendered
merely a wish (De Quidt, Haushofer and Roth, 2018).
In the concepts of Microeconomics, Demand is governed by a law, called Law of
Demand. Law of Demand specifies that there is seen inverse relation between prices of product
and the demand in the market. Which means, with increase in prices of products of ASOS plc
demand for them will decrease, and with decrease in prices demand will increase. The law is
basically describing behaviour of consumers in market and is applicable in normal
circumstances. In graphical presentation, the curve which shows this relation is called Demand
curve.
In Microeconomics there are three aspects of Demand, which are comprehended with
changes seen over the Demand curve. The report has made understanding of all these three
aspects.
Movement along Demand curve
Movement along the demand curve is that concept of Microeconomics which directly
represents the law of Demand. In this concept, it is seen that with increase in prices, demand for
products are decreasing and with decrease in prices demand for Products of ASOS are
increasing. The concept is called Movement along Demand curve, because the changes in
demand with increase and decrease in prices are reflected over demand curve of ASOS plc in
such manner where the demand point fluctuate over the curve itself (Creutzig and et.al., 2018).
However, this is applicable only when other factors for ASOS plc are not in force and simply
market forces are driving demand. This can be understood from following Diagram.

Leftward Shift in Demand curve
Shift in Demand curve towards the left is indicative of decrease in demand for products
of ASOS plc. However, this do not happen with change or increase in prices but due to other
factors which are out of control of ASOS management. For example, if there is decrease in
demand for products because incomes of consumers are reduced, which is most relevant case in
business environment at present, as almost every economy in world is facing economic
slowdown. Then, it is obvious that at reduced incomes consumers will be able to buy lesser
quantities. Since this decrease is not because of increase in prices, and happens at the existing
prices demand will decrease, leading to curve shifting leftwards.
Illustration 1: Movement along Demand curve

Rightward Shift in Demand curve
Rightward shift in demand curve is increase in demand of commodities of ASOS plc.
Like Leftward shift, this change in demand is also led by external factors and the increase in
demand is not seen by decrease in prices of products of ASOS (Guerrieri and et.al., 2020). For
example, changes of preference of consumers occur and they gets more engaged in buying
products from online retail sites, compared to present levels of online procurements. As seen
during the Pandemic and lockdown of economies. When shops were debarred from opening,
people were placing more and more orders on online sites. Therefore, demand for products of
ASOS increased at the existing prices only and curve was seen shifting rightwards.
Illustration 2: Leftward shift in Demand curve

Understanding Supply
Supply in Microeconomics can be described as the quantity of products that the suppliers
in the market are ready to supply at the given prices and at a given point of time. The concept of
supply is reflection of the behaviour of ASOS plc. It indicates that at particular prices of any
products, which the company have over its products portfolios on Website, how much ASOS is
ready to accept the orders of buyer for those products. In context of ASOS, it is relevant only for
acceptance of orders placed by consumers and the inclusion of products on the online portfolios.
Because, company itself is not manufacturing any clothes or cosmetic products,
In Microeconomics, Supply is governed by a law called Law of Supply. This law
specifies the attitude of Supplier in the market. It states that, in general conditions in market,
when other or external factors in market are constant, supplier will be supplying more products
with increase in prices and will be supplying lesser quantities with decrease in prices (Greenlaw,
Shapiro and Taylor, 2018). This attitude of supplier or ASOS is reasonable, because prices of
products are source of revenue for company, and therefore ASOS will be maintaining supply
consistent with prices. Because any factor leading to decrease in revenue/ prices will offer
burden over the cost of company and for maintaining its business operations company will be
required to decrease cost somewhere and supply will be reduced. Similarly, increase in prices
Illustration 3: Rightward shift in Demand curve

shall be generating higher revenues for company. Over the graph, this behaviour of suppliers is
depicted by Supply curve.
Likewise Demand, in Microeconomics Supply also has three aspects, discussed as
follows in report.
Movement along Supply curve
Movement along supply curve is basically depiction of Law of Supply over the graph. As
the law of supply indicates that with increase in prices of products, ASOS shall be supplying
more products to generate higher revenues, and with decrease in prices shall be supplying less to
prevent its cost. When this positive relation between price and supply is depicted on the Supply
curve of ASOS, any changes in prices will be affecting quantity supplied in such manner that
fluctuations will occur over the curve itself (Keppler, 2017). When quantity supplied will
increase it will be called expansion and when it will be decreased by supplier, it will be called
contraction.
Leftward Shift in Supply curve
Leftward shift in Supply curve is referred to as the decrease in quantity supplied of
commodities offered by ASOS plc, that is led by external factors in the business environment of
ASOS, and not by the decrease in prices of products, which is seen as direct relation. Here,
decrease is caused by factors that are beyond the control of management in ASOS. For example,
if the factor cost of business operations of company rises due to cause such as deflation etc. It is
Illustration 4: Movement along Supply curve

obvious that ASOS shall be trying to manage its operational cost and cut down its services.
Hence, quantity supplied will get reduced at existing prices only.
Rightward Shift in Supply curve
Rightward shift in Supply curve means increase in quantity supplied of products, by
supplier due to the force of external factors proving favourable for business scenario of ASOS.
For example, in case government start offering subsidies and tax cuts to online delivery business
for encouraging digital revolution in business environment or encourage trafficking of people
over these sites (Buechner, 2018). Than the costs for business operations of company will
reduce and ASOS can be increasing its services and supply of products to gather more revenue.
Hence, quantity supplied will increase at existing prices and curve can be seen shifting to
rightwards.
Illustration 5: Leftward shift in Supply curve

Illustration 6: Rightward shift in Supply curve

CONCLUSION
In the above discussion it the report, two major concepts of Microeconomics were studied
in relation to current business practices of a global online retail giant company, ASOS. The
understanding generated through this report has concluded that being aware of the basics of
economic concept can sometime seen giving answer to different complicated questions as well.
For example, when Leftward shifts in supply and demand curve were studied, a very complicated
question of current business environment have been answered that how economic slowdown is
affecting behaviour of businessmen and consumers as well.

REFERENCES
Books and Journals
Browning, E. K. and Zupan, M. A., 2020. Microeconomics: Theory and applications. John
Wiley & Sons.
De Quidt, J., Haushofer, J. and Roth, C., 2018. Measuring and bounding experimenter demand.
American Economic Review. 108(11). pp.3266-3302.
Creutzig, F. and et.al., 2018. Towards demand-side solutions for mitigating climate change.
Nature Climate Change. 8(4). pp.260-263.
Guerrieri, V. and et.al., 2020. Macroeconomic implications of COVID-19: Can negative supply
shocks cause demand shortages? (No. w26918). National Bureau of Economic Research.
Greenlaw, S. A., Shapiro, D. and Taylor, T., 2018. Principles of Macroeconomics 2e (OpenStax).
Keppler, J. H., 2017. Rationales for capacity remuneration mechanisms: Security of supply
externalities and asymmetric investment incentives. Energy Policy. 105. pp.562-570.
Buechner, M. N., 2018. A comment on the law of supply and demand. Journal of Philosophical
Economics. 11(2). pp.67-80.