Trampoline Business Analysis: Applying Microeconomic Theories to Costs

This case study examines the impact of soaring shipping costs on the trampoline market, employing microeconomic principles to analyze the situation. The report delves into the arguments presented in the case study, focusing on the microeconomic concepts of demand and supply, as well as elasticity. It highlights how increased shipping costs, driven by high demand for Chinese products and overall shipping services, affect the price of trampolines in the UK. The analysis applies the theory of demand and supply, illustrating the inverse relationship between price and demand and the positive relationship between price and supply. Furthermore, the concept of elasticity is used to explain how changes in price can significantly impact the demand for trampolines, which are considered luxury goods. The report concludes that rising shipping costs have a severe impact on the product market, affecting producers' ability to maintain previous price levels and influencing consumer expectations. Desklib offers this and many other solved assignments for students.

BUSINESS ENVIRONMENT

INTRODUCTION
•Business environment refers to the aspects which affects business operations in many
ways and also affects effectiveness, profitability and risk aspects too.
•In the report a case study is taken in which due to higher shipping costs the producers
of Trampoline a type of big toy are facing problems.
•In the report on the basis of the taken case study main arguments which are raised
would be discussed, using microeconomic terms and concepts.
•At the end of the report taking demand and supply theory and elasticity theory of
economics the issues would be deciphered.

MAIN ARGUMENTS OF THE ARTICLE
The cost of shipping are soared so are likely to cause a bounce in the cost of trampolines.
•Microeconomic concept of demand and supply refers that if the demand of some product or
service is high then will cause the prices up.
•Due to high demand of ships services are hiked so as per the law of demand causing shortage
of the services.
•As per the argument the demand of Chinese products is getting higher which causes shortage
of shipping services.
•Since the retailer is engaged in big toys business and having need of such transportation
system so can fulfil his business requirements.

Continued……
The raising cost of transportation would cause cost of trampolines in the UK.
•As the microeconomic concept of Scarcity articulates if a service of product is not available in
access then the cost will be surging.
•In the case where shipping services are experiencing hike in term of their demand in the market.
•Which would ultimately cause their prices higher and that's the reason behind hiking cost.
•The row material cost and services cost are directly related to the price determination of the
organization.
•The final cost is nothing but accumulation of various direct and indirect costs which are
occurred while going through the process of production.

Continued….
People would pay premium for new outdoor toy is the concerned raised by the producer.
•After experiencing higher shipping cost it would not be easier for the producers to provide the
product on previous prices.
•The anticipation of customers would also be affected since the higher shipping costs will not
allow the producer to keep the prices as expected.
•The basic principle of “Elasticity of demand” says if the product in elastic more than one, it
shows any changes in price will cause more to the demand.
•Trampoline is not an essential product which may offer necessity to the customers and make
them buy at any cost.

Application of microeconomic theory-
Demand and Supply-
•The theory of demand and supply cites that there is negative relationship
between prices and demand, and positive relationship between price and supply.
•If the prices are soaring then the demand would come down and vice verse in
case of supply.
•The demand of such toys is not regular or extremely necessary, this is a seasonal
business in which in a particular period such products are being sold.

continued…
•So due to higher cost the product would not be sold as much it should be.
•As the theory of short term says the maximum capacity can be used to meet the
demand of certain goods or services.
•As per the case currently the Chinese goods are extremely demanded across the world
and this is the main reason behind the shortage of shipping capacity.
•In these circumstances even the shipping service renderers can also hike their service
capacity with proper utilization of existing resources but in long term the demand can
be meet with higher supply.

Elasticity-
•The concept of demand elasticity defines relationship between price and demand of product
or a service.
•The toys are luxury or amusing goods whose elasticity is more than one which defines that
if there is certain change in the price of the product then the effect the demand would be
greater.
•But the case is not same when it comes to shipping services supply elasticity, supply
elasticity defines relationship between change in the price of supply and responsiveness to
the supply of service or goods.

Continued…
•For such toys companies in short term acquiring such services are inevitable since other
alternatives are not available for them now. In short term the supply of certain goods or
services can be increased only by maximum utilization of the existing resources.
•In long term the toys companies may get other alternatives like Truck firms may provide
ease and entry of other avenues to provide the same services. But the all anticipated
positives would take place in future but not in short term.

CONCLUSION
•From the report above it can be summarized that the soaring costs of shipping are having
their severe affects on the product market.
•The report has presented various arguments raised in the considered case study.
•At the end of the report by using two different microeconomic theories the issues of the
case are discussed.

REFERENCES
•Ben Abdesslem, A. and Picault, J., 2022. Bounty Hunters Can Teach Microeconomics:
Illustrations from Netflix's Cowboy Bebop. Available at SSRN 4032729.
•Borland, J., 2020. Microeconomics: Case Studies and Applications. Cengage AU.
•Geerling, W., Wooten, J., Dirk, M. and Gabriele, F., 2021. Breaking Down the Language
Barrier: Using Pop Culture from Across the Globe to Teach Microeconomics. Available at
SSRN 3769681.