ECO-201-X3220 Microeconomics 15EW3
Professor Robert Washick
Southern NH University
Microeconomics Case Study of The Firm WOW
Work Out World New England (WOW), is one of the locations I am an aerobics instructor. I have chosen this facility due to the growth over time it has experience in about 10 years. It began approximately 10 years ago at one club and now has expanded over the New England area and has 14 clubs. The number of firms may change overtime. If the number increases which it has, the supply will increase, and the supply curve will shift outward to the right. If the firms decrease, supply will decrease and the supply curve will shift inward to the left (Pearson, p. 63). In being in a recent training I learned they began with 14 group exercise instructors this number has grown tremendously beyond that. That shows just the growth in group exercise program. That is not to mention the sales, baby sitting, cleaning, and manager’s employees at the 14 locations. The number of firms in the industry only affects the number of employees they use, we hold the number of firms in the industry constant (Pearson, p. 63.) I think it’s important to see the supply and demand definition and the four basic laws:
“In microeconomics, supply and demand is an economic model of price determination in a market. It concludes that in a competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers (at current price) will equal the quantity supplied by producers (at current price), resulting in an economic equilibrium for price and quantity (Supply and Demand,” 2015).”
The four basic laws of supply and demand are
1. If demand increases (demand curve shifts to the right) and supply remains unchanged, a shortage occurs, leading to a higher equilibrium price.
2. If demand decreases (demand curve shifts to the left) and supply remains unchanged, a surplus occurs, leading to a lower equilibrium price.
3. If demand remains unchanged and supply increases (supply curve shifts to the right), a surplus occurs, leading to a lower equilibrium price.
4. If demand remains unchanged and supply decreases (supply curve shifts to the left), a shortage occurs, leading to a higher equilibrium price (Supply and Demand,” 2015).
After reading this I believe, “(3) If demand remains unchanged and supply increases. (supply curve shifts to the right), a surplus occurs, leading to a lower equilibrium price. WOW remains right now at 14 clubs and haven’t heard any talk of if they will be adding locations in the near future. What I do find interesting in my research is that this industry is going to prosper further.
According to IBISWorld analyst, Mary Gotaas, over the next five years, the industry will benefit from increased youth and baby boomer memberships. “Revenue will expand at an average annualized rate of 2.6% to $28.2 billion over the five years to 2016,” says Gotaas. “Firms will profit from growing interest in staying fit, and the industry will transition toward larger and all-inclusive clubs.” With total health club memberships expected to reach 47.5 million in 2016, players will capitalize on this growth and provide members with additional services in a bid to increase registration and retention rates (Gym, Health & Fitness Clubs Market Research Report, 2011).
I think it’s important to understand that this club has grown tremendously because the memberships are $10 a month for a basic membership which is the main floor and access to the one location of sign up. For premium members they have tanning, group exercise, baby sitting services and a multi access to all locations just for $19.99.
“In the past five years’ time-strapped consumers became more prevalent, which resulted in higher demand for low-cost gyms with few amenities and month-by-month contracts. Furthermore, many health-conscious individuals have implemented