Trisha sells imported clothing at her boutique, La Boutique. She has been informed that the price of wool has increased by 25 percent. The wool is exported from New Zealand, and then shipped to France where the sweaters are custom made and shipped to the United States to buyers like Trisha.
Trisha has a list of over 30 customers who are waiting for the new shipment of sweaters as the holidays approach. Customers love the sweaters for the trendy styles and warmth that wool provides. Trisha finds that customer purchases start to rise in the fall prior to winter.
In addition to the increased price of wool, the itemized cost of manufacturing and shipping the sweaters has also increased. Trisha’s operating costs are also rising, which has significantly cut into profit margins.
Trisha charged $139 for the sweater prior to the increased price of wool. She decides to raise the price of the sweater to $172 to meet the demand from customers and to offset higher costs in order to make a profit. When making business decisions such as this, supply and demand and rising expenses are some of the market forces that must be considered.