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ECO 561 Economic Analysis Week 4 Assignment- PostureNOW

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Running head: POSTURENOW ECONOMIC ANALYSIS 1
PostureNOW Economic Analysis
ECO 561
PostureNOW Economic Analysis
Background
PostureNOW is a startup online sales business employing one employee along with the
two co-developers of the product with an annual income of $200,000. The company distributes
the product to consumers in 75 countries. The PostureNOW back belt is a revolutionary back
support designed for people who suffer from back injuries associated with sedentary work. The
belt is designed to pull the shoulders back and alleviate hunching and poor posture while sitting
at a desk or working on computers. This alternative method of correcting back and posture issues
is on the cutting edge of a growing trillion dollar health and wellness industry.
The company’s headquarters are in Portland, Oregon with manufacturing processes
completed in China. The company relies on on-line sales via their website for the distribution of
the product, which they store in their Oregon warehouse. The product is in the patent-pending
stage and recently received an additional boost of financial support from the television series,
Shark Tank.

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POSTURENOW ECONOMIC ANALYSIS 2
The Monopolistic Market
Due to the increase in the health and wellness movement in the world thousands of
posture support devices flood the market. Following the television show, Shark Tank, increases
in sales of the PostureNOW plateaued. The company is looking to elevate the product and
increase demand in the industry. With over 1 million internet searches per month for back
support devices, the co-developers of PostureNOW believe there is a strong market for their
unique product.
Monopolistic markets characterize themselves with a large number of sellers producing
differentiated products with, “…nonprice competition, a selling strategy in which one firm tries
to distinguish its product or service from all competing products on the basis of attributes like
design and workmanship” (McConnell, Brue, & Flynn, 2009, p. 177). With hundreds of different
sellers of a posture device the company must sell their product in the right demographic and sell
it at a competitive price.
The Elasticity of the Product
The monopolistic market of the product allows the company to set prices based on
current market prices for similar products. In purely competitive markets sellers are “price
takers” (McConnell, Brue, & Flynn, 2009, p. 178) with little control over the amount they can
sell their products. But, in a monopolistic market the seller maintains a little control over how
much they can charge for the product. Due to this fact the demand for the PostureNOW product
is inelastic where percentage changes of price equate to small percentage changes in demand.
The current selling price for the device is $39.95 (plus shipping). The production costs
for the device provide marginal revenue of 20%. The product is manufactured overseas at a
significant lower cost and shipped to the distribution warehouse. On-line orders generate the

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POSTURENOW ECONOMIC ANALYSIS 3
majority of the sales with a low 7% return rate. The company orders production in unit lots of
4,000 but has occasional orders as high as 10,000 units. The fixed costs of the product are set in
the production costs at $5.00 per unit. The company’s low variable costs consist of shipping,
advertising and labor costs for one employee. The company realizes a profit of $8.00 per unit
based on 25,000 units per year.
Elevating Product Demand
The company’s recent investment of a new webpage is the first step to increase exposure
and increase demand. Because the PostureNOW device provides a unique design that targets
multiple demographics the company should maintain the current price and expand the market for
the product. Advertising is the key to increasing the products visibility and the company can
directly target large corporations with advertising. Corporations employ people who sit at desks
or who work with computers daily. The National Institute for Occupational Safety and Health
(NIOSH) reports,
“Back injuries account for nearly 20% of all injuries and illnesses in the workplace
and cost the nation an estimated 20 to 50 billion dollars per year […] NIOSH
believes that the most effective way to prevent back injury is to implement an
ergonomics program that focuses on redesigning the work environment and work
tasks…” (NIOSH, 1996).
Corporations and consumers pay the price for injuries as a result of the occupation. According
the Bureau of Economic Analysis the three-year trend (2012-2104) on personal consumption
expenditures on health care witnesses increases each year from $1.7 billion in 2012 to 1.8 billion
in 2014 (BEA, 2014). The increase in health care expenditures is one reason why many
corporations are expanding their health and wellness programs for their employees.

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Anonymous
I was having a hard time with this subject, and this was a great help.

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