Long Run Cost and Economies of Scale

These days, people are very interested in clean living alternatives in everyday life. This extends to the items that people use on their babies as well. More and more people are turning to organic baby food, toys and bottles that are BPA free, and cloth diapers. A potential business that I would be interested in creating is a web-based cloth diaper company that sells cloth diapers, organic, gentle laundry detergent, and accessories.

This would be a small family-run company based out of our home. This product would be marketed towards new parents looking for healthy alternatives to disposable diapers. The market size would start small. I would use social media such as Facebook and Twitter to begin getting the word out, meaning that the initial customers would be friends and friends of friends who have children or are looking for gifts for others who have. Short-run costs would be the initial investment in a variety of products that we would carry, such as different brands and styles of cloth diapers ready to be shipped out when orders are placed online.

Long-run costs that would be involved as the business grows would be bringing in more products as more inventory on hand would be required to keep up with increasing orders, more accessories to complement the diapers, and time spent researching the market to keep up with new brands that are popular. A fixed cost example would be website registration fees, and PayPal fees to ensure that customer have a secure payment option.

One example of a similar business is www.puremodernbaby.ca.  When I searched for “Alberta cloth diapers” in Google, this was the first company that came up in my search, which shows good marketing on their part. They have a section that educates the customer on types of diapers available, which is very handy for new users. They also have a gift registry section, which is great for expectant parents to register to receive the diapers as gifts, since the start-up costs for new families can be expensive. The website is very easy to navigate and user-friendly. They also offer PayPal as a payment option, which many customers will look for to ensure their credit card information is secure. They have accounts on Facebook and Twitter. One thing that they could add to improve on their customer service would be to add videos demonstrating how to use the diapers to illustrate ease of use for people who are unsure about making the switch to cloth diapers.

Pure Modern Baby (2010). Retrieved on August 13, 2012, from: www.puremodernbaby.ca

Elasticity of Demand in the Tourism Industry

The tourism industry in Canada is on the rise, albeit a slow a steady rise. The Canada Business Journal shows that the amount Canadians are spending on tourism is up slightly - "the ninth consecutive quarterly increase" (2010). This increase is coming from more Canadians spending money to vacation at home. In my opinion, this makes sense. The economy has been improving since the recession a few  years ago, but many people may still be paying off debt that was incurred during that time, or simply spending more conservatively with the memory of tougher times still fresh in their minds. It makes sense that as Canadians begin to spend money on the luxury of vacations, they would choose the more economical option of staying close to home.

This has led to a boost in the tourism industry, but not in every sector. "These increases were offset by a 0.2 per cent decline in spending on food and beverage services and a 0.3 per cent decline in other tourism commodities, such as recreation and entertainment" (2010). Canadians spend less than international travellers in these areas. This year, there was a cut in government funding to the Canadian Tourism Commission, meaning that they had to decrease the amount of marketing in international areas. This comes at the same time as the United Staes has increased their own marketing campaign (2012). So we are seeing a slow and steady rise in the industry, but not as big a rise as we would see if more international travellers were visiting Canada.

I think that the tourism industry has a high degree of elasticity. As Canadians see a rise in income, they will spend more on luxuries, including travel. Tourism is an industry that is income elastic. The more people make, the more they will spend on travel.


Canadian Business Journal. (2010, January). Tourism spending on the rise. Retrieved on August 7, 2012 from:
http://www.cbj.ca/business_news/canadian_business_news/tourism_spending_on_the_rise.html

Yelaja, Prithi. (2012, July 26). New tourism ad makes U.S. look like Canada. Retrieved on August 7, 2012 from: http://www.cbc.ca/news/world/story/2012/07/25/us-tourism-ad.html