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In the News

Warburtons battles soaring cost-push inflation

Graham Watson

19th January 2023

The cost of living crisis, a well-known bakers and a consideration of costs. Those studying Economics in Year 13 should, by now by aware of the importance of costs in determining price and quantity for a firm, and this article gives you chance to put it into action.

The price of a toastie loaf has gone from £1 to £1.25, although company chair, Jonathan Warburton argues that this is solely to cover costs. He's also clear that constant cost increases undermine the brand's relationship with its customers.

Here is the article

So how might you draw this - differentiate between fixed and variable costs - and then you might also try to think about how firms can operate without increasing prices in such an environment, perhaps by shrinking profit margins, but is this sustainable? You might look to evaluate why/why not?

A further article here detailing the extent to which prices, particularly food prices have risen, even though inflation is only 10.5%.

What is cost-push inflation?

Cost-push inflation is a type of inflation that occurs when the cost of production increases, causing prices to rise. This can happen when the cost of inputs such as raw materials, labour, or energy increases. As a result, companies will raise their prices to maintain their profit margins. This leads to an overall increase in the general price level, or inflation.

Cost-push inflation can be contrasted with demand-pull inflation, which occurs when there is too much demand for goods and services, causing prices to rise.

Warburtons - Background

Warburtons is a UK-based bakery company that was founded in 1876 by Thomas Warburton in Bolton, England. The company is currently the largest producer of packaged bread in the UK and is known for its wide range of products, including sliced bread, rolls, crumpets, and cakes. Warburtons is a family-owned business and is currently run by the fifth generation of the Warburton family.

Graham Watson

Graham Watson has taught Economics for over twenty years. He contributes to tutor2u, reads voraciously and is interested in all aspects of Teaching and Learning.

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