Fast-Fashion Unravelled: How Microeconomics Shapes Your Wardrobe

Did you know 92 million tonnes of textile waste is produced each year? (Ingini, 2023). Fast-fashion is a dominant trend in retail, characterised by rapid production cycles, low prices, and high consumer demand. Brands like Zara and Shein capitalise on ever-changing trends, making stylish clothing accessible but at significant social and environmental costs.

This blog post analyses fast fashion using key microeconomic concepts. Supply and demand drive the industry, as consumers seek affordable clothes while firms quickly produce and distribute them. Consumer choice plays a role, as shoppers prioritize low costs over sustainability. The market operates under monopolistic competition, with many brands offering similar yet differentiated products. However, negative externalities, such as environmental pollution and poor labour conditions, highlight the hidden costs of this model.

By examining fast fashion through this lens, we can better understand its benefits, drawbacks, and potential policy solutions to mitigate its harmful effects. Fast fashion refers to the rapid production of low-cost clothing designed to keep up with ever-changing trends. All our favourite brands such as H&M, Zara, and Shein now produce new styles in weeks rather than months, allowing consumers to access trendy clothing at affordable prices. This model relies on quick turnover, mass production, and low labour costs to maintain profitability.

From a microeconomic perspective, fast-fashion operates under monopolistic competition, where many brands offer similar but slightly differentiated products. Supply and demand play a crucial role, high demand for cheap clothing drives continuous production. Consumer choice explains why shoppers prioritise affordability and variety over sustainability. However, fast-fashion causes environmental damage and poor conditions, costs not reflected in prices.

By applying microeconomic principles, we see how fast fashion influences consumer behaviour, pricing, and market structures while weighing its societal impact. Cheap, trendy and quick, brands such as Shein, Temu and Boohoo reel us in with their addictive websites and deals allowing you to buy a whole outfit with £15! But what are the economics behind all this? Let’s explore consumer behaviour, supply and demand, market structure and the negative externalities.

Why We Buy…

The craving low prices and variety of products all stems from psychology. Your own income naturally favours 5 shirts for £50 rather than one quality shirt since you can get more for your money. The fast-fashion brands are aware of the fact most of the population are in this band of ‘low income’ and abuse it.

Supply’s perspective:

To meet the high demand of fast-fashion these brands have evolved into absolute supply-chain powerhouses! High production slashes costs through economies of scale (see graph below, the more of one thing you purchase the cheaper each unit is). Comparing 𝑝! to 𝑝" dependent on an increase in quantities for price decreasing. Fastfashion brands will use this practice of bulk buying materials for cheaper, the supplier will be willing to decrease the price. Here is a graph to represent it.

Due to fast-fashion being an extremely profitable industry from these economies of scale, many big brands are in a constant battle to underprice each other and steal the other customers in order to make a greater profit. This drives speed and savings but often comes at a cost to ethics. A race to the bottom.

The ethics:

The externalities attached to fast-fashions from practices such as these are immoral. From exploiting workers with long underpaid working days to huge levels of pollution and waste, fast-fashion has a bad reputation. The desire for higher profits stems from the greed of CEOs scurrying to cut costs even if it means crossing the line of ethical to unethical.

Fashion brands thrive of price elastic products such as clothing. This basically means that when the price of a good is lowered, the demand for it increases drastically rather than slightly. This can be seen in graph 2, where quantity doubles from a small change in price (𝑝!𝑡𝑜 𝑝"). These brands can play around with different deals and discounts to draw the consumer in.

This high demand can be detrimental and lead to market failure as shown by the very known negative externality of waste. The constant battle of meeting consumer demand leads to tons of waste every single year which is a form of market failure since resources were clearly not allocated efficiently

Additionally, to cut costs brand owners will cross any line. They deliberately ignore steps in the supply chain for health and safety. The effects of this was seen in 2013 in a Rana Plaza sweatshop collapse. This killed ‘1134 people’ and left thousands  more injured (Begum, 2014). This is another example of fast-fashion leading to market failure.

Fast-fashion arguably benefits consumers. Microeconomic forces have shaped this industry of fast-fashion by promoting competition and driving down prices for consumers like us whilst promoting countless job opportunities for us as well; however, it is still obvious that the market failures within this industry are plentiful. From mass waste becoming a normality to putting the lives of exploited workers at risk, clearly fashion inevitably leads to market failure.

So, ultimately, do you think your fashion choices are driven more by price or by quality? And what should be done about this? Potentially, microeconomic policy interventions can take place (e.g. taxes on pollution, subsidies for sustainable practices) but these would have to be undertaken by countries and would work against their best interests.

Fast-fashion thrives on affordability, rapid production, and monopolistic competition, driven by high demand and economies of scale. However, negative externalities like waste and labour exploitation lead to market failures. Microeconomic policies, such as taxes and subsidies, could mitigate harm, but consumer choices remain central to shaping the industry's future.

Understanding microeconomic principles helps us analyse fast-fashion’s benefits, drawbacks, and broader societal impacts. It reveals how consumer behaviour, pricing strategies, and market failures shape the industry, urging us to consider its ethical and environmental consequences.

Think critically about your fashion choices, do you prioritize price or quality?

References:

Begum, T. (2023). “A nightmare I couldn’t wake up from’: half of Rana Plaza survivors unable to work 10 years after disaster’, The Guardian, 28 April. Available at: https://www.theguardian.com/global-development/2023/apr/28/a-nightmare-i-couldntwake-up-from-half-of-rana-plaza-survivors-unable-to-work-10-years-after-disaster (Accessed: 2 April 2025).

Igini, M. (2023). 10 Concerning Fast Fashion Waste Statistics, Earth.org. Available at: https://earth.org/statistics-about-fast-fashion-waste/ (Accessed: 1 April 2025).