Contemporary Business Economic: Analysing Law of Demand and Supply with Emerging Theories and Models

This report analyses the law of demand and supply with its factors for Tesco in the context of contemporary business economics. It also compares and contrasts emerging theories and models in 21st century contemporary economics with those of 20th century and relates both of these to modern business practices.

BM533 Contemporary
Business Economic

Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Analysing law of demand, movements along the same demand curve and changes in demand
curve with its factors....................................................................................................................1
Analysing law of supply, movements along the same supply curve and changes in supply
curve with its factors....................................................................................................................4
TASK 2............................................................................................................................................7
Analysing compare and contrast emerging theories and models in 21st century contemporary
economics with those of20th century and relate both of these to modern business practices.....7
CONCLUSION................................................................................................................................9
........................................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Contemporary business economics refers to a framework of applied economics that
describes the various issues such as environmental, financial, market and organisational, faced
by the company in same time (Audretsch, 2018). Scarcity, costs and benefits, supply and demand
and incentives are the main concept of economics that provide knowledge about how people
make decision. For this project, selected company is Tesco, it is a multinational company of UK.
It is founded in 1919 by Jack Cohen and its Headquarters is in Welwyn Garden City,
Hertfordshire, England, UK.
The report describe law of demand, movement along the same demand curve and factors
that change demand curve. It further describe law of supply, movements along the same supply
curve and factors that change supply curve. It also describe compare and contrast emerging
theories and models in 21st century contemporary economics with those of 20th century, and
relate both of these to modern business practices.
TASK 1
Analysing law of demand, movements along the same demand curve and changes in demand
curve with its factors
Tesco is the third largest retailer in the world and provided its services in United
Kingdom, Hungary, Ireland, Slovakia and Czech Republic. Its products are available in
Superstore, Hypermarket, Convenience shop and Supermarket. It has around 7,005 shops and
423,092 employees which helps them to operate their functions in effective manner.
One of the best selling product of Tesco is Bananas and it comes from Rainforest
Alliance Certified farms where labour conditions are improve continuously as well as protect
environment in effective manner in order to promote sustainable production in all over the world
(Babii, 2018). It ensured to increased workers representation and welfare by working closely
with farmers. It makes direct and long term relationship with their suppliers in order to help them
to invest in their workforce and farms in effective manner.
Market structure for Tesco is oligopoly because there are only few competitors in market
and they control supply of their products in effective manner. In oligopoly market structure, few
firms are available in market with large number of market share as well as has high barriers for
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the entry of new firms. It makes Tesco interdependence, more efficient and charge higher prices
from their potential customer.
Law of demand refers to a important law of economics which states that a higher price of
goods makes consumer to demand lower quantity of it. It shows negative or inverse relationship
with price and quantity demanded for the particular product (Deakins, 2020). Demand curve
refers to a graphical representation of a product price and its quantity demanded. In context of
Tesco, movements along the same demand curve of its product that is Banana and factors that
change its demand curve are described below:
Movements along the same demand curve-
Movements in the same demand curve occurs when the price of the product changes its
quantity demanded are also changed and other things remain constant. Two types of movements
occurs in demand curve that is extension and contraction. In regards of Tesco, two types of
movements in demand of curve of Product is described below:
Extension- If the price of the product is fall then its quantity demanded increased, this
situation shows extension in its demand curve. It create downward movement in the demand
curve of the particular product. In case of Tesco, when the price of Bananas fall it increase
quantity demand in the market and makes downward movement in its demand curve.
Contraction- If the price of the product is rise then its quantity demanded decreased, this
cause contraction in demand curve of the particular product and create upward movement in its
demand curve (Dixit, 2020). In accordance with Tesco, if the price of Banana rise then its
quantity demanded decreased in the market and makes its demand curve move upward.
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Shifting in demand curve-
When quantity demanded of the product is affected by the various factors that create
changes or shifting in the demand curve. These factors shift demand curve in two directions that
is rightward and leftward (Giménez and Calabrò, 2018). In account of Tesco, factors that cause
shifting in the demand curve of Banana are described below:
Tastes and preferences of customer- It is an important factors which affects the demand
of a product and cause shifting in its demand curve. In context of Tesco, if the customers' tastes
and preferences for its product that is Bananas is high, it increase its demand and cause rightward
shifting in its demand curve. If their tastes and preferences for Banana is low, its demand
decreased and cause leftward shifting in its demand curve.
Income of the people- People's income affects their purchasing power as well as quantity
demanded of the product. In respect of Tesco, if the the income of customers increased, demand
of Banana is also increased which cause rightward shift in its demand curve. If their income
decreased which cause decrease in its demand and leftward shifting in its demand curve.
Changes in the price of related goods- The demand of the product is also affected if there
is change in the price of its related products. In regards of Tesco, if the price of related product of
Banana is high then its demand increased and cause rightward shift in demand curve. If the price
of its related goods decreased its demand curve shift leftward because their demand decreased in
market.
Advertisement expenses- It refers to those expenses which is spend by the company in
order to advertise their products in market. In case of Tesco, if its management spend huge
amount in advertisement of their products, it increase the demand of Banana and cause rightward
shift in its demand curve (Kannenberg and Schreck, 2019). If they spend less amount which
cause decrease in its demand and shift its demand curve leftward.
Number of customer in the market- If the number of customer is large in market, it
makes huge demand for the product of Tesco that is Banana and shifts its demand curve
rightward. If there is less number customer in the market so, they demand less product and shifts
demand curve leftward.
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Consumers' Expectation with regards to future price- If expect that the price of Banana
increase in future, then its demand increase and shifts its demand curve rightward. If they expect
that its price decrease in future, then its demand decrease and shifts demand curve leftward.
Analysing law of supply, movements along the same supply curve and changes in supply curve
with its factors
Law of supply refers to the fundamental law of economics which states that an increase
in the price of the product makes producer to increase products supply in the market. It shows the
positive relations between the price of a product and its supply (Kobayashi, 2020). Supply curve
is a graphical representation of the prices of the products and its quantity supply by the supplier
in different prices. In respect of Tesco, movements along the same supply curve of its product
that is Banana and factors that change its supply curve are described below:
Movements along the same supply curve-
Movements in the same supply curve of a product occurs when its price change, other
things remain constant and its quantity supply are also changed (Korol, 2018). In supply curve,
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Illustration 1: shift in demand curve

there are two type of movements that extension and contraction. In context of Tesco, movements
in supply curve of Banana are mentioned below:
Extension- It describe increase in price and quantity supplied by the supplier in the
market. It makes upward movement in supply curve of particular product (Lewis and Henry,
2019). In regards of Tesco, if the price of its Banana is increased, then its management supply it
more in the market. It cause upward movement in its supply curve.
Contraction- It happens when the price of a product is decreased which makes supplier to
supply less products in the market. It makes downward movements in its supply curve. In case of
Tesco, if the price of its Banana decreased, it makes its management to supply it less in the
market. It cause downward movements in its supply curve.
Shifting in supply curve-
When the changing in various factors instead of price, change the decision of the supplier
in order to supply product in the market, cause shifting in its supply curve (Pinarbasi, 2019).
These factors shifts supply curve in two direction that is rightward and upward. In accordance of
Tesco, factors that shifts its Banana supply curve are discuss below:
Taxation- When the government imposed or increased tax on Banana, its makes supplier
of Tesco to supply it less in the market, it cause leftward shifting in its supply curve. If decreased
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tax on it, then supplier supply it large in the market in order to earn maximum profit from it. It
cause rightward shift in its supply curve.
Cost of factor of production- If the cost of factor of production of banana is increased,
then supplier of Tesco supply less it in market and its supply curve shift leftward (Pop, 2020). If
their decrease in its cost of factor of production then they supply it large in market and its supply
curve shift rightward.
Weather condition- If there is favourable weather condition in the country it makes
supplier of Tesco, supply more Banana in the market and its supply curve shift rightward.
Unfavourable weather condition cause leftward shift in its supply curve because supplier supply
it less in the market.
Seller's expectation for the future price of a product- If the supplier of Tesco expected
that the price of its Banana increased in future, they supply them less in the market then its
demand curve move leftward. If they expected its future price fall then they supply it large in the
market which makes rightward shift in their supply curve.
Equilibrium curve of demand and supply
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TASK 2
Analysing compare and contrast emerging theories and models in 21st century contemporary
economics with those of20th century and relate both of these to modern business practices
Economic theories and models describe the reality of economic behaviour in simplified
manner that allows in order to understand, observe and make predictions about them (Schinckus,
2018). Many economist developed various types economic theories and models in order to make
economy more better and developed. The main aim of these theories is to provide scientific
explanation on economy and society. Theories of 21st century and 20th century are discuss below:
21st Century economic theories-
Behavioural economic theory are also known as modern theory of economics that provide
the information about human behaviour in order to make irrational choices when the resources
are scared. This theory are considered most important from other emerging theories of 21st
century for understanding human behaviour. It describes the impact of decision making process
of individual because of changing in their psychological factors. It states that, every business
should analyse human behaviour also while maximize their utility or profit because it change in
different situation.
Nudge theory is also a 21st century economics model which describes the understanding
of how an individual think, behave and make decisions. This theory helps people to improve
their thinking and decisions. It describes that there are lot of unhelpful influences for people
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which is need to get remove and alter in order to help people. This theory primarily concerned
with the different design choices which help people in their decision making. It proposes various
designing of choices which describe how people think and decide in particular situation. It
advocates changes in a group by using indirect method instead of making direct instruction and
enforcement. It is important for the individual in order to make their decision in order to choose
better aspects from the given choices and get effective outcomes from it.
20th Century economic theory-
Adam Smith theory is the most popular theory of 20th century which states that market
can perform their work in most effective manner if government are not interfere in it. Adam
Smith was considered father of modern economics (Sejfijaj and Shehu, 2020). According to it,
rational people can find better method naturally in order to use particular resources in effective
manner. The concept of gross domestic product (GDP) was also given by him. Compensating
wage differential theory was also given by him which describe that it is important for the
recruiter to provide higher wages for undesirable and dangerous job in order to attract more
candidate for it. Its philosophy of free market makes market free from government intervention
and their taxation policy that help business to operate their business functions in effective
manner and improved economy growth. Its idea of invisible hand provides the information of
different forces of demand and supply within economy.
John Keynes was a British economist of 20th century and introduced Keynesian economic
theory. It argues that the healthy economics invest or spend more instead to save if the supply is
motivated by demand. This theory represent a new way for viewing spending, inflation and
output. It beliefs that when economy faced recession then government should lower taxes and
spend more in order to boost customer buying power as well as create jobs. Its basic principle is
that it is important for the government should spend more in economy in order to maintain full
employment, even they have to take debt for it (SERGI, 2019). It supports the use of monetary
and fiscal policies that reduce the affects of recession and depression in the economy. According
to this theory, employment can be increased in the economy if the consumption and investment
increased in the economy. The primary focus of this theory is to use effective government
policies for managing aggregate demand and prevent economy from recession. If the economy
has low level of wages and inflation which influence employers to increase capital investment
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and employ more people in order to increase employment and economic growth in effective
manner.
Comparison between 20th century economic theory and 21st economic theory-
Many ways are there in both the century economic theory which makes both different
from each other (Sigué, 2020). 21st century economic theory is a combine factors of psychology
and economics in order to understand human behaviour in order to make their decision whereas
20th century economic theory describes an idea in which market perform its various activity in
effective manner if government remove their rules and regulation from it.
CONCLUSION
From the above mentioned project, it is concluded that contemporary business economics
help companies by analysing various issues which is faced by them in current time. Law of
demand helps companies in order to influence more customer in order to buy their products and
services more by making effective pricing strategy for it. Law of supply help companies to
analyse various aspects which helps them to supply their products in the market. Economic
theories helps companies in order to compute effective answer for their problems. It helps
government in order to develop policies that create economic growth in effective manner.
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REFERENCES
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International
Entrepreneurship and Management Journal,
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Journal of Business Economics,
89(5),
pp.515-567.
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A factor analysis of business start-up rates in Japan: contemporary and
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Handbook of Research on Managerial Thinking in Global Business Economics (pp.
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Challenges and Opportunities to Develop Organizations Through Creativity,
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Management Practices-Correlation with Business Performance.
SERGI, B.S., 2019. Modeling Economic Growth in Contemporary Russia.
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Contemporary Issues and Prospects in Business Development in Africa:
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(Audretsch, 2018)(Babii, 2018)(Deakins, 2020)(Dixit, 2020)(Giménez and Calabrò, 2018)
(Kannenberg and Schreck, 2019)(Kobayashi, 2020)(Korol, 2018)(Lewis and Henry,
2019)(Pinarbasi, 2019)(Pop, 2020)(Schinckus, 2018)(Sejfijaj and Shehu, 2020)(SERGI,
2019)(Sigué, 2020)
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