Business Economics Report

This report explores the principles of business economics, analyzing concepts like scarcity, supply and demand, market structures, and macroeconomic policies. It uses Tesco plc as a case study to illustrate how these factors influence business operations and decision-making. The report also examines the impact of emerging economies on developed economies and the implications of recent economic shocks.

BUSINESS ECONOMICS

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Economic problem of scarcity and demand source demand resource allocation to manage
economy......................................................................................................................................1
1.2 Role of supply and demand in an economy and elaborate how equilibrium in the market is
achieved.......................................................................................................................................1
1.3 Importance of diverse market system and the role of opportunity cost subject to economic
decision.......................................................................................................................................2
1.4 The role of opportunity costs in determining how
economies make decisions.........................................................................................................2
1.5 Importance of Elasticity in market interactions....................................................................3
TASK 2............................................................................................................................................3
2.1 Implications of pricing and corporate objectives on operations of business........................3
2.2 Compare how prices are set in different market structures...................................................4
2.3 Analyse how firm's behaviour is affected by market structure and operations.....................4
2.4 Impact of regulation on market power in given situation.....................................................4
TASK 3............................................................................................................................................5
3.1 Structure of an economy changed in 21st century................................................................5
3.2 Tools available to meet macroeconomic policy change.......................................................5
3.3 Measurement the success of a government's policies in achieving macroeconomic
objectives.....................................................................................................................................6
3.4 Economic performance of an economy in the global market...............................................6
TASK 4............................................................................................................................................7
4.1 Theory of comparative advantage using relevant examples form emerging economics......7
4.2 Clarify the advantages and disadvantages of free trade for development.............................7
4.3 Impact of emerging economies on the developed economies...............................................8
4.4 Impact of recent domestic and global economics shocks to the economy...........................8
CONCLUSION................................................................................................................................8

REFERENCES..............................................................................................................................10

INTRODUCTION
Business and organisation plays crucial role in respect of enhancing the economic
structure of nation. This is one of the essential aspect in terms of dealing with the study of the
financial challenges scarcity faced by the corporation (Stuetzer, Goethner and Cantner, 2012).
This report is prepared to define the aspects of business management, organisation strategy,
expansion. Economy of the UK is dramatically development and market oriented. Tesco plc is
considered to explain contribution to economy of the UK. Role of effectively business strategies
and economic theories are carried out in this context. How business in UK are working and
growing by understanding culture and nature of economy.
TASK 1
1.1 Economic problem of scarcity and demand source demand resource allocation to manage
economy
Scarcity simply indicates towards shortage of resources and elements which helps to
assist business operations smoothly. For any country it is required to manage the available
resources to meet the requirement and needs. Good and quality products are services are the
prime needs of society which only be fulfilled and managed with perfect utilisation and
allocation of resources. High demand of products influence price structure of raw products and
basic resources. Management of scarce resources is one of the key functional areas for an
economy because lack of scarce resources fails to fulfil the demand of society, and this become
the reason of high price. Net effect fall upon the supply management of organisation.
For example Tesco plc is one of the largest retail industry in the UK and contributing
valuable efforts to improve and develop the economic structure of UK. To fulfil the demand of
society it has to pay attention upon proper management of scarce resources such as soil, labour,
fuel, capital and natural resources.
1.2 Role of supply and demand in an economy and elaborate how equilibrium in the market is
achieved
Market equilibrium indicates towards the stage and steps where the demand of product
remain equal to supply of the product (Chandler, 2012). The price of demanded product remain
equal to the quantity of the supplied product is considered as equilibrium price. As per this
concept demand of the product decrease when the product price remain high. Theory of economy
contains the concept of equilibrium price or market clearing price to balance demand and supply.
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Mostly the price of products influenced by scares resources and perishable resources. For
example price of the goods sold by Tesco is determined by dealing with buyers after a particular
time. There is a contingent situation occurs while dealing with buyers and suppliers.
In this situation the price of products are decided on the basis of demand. The current
market price is adopted to sell the products and services. The price of products are set where
supply meets with demand. This is considered as stage where balance between two opposite
functions which remain associated with demand and supply.
1.3 Importance of diverse market system and the role of opportunity cost subject to economic
decision
There are type of market systems are used in organisational context to make business
operations and functions more viable and transparent (Granger, 2014). These systems are
basically used to improve the market structure of organisation. This helps to build string relations
with stakeholders and communities. There is a process of market evaluation adopted by
organisation in order to make budgets and market plans. Market goals are achieved with the help
of communicating organisational objectives. Nature of products, Venue, cost, marketing are the
main factors which are found in marketing system. These helps to find out better competitive
marketing strategy. This not only build the strong product market but also build strong
stakeholders relations.
Tesco is very concerned with its market system. It is running its business and operations
in high competitive market conditions. It majorly focus upon sales output rather then forming
price of products and services. Sales strategy, consumer market analysis, analysis of profitability
index, and possibility of minimum profit and loss are adapted by organisation on periodic basis.
1.4 The role of opportunity costs in determining how
economies make decisions
Opportunity cost is considered as the cost of sacrificing of existing option to new one, it
plays vital role in terms of analysing the cost and sustainability of new investment plan with
organisation's aim and objectives (Annerstedt and Währborg, 2011). This cost contains the
advantages and disadvantage of opting new option in terms of energy time and fulfilling the
needs of business. This contains huge market investment and resources to adopt new business
plans for development and growth. calculation of investment remain based upon cost of existing
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investment. This plays vital role in respect of decision making and helps to analyse the viability
of alternative option.
Tesco adopted new marketing techniques and approach to assist the marketing structure
and enhancing the sale graph of organisation. This is mainly helps to analyse the aspects which
remain associated with analysing opportunity cost of existing option. Effectiveness of new
investment plans are evaluated by comparing the benefits of current option and existing one.
1.5 Importance of Elasticity in market interactions
As per theory of economics elasticity defines the relationship between the demand of
product and price of product. Price elasticity demand majorly associated with analysing the
potential aspects between price and the quantity of the product (Barbero, Casillas and Feldman,
2011). Price gets higher when product demand remains high and vice a versa, this is called as
elasticity of demand. If both the price and the revenues go up then it is considered that demand is
inelastic. This concept remain helps managers to understand the meaning and dimensions of
price variation parallel to demand. There is an optimum price is set up and determining the price
of products and services.
If the products fulfil the needs and requirements of products and services then also
demand of product become inelastic. It is seen that he elasticity of Luxury products remain low
because the demand remain low in comparison of normal good. For example the demand Tesco
deals in retail products and elasticity of demand of home appliances and products high.
TASK 2
2.1 Implications of pricing and corporate objectives on operations of business
An effective pricing strategy helps to improve the sales and growth graph of organisation
towards sustainable growth. Optimum price of products helps to maintain satisfaction level
among customers and consumers. Process of evaluating profit and measurement it is required to
maintain the level of demand and price of products and services. It is difficult for stakeholders
and clients to participate in daily operations and management. Price optimising techniques
basically helps to analyse the important aspects such as cost of raw material, labour and direct
expenses incurred with in production process (Sarasvathy, Menon and Kuechle, 2013). Managers
keep working in the direction of maximising profitability and building consumer interest whereas
senior authorities and stakeholders wants higher returns and profitability. Demand and forecast
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subject to analysing the price of products done to maintain satisfaction and profitability level of
organisation.
For example efforts of Tesco plc are centralised around managing the balance of demand
and price of consumer products at optimum level. Variations in price of competitive prices may
lose the interest of customer due to which profitability also decreased. Management tries to
control the variations.
2.2 Compare how prices are set in different market structures
Perfect competition: There are type of competitive products found in organisational
context. Organisation can not vary the price of products and services in perfect competition
market structure (Korsakienė and Tvaronavičienė, 2012).
Monopolistic environment: this is one of the type of market structure in which products
are sold by various buyers and ideas of the product.
Oligopolistic competition: this is one of the market structure in which small number of
firms and entities work in market. There is a lack of cut throat competition found in this market
competition.
2.3 Analyse how firm's behaviour is affected by market structure and operations
Determining the price of products and services and supply of the products are determined
in market power. Different market structure influence the pricing strategy of and reduce the
credibility of organisation in perfect competition. For example Tesco has lack of controlling
power in respect of determining the price of products.
Sales and marketing operation also based upon the business structure of organisation.
Pricing strategies for competitive goods and services remain associated with variations in
distributing strategies.
2.4 Impact of regulation on market power in given situation
Position of organisation in market depends upon goodwill and reputation among
customer and market (Gawer, 2011). For example Tesco plc is one of the multinational retail
industry which has good brand image in the UK market and there is a lack of Zero contol found
in perfect competition. Organisation is able to manage the demand and forecast about luxury
products whereas the price variation is difficult in terms of daily consumable products and
services.
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TASK 3
3.1 Structure of an economy changed in 21st century
It has been analyse that UK has looked outward to larger nation for plenty of centuries,
while their roles are consistently evolved with them. The UK economy and their places has
shifted drastically from the early days in 16th Century (La Rocca, La Rocca and Cariola, 2011).
With the industries revolution of 18th and 19th era has made huge impacts on nation in current
time. Today , the UK economy is diversified and have stronger spread their influences across the
various parts in London. The British economy has also has rich and sectoral mixes. The huge of
economy is relies on service market. The UK's industries strength are also reached all corners of
the nations.
Apart from this, they are having sizeable financial sectors from 4% of GVA in east
London. There 65% of total GDP is connected to trade businesses which is higher than that in
plenty of other wide advanced economies that consists of France, Italy and Japan. It is mostly
related with a export strength which is second largest exporter of service in nation. This seems to
be increased output, improvement in regular lives and trading norms. Like for example, in
accordance with TESCO PLC which is having new machines and modern techniques of
production and transportation systems.
3.2 Tools available to meet macroeconomic policy change
It is seen that macroeconomic policy is associated with the operations of an economy as a
whole. In wide term, the global of aspects provides a constant economic environment that is
condition to fostering positive and sustainable economic growth for the company. It will needs to
done for the purpose of create jobs opportunity, wealth maximisation and increasing standard of
living. There are various policies those are associated with the macroeconomic are discussed
underneath:
Fiscal policy: This seems to operate by changes in overall level and composition of
government total spending, types of taxes and forms of borrowings. It has been seen that
government can directly impacts economic events by recurrent and capital expenses and directly
to the effects of overall spending and transfers on private consumptions.
Monetary policy: Such kind of decisions are introduced by the alternation of cash rate
(Lusher, Koskinen and Robins, 2013). It consist of necessary actions that are made by the central
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banks as well as other regulatory bodies those are responsible for evaluating size and growth of
money supply.
The success of UK economy can only be attain in case they are following specific
policies those are essential for the company. The primary objectives is to make stable as low
inflations. The government inflation use to target 2.0% for the consumer price index.
3.3 Measurement the success of a government's policies in achieving macroeconomic objectives
It has been observed that macroeconomic is related with all essential issues, purpose and
policies that affects the entire nation. Every analysts that refers to aggregates is macro economic
factors related with the company. The unemployment rate and inflation growth rate of in
economic are analyse effectively. There are various aspects those are associated with the
measuring organisational overall performance helpful in order to measure their objectives in
more effective manner. Some of them are:
Non inflationary growth: It is known as more stable and effective economic growth and
formulation over the longer period of time. It is an economy which is an outward move in their
production possibility curve.
Low inflation: Because of this, there is sustainable growth in the level of prices. The rate
of inflation is modified in inflation over a period of time (Cruz and Nordqvist, 2012). Banks
should like to keep continuous growth of their rate at which prices will increase at minimum
level.
Low unemployment or full employment: In accordance to labour forces which is fully
engaged in productive work. An individual take into account to be unemployed in case current
data does not have a job and most of them are still looking for one. The main objective means
that as many people who wants to be employed need to work on effective manner.
Equilibrium in BOP: The government of UK need to target their export and imports in
effective manner so that balance in payment can be create on large manner to determine deficit
or surplus which is not effective for the nation.
3.4 Economic performance of an economy in the global market
Profit is one of the most important aspect in activity economic action and gross domestic
products which is more similar used to analyse nations specific activities. In short, GDP used to
show the overall value of all final goods and total services which is legally develop in an
economy in a specific period of time. There are certain indicators such as:
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level of national income: It is seen that total level of national earning and output. Total
spending are three key variables which would indicate, whether an economy is increasing during
the time of recession.
Income and wages: In case of operating efficiently, earning would maximise continuous
to keep with the total average cost of living. It is an indication that employers need to cut pay
rates or reduce their working hours.
Unemployment rate: It is very significant and measure that number of people are
searching for work as a overall percentage of total labour forces. In case of strong economy, the
unemployment rate would be lie in between 3 to 5%.
TASK 4
4.1 Theory of comparative advantage using relevant examples form emerging economics
Comparative benefits is a kind of situations a company use to make a good or service in
order to lower opportunity cost that is lower than other nation. Opportunity cost is used to
measure overall trade restrictions that are applied in the country (Karatepe,2011). It has been
determine that comparative benefits make total trade off worth of them. The buying and their
products and services surpass the limitations. There are various types of comparative theories
such as:
Free trade agreement: It is known as effective areas which is encompassing a trade bloc
with the associated nation that have signed a free trade agreement. It is a corporation among at
least two nation in order to reduce trade restrictions by using import quotas and tariffs.
Trade protectionism: It is most reliable variety of planning which is used to protect their
trade regulations. One ways is to act tariffs on the tax import. This will increase drastically in the
price of imported products. International trade are growing at faster rate to attain maximum
growth in coming future.
4.2 Clarify the advantages and disadvantages of free trade for development
Advantage: This seems to deliver consumers with wide option and benefits by offering
minimum prices. Free trade causes global specialisation as it enable the different nation to
deliver product in order to gain competitive advantages in coming time.
Connection with other nation: Global trade and commercial relation is often lead to
analyse relationship of knowledge and culture among two different country (Teece, 2012). This
will provide a wide understanding between those nation that leads to friendliness transactions.
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Assist to consumers: On a account of free trade the consumers of various nation to
delivery appropriate quality of products at low rate and as per their own choice.
Limitation of Free trade:
Obstacles to formulate Home sectors: In case international products are imported at
large, the domestic industries of developing nations need not be able to formulate quickly to
superior strength of global sector.
Rivalry and friction: Finally, free trade is basically rivalry among the trading nations. In
other words, commercial outcomes from trade are often leading to create more complications to
the company.
4.3 Impact of emerging economies on the developed economies
In the emerging market which is increasing from a closed to an open market economy.
There are certain impacts those are related with emerging economic effects in various developing
nations. Such as:
 Change in global assets prices can increase financial development in other developing
countries.
 Policy makers need to take into consideration of emerging economies through using
appropriate rules and regulation for the nations.
4.4 Impact of recent domestic and global economics shocks to the economy
The internal economy has been seen as important impacts on UK outputs and inflation
over the recent past time (Foss and Knudsen, 2013). Transmission done through the trade mode.
However, financial channels and uncertainty are more likely to have under pressure because of
government influences on a lot times to attain even more effective output from there overall
activities. The total supply and demand of the customers are needed to be determine in effective
manner.
CONCLUSION
This report defined the business economics in term of operating and managing businesses
in developed economies and diverse market conditions. Theory related to microeconomic theory
related to markets are defined in this context. Market power in terms of pricing objectives on a
business firm's operations, various market structures, impact of regulation on market power in
business situations are discussed. Role of government in the macroeconomic environment in
various forms are explained with business context. Impact of developing economies upon
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developed economies also included in this report. How economic theories can be applied in
organisational context subject to trade in international market successfully explained.
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REFERENCES
Books and Journals:
Stuetzer, M., Goethner, M. and Cantner, U., 2012. Do balanced skills help nascent entrepreneurs
to make progress in the venture creation process?. Economics Letters. 117(1). pp.186-
188.
Chandler, V., 2012. The economic impact of the Canada small business financing
program. Small Business Economics. 39(1). pp.253-264.
Granger, C. W. J., 2014. Forecasting in business and economics. Academic Press.
Annerstedt, M. and Währborg, P., 2011. Nature-assisted therapy: Systematic review of controlled
and observational studies. Scandinavian journal of public health. 39(4). pp.371-388.
Barbero, J. L., Casillas, J. C. and Feldman, H. D., 2011. Managerial capabilities and paths to
growth as determinants of high-growth small and medium-sized
enterprises. International Small Business Journal. 29(6). pp.671-694.
Sarasvathy, S. D., Menon, A. R. and Kuechle, G., 2013. Failing firms and successful
entrepreneurs: Serial entrepreneurship as a temporal portfolio. Small business
economics. 40(2). pp.417-434.
Korsakienė, R. and Tvaronavičienė, M., 2012. The internationalization of SMEs: an integrative
approach. Journal of business economics and management. 13(2). pp.294-307.
Gawer, A. ed., 2011. Platforms, markets and innovation. Edward Elgar Publishing.
La Rocca, M., La Rocca, T. and Cariola, A., 2011. Capital structure decisions during a firm's life
cycle. Small Business Economics. 37(1). pp.107-130.
Lusher, D., Koskinen, J. and Robins, G. eds., 2013. Exponential random graph models for social
networks: Theory, methods, and applications. Cambridge University Press.
Cruz, C. and Nordqvist, M., 2012. Entrepreneurial orientation in family firms: A generational
perspective. Small Business Economics. 38(1). pp.33-49.
Karatepe, O.M., 2011. Service quality, customer satisfaction and loyalty: the moderating role of
gender. Journal of Business Economics and Management. 12(2). pp.278-300.
Teece, D. J., 2012. Dynamic capabilities: Routines versus entrepreneurial action. Journal of
management studies. 49(8). pp.1395-1401.
Foss, N. J. and Knudsen, C. eds., 2013. Towards a competence theory of the firm (Vol. 2).
Routledge.
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