Contemporary Business Economic: Explaining Law of Demand and Supply with Factors and Theories in 21st and 20th Century

This report explains the law of demand and supply with factors affecting them, along with emerging theories and models in 21st and 20th century contemporary economics and their relation to modern business practices. The report also includes a case study of Tesco.

BM533
Contemporary
Business Economic

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK 1............................................................................................................................................3
1.1 Explain the law of Demand, movement along the same demand curve and changes in
demand curve with its factors (with the aid of diagram)............................................................3
1.2 Explain Law of supply, shift along with the constant & different factors which is having
change supply curve with the help of suitable curve..................................................................6
TASK 2............................................................................................................................................9
Compare and contrast emerging theories and models in 21st century contemporary economics
with those of the 20th century, and relate both of these to modern business practices...............9
CONCLUSION .............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Economics comes from two Greek words that are 'eco' which means homes and 'nomo'
which means accounts, the subject has modified from being how to keep the family accounts into
the wide-ranging subject of today. Economics has grown in scope, very slowly up to the 19th
century, but an accelerating rate ever since(Baker, and et. al., 2021). Today it has so many parts
in language, it has lingual roots, well-formed rules, good and bad structure, accent and a broad
knowledge. In this report the company chosen is TESCO, it is a British multinational grocery
shop which is headquartered in Welwyn garden city, England. It is the world thirds most popular
retailer, the ninth biggest company in terms of revenue . It has five shops across the whole
country. It was discovered by jack colen in hackney, London in 1924
TASK 1
1.1 Explain the law of Demand, movement along the same demand curve and changes in
demand curve with its factors (with the aid of diagram).
Demand is an economic principle which refers to consumer's willingness to pay a price for a
particular goods (Rainò, Novotny, and Frimmer, 2021). Holding all factors same, an increase in
price of a product will fall the quantity demanded. Law of demand is inverse relationship
between price and demand, it says that when price for a commodity will rise the demand will fall
due to high prices, consumer will not buy that specific good. On the other hand, if prices for a
commodity will fall the demand for that particular good will rise(Reeves, 2021). In this report of
Tesco, if prices of goods will increase then demand for them will fall and with low prices in
Tesco, there will be high demand with low price and low demand with high price.

From the above curve we can witness that when the price of the good increases from price p3 to
p2, then the quantity demand for the same good decreases from Q3 to Q2 to Q3 accordingly.
Factors affecting demand shift are as follows:
Taste and preferences: It says that when consumer will like the product he will be attracted to
buy the product and it will be easy for him to do so as he is already in favour of the quality
of product but if customer don't like product the demand will decrease as he will not buy that
specific product because he is not in favour of that good(Ye, and Qiu, 2021).
Income of consumer: It is to be taken into consideration that income is very important aspect of
economics and it the factor on which consumer depends for buying the goods or not, if the
income of consumer is high then he will be able to buy more products but, if the income of
consumer will be low then he will not be able to buy sufficient amount of goods.
Change in the price of related goods: When prices of related goods increase the demand for the
goods which Tesco is providing will increase. And when price of goods that are related to
each other decrease, then the quantity needed of that one product will rise and the demand
for that different good will rise. When the price of substitute goods will decrease , the
quantity demand for that product increase but the demand for the good which is being
substituted will fall

Number of consumer in the market: Rise in price of good causes an increase in demand for
substitutes products, but when there are high number of consumers for the good which
Tesco is providing there will be more demand and if there are no customer for the good what
is being provided by Tesco the demand will be less . So the number of consumer is also an
major aspect because when there will be customers the demand will always be high and if
there will be no customers the demand stays low(Misiune, and et. al., 2021). Also,
launching its products in the new market where the customer demand for beef is already
high will also help them to increase the no. of users in the market.
Consumer expectations: It says that when consumer is expecting the prices to fall down , they
will wait for the product to be affordable and then buy it, same goes on when prices will
risse in future, then consumer will be in hurry to buy it the same day because consumer is
always in favour of buying goods at affordable price
Price of product: It says that with rise in price of product the demand of the particular good
will fall and if the prices falls down the demand fort the product will increase. So the
customer will always buy the product when the price is low and do not buy the product with
high prices as the buyer always loves to but the product when it is in their favour.
Change in demand curve:
This is defined as the change in the whole demand curve because of the change in the some
factors which includes the price of auxiliary products, price of additive goods, taste and liking of
the consumer and the coming days the expectation of the buyer. In this situation, the demand
curve will shift towards left or right(Vesal, and et. al.,2021).

In this diagram, the demand basically shift in the given curve to the right and can be shift to the
left. When the demand of the goods rises then the demand curve then the curve will shift
rightwards. On other side, decrease in the demand of the given goods relies in shift in the curve
to the left, as per the curve, rise in the demand of the given goods then the demand curve shift
from d0 to d2 and vice-versa.
1.2 Explain Law of supply, shift along with the constant & different factors which is having
change supply curve with the help of suitable curve.
Supply is defined as the basic concept that are accomplishing the worldwide availability of the
goods for future sales to their possible purchasers in the field of market (Wiedmer, and Griffis,
2021). It is also related to the certain costs of the products in the target market as according to the
curve.
Law of supply -
The law of supply will relates to the positive relationship among the quantity that are
supplied and the cost of the products in the large market and other factor that are being constant.
When the price of the products increase then the supply of the goods that also rise by the supplier
as they would like to sell their goods at higher cost through which they can make sure an
impressive term of gainfulness in the field of market place(Hall, 2021). In relation to the Tesco,
when the price of the products about to raise then the supplier will sell much more of their
quantity in respect to have high measure of earnings as effectively and efficiently.

In the above diagram, it has been given that the supply curve is rising and by having
positive relationship between the cost and the quantity that are supplied of the present products
in big market. As per above diagram shown, when the cost of the goods was at P3 then the
supplier also providing Q3 but with the changes in the price of the products that tends to increase
the cost of the products from P3 to P2. It shows the maximisation level in the supply of the
products from Q3 to Q4 as the provider also rise the supply in an effective and efficient way.
Factors affecting supply of the particular products that are discussed below -
 Government Subsidies - With increase in the government subsidies that also leads to
decrease the price of products. By it, when the costs of the grant increase then the supply
of the product will also increase. In relation to the tax rates that can also lowers the
supply of the existing merchandise.
 Costs of production - In the immediate direction, they can provide any section of
manufacture but it also have an effect by deficiency of the demand of raw material and
lower income of the individuals(Al-Rawi, and et. al., 2021). When the price of
production is low, so it will lead to decrease the world price of the products. In context to
the Tesco, when they have enough raw material then it will decrease the global supply of
their goods.
 Technology - It is termed to the creativity or the growth in the development through
which the management can appropriately decrease their operating price. It is the cardinal

circumstance through which they can employ the invention and the method. At the time
of business that are increasing the technology that also lead to increase the supply the
goods by decreasing in the global cost of the business.
 Weather - Such goods that have direct impact on the gainfulness of the business. Tesco
is the retailer sector and there is high effects of the weather on the products in the present
business(Worthington, 2021). In respect to have an impressive goods the establishment
should know that the effects of the atmospheric condition on the global profit of the
business.
 Objectives of firms - When the business is dealing with the single mark of producing
more profit then they just sale their products at higher cost. But when the business have
the circumstance of doing the social welfare then they only deals with selling of their
goods reciprocally of their value.
 More firms - By high term of objections in the market place, there is cardinal impact of
business that are providing effective goods to them and make sure that they also offers
high benefits of the management . When there is decline in the costs of the goods then the
supply of the present goods tends to fall.
Change in Supply Curve -
It is defined as the shift in the global supply by having changes in the various factors that
also have an impact on global supply of the existing goods. It involve taxes, production price and
application(Ülkü, and Engau, 2021). When the supply of the products tends to rise then the
supply curve shift from S0 to S1. As when the supply of the commodities tends to decrease then
the supply curve shift from S0 to S2.

According to the curve, when the given cost of the goods tends to raise then the supply
of the products will also increase. It will shows that the supply curve will shift to S to S1 and the
cost of the products will decrease the supply of some products that will decrease by low cost in
industry.
TASK 2
Compare and contrast emerging theories and models in 21st century contemporary
economics with those of the 20th century, and relate both of these to modern business
practices.
Different theories has been proposed and presented by the economist in the 20th and 21st
century and all the organisation utilised these theories in order to grow in the market. The
theories has been discussed below :-
 Neoclassical Growth Theory :- the overall economic development of the company has
been cover in this theory. In addition to this more focus has been paid on the three
component such as technology, labour and capital(Grassetti and Hunanyan, 2018).
According to the national bureau of Economic research in 1956 economists have
presented the credit of promoting long term economic development. The short term

reactions which have been generated from the diverse set of capital and labour in their
production has been effectively defines in this theory. Organisations which have invested
high amount of capital and labour in their production, this theory is very good for them.
In this theory change which is related to the development of the economy has also been
discussed. The organisation cannot achieve a successful growth in the market if they don't
use the effective technology in their production system. No extra component has been
required if the short term has been present in the diverse sections for a long period of
time(Abreu, 2021). This theory is totally related to the collection of the capital within the
economy and business. With the help of this theory individual are able to utilise the
capital and fund in a very effective manner. Along with this they not only make sure the
technological growth but also labour and capital growth.
 Marx's Social Economic system :- this theory was presented by the famous economist
Karl Marx, in which theories related to the capitalism and communism has been
described. Karl Marx has been motivated by one of the greatest classical, political and
economists David Ricardo which have their own sections of economics. This theory is
basically the combination of two fundamental classes such as capitalists and social
system. In capitalist they know economic condition of the organisation and in social
system gives support to the contemporary world(Nicholson, 2018). Capitalists are
basically the owner of the organisation in which they are responsible for managing the
process of productions. In addition to this the several sections which have been
maintained by the person related to the production department is tolls, raw materials and
many more. The effectively responsiveness to these several sections help the factories to
entitled the higher terms of profit. This theory believes that a revolution has been came
which help in solving the conflict between the working class and capitalists class. Mark
says that the seeds of own destruction has been contained by the class of capitalist and
the process of communism is inevitable which begun with the evolution of feudalism.
This process passes through capitalism and socialism (Heller, 2018). The labour theory
of value help the manage of the TESCO company in identifying the difference in the
market price. The value of the good which have been produced by the company can
effectively measured by average number of labour hour required to produce the good. In

addition to this relationship between ownership, power and social change can be
effectively analyse by the management of the company.
 Keynesian Economics theory :- in this theory the cost of the product which has been
assumed by the company and the income which is suitable for the nature has been
covered. In addition to this this theory also manage that the how the economy of the
country and organisation can work in the dynamic and unfortunate environment. This
theory is basically related to the three major factor which comprises demand, cost and
income(Dimand, 2020). These three factor effectively indicates the utilisation of all the
resources which are available for the company in very effective and suitable manner.
Due to this improvement has been seen in the productivity as well as profitability of the
company which ultimately leads to acquire large market market place. If the recessionary
time has came in the nation then the spending of the government has been increased
which is beneficial for the TESCO company . Due to this rapid growth has been seen
within the economy of the country and demand has been increases within the nation that
spurs the inflation. So with the help of this theory the respective organisation is able to
effectively utilise all the resources in a very effective manner.
CONCLUSION
From the above report it has been concluded that the profitability and the flow of product
in the field market place is totally depend on the supply and demand of the goods and services in
the market. Supply has a positive relationship with cost and the supplies of the present product
which maximise the global supply of the product. An inverse relationship has been seen between
the price and demand of the product in the market. It has been concluded that the if the price of
the product has been decreases then the demand of the particular product has been decreases. The
structure and product in context to the TESCO company has been concluded. This report also
concluded the definition of demand and supply with their curves and along with this equilibrium
curve has been concluded in relation to chosen company. After word this report concluded the

different theories like Marx's Social Economic system, Keynesian Economics theory and the
neoclassical theory which help in betterment of the management.

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