Contemporary Business Economics: Demand and Supply, Emerging Theories and Models in 21st Century

Learn about the law of demand and supply, movement along with the demand curve and change in the demand curve. Compare and contrast emerging theories and models in 21st century contemporary economics with those of 20th century and their relation to modern business practices. Read about Debenhams, an online retail brand, and its use of economic theories in decision making.

BM533 Contemporary
Business Economics

Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Explain the law of demand, movement along with the demand curve and change in the
demand curve with the help of appropriate diagram...................................................................1
1.2 Explain the law of supply, movement along with the supply curve and also explain change
in supply curve with suitable diagram.........................................................................................1
TASK 2............................................................................................................................................2
Comparison and contrast of emerging theories along with models in 21st century
contemporary economics with those of 20th century and relation of them to modern business
practices ......................................................................................................................................2
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................6

INTRODUCTION
In contemporary world, business economics aids in guiding managers for making effective
and rational decisions to run the establishment. It provides analysis that is needed to devise
optimal decisions in all major organisational activity aspects (Grima, Özen and Boz, 2020). For
the assessment, chosen organisation is Debenhams which is online retail brand having
headquarters at London, UK. It is emphasised for putting its customers at heart of all things it
performs, investing heavily in analytics in order to understand shoppers to permit it for
delivering confidence-boosting and fun experience.
The assessment highlights law of demand and supply along with their change and contrast
and comparison among emerging theories in 20th and 21st century along with a relationship with
practices of modern venture.
TASK 1
1.1 Explain the law of demand, change along with the demand curve and change in the demand
curve with the help of suitable diagram.
Demand refers to the principles which is based on the desire of the consumer in order to
purchase the particular commodity and services backed with the sufficient purchasing power of
the particular products.
Law of Demand:
According to this law, it is stated that there is opposite relation in the prices & the
quantity demand of the certain goods as other factors remain constant. When the given prices of
the goods tends to increase from p0 to p1 then the demand of the certain goods tends to fall down
from oq0 to oq1 and vice-versa. These aspects shows the negative relationship between the price
and the quantity demanded of goods. In context to Debenhams, when the price of cloths tends to
rise then the demand for such goods decreases as the people will love to have affordable goods to
them.
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AS per the above diagram it is shown that demand curve is sloping downward an this
implied due to inverse relationship between prices and the certain goods in the large market.
When the value of the commodities tends to rise from p3 to p2 then the demand for the goods
reduces to q3 to q2.
Factors affecting demand of the particular good are as follows:
 Price of the goods: when the prices of the given goods tends to increase then the demand
for particular goods will reduce and the price of the goods tends to reduce then the
demand for the given goods rises as more consumer will move to affordable goods
backed with the sufficient purchasing power.
 Price of substitutes goods: These are the goods which can be replaced by other
commodity and giving same level of satisfaction. When the price of the particular
commodity tends to rise then the demand of substitute goods fall down. In context to
Debenhams, when the price of the cloths of Marks and Spencer increases then the
demand for current goods tends to rise as the customer will stick to cheaper goods.
 Price of compliments goods: when the price of regard goods increases then the demand
for own goods reduced and vice-versa. These are the goods which are optimistic in nature
as the prices of such goods tends to increases then the demand for goods tends to reduce
in the large market.
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 Taste and choice of the consumer: These are the liking and the choices of the customer
which is having major consideration to the business. When the customer is having
favourable choices and preferences to the cloths of Debenhams then the demand for such
gods tends to increases in the large market.
 Income of the consumer: It is stated that when the available income of the consumer is
high then the demand for the goods and services also increases as the customer can easily
buy certain premium goods backed with their sufficient purchasing power. Whereas,
when the individual are not having effective purchasing capacity or the income then the
demand for cloths tends to slow down.
 Change in future expectations: this is directly related to the availability of goods when
the buyer are expecting higher prices of the given goods in the near future then the
demand for goods increases which also contribute to the profitability of the company on
larger scale by which they can have higher sale and profitability. For example when the
buyer are expecting hike in the prices of Debenhams's cloths then the demand for such
goods tends to rise in the target market.
Change in demand curve:
This is referred as the change in the entire demand that is majorly affected by taste and
preferences, change in income, complementary goods or the change in the price of substitute
good. In this cases the demand curve tends to shift right or left.
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1.2 Justify the law of supply, movement along with the supply curve and also explain change in
supply curve with suited curve.
Supply is the basic concept which defined as the total available amount for particular
goods and services by which they can further sale them in the large market. Basically, it is
related to the particular prices in which given products can be sold.
Law of supply:
It is stated that there is affirmative relationship between the prices and the quantity supply
of the given goods as when the prices of goods increases then the supply of particular goods and
services also increases as the suppliers will sale only on higher prices. In context to Debenhams,
when the prices of the products tens to rise in the large market then the supply of the given goods
also rises in term of their cloths.
As per the above diagram, It is shown that supply curve is sloping downwards and also
having the positive relationship between the price and the supply of the given goods in the large
market. As per the given diagram, when the price of the given goods was at p3 then the products
supplied by the customer is q3 but increase in the prices of the given goods from p3 to p2 reflect
the rise in the supply of the goods from q3 to q2.
Factors affecting supply of the specific good are as follows:
 Costs of production: These are the factors which is having major consideration to the
business as this includes raw material, wages of employees etc, which directly reflect the
overall prices of the goods in the reference market. In context to Debenhams, when the
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prices of machine, labour are tending to rise so this directly effect the prices of the given
goods and its supply in the large market.
 Government Subsidies: when the government tends to increase the subsidies then it
leads to reduce the general cost of production in the target market. When the prices of
subsidies rises then the supply of given goods also increases in the consideration of
Debenhams.
 Technology: This is the positive factors which tends to increases the supply of goods and
services when an organisation is using advance technology which also leads to have
better product as well. This also helps in reducing the overall cost of the company which
gradability helps in managing the better products in the large market.
 Objectives of firms: There are various types of firms some are profit oriented and some
are working for the social welfare of the people. When the company is aim to generate
higher profits such as Debenhams then they sale their product only at higher prices by
which they can ensures higher growth and profitability in the market. When the company
is having consideration of doing social welfare then they only try to serve more the
society instead of generating more profits(Vidagañ and de Arriba, 2018).
 Weather: It is the aspects which is not being controlled by the company as Debenhams
is dealing in food also so this is huge impact of weather if they are having any favourable
conditions in the target market. They needs to emphasis this aspects as there is great
influence of the factor on the overall availability of goods and services.
 More firms: In an competitive world, when there is large number of companies who are
offering better products in order to have the consideration in the market and this leads to
increase the overall competition in the target market and firms have to offering some
more product in order to enhance its supply.
Change in Supply Curve:
It is the shift in the entire supply curve due to occurrence in the certain aspects that
includes technology, cost of production, government subsidiaries and may more. In this, when
the supply of the goods increases then the supply curve shift from s0 to s1 where as decrease in
the supply of goods and services makes shift in the supply curve from s0 to s2.
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According to the given diagram, when the prices of goods increases then the supply of
goods also increases as given in the above diagram. In this, the supply curve shift from s0 to s1
due to increases in the prices of the goods implies in rise in the supply.
TASK 2
Compare and direct contrast of emerging theories along with models in 21st century
contemporary economics with those of 20th century and relation of them to modern
business activities
Contemporary economics includes advanced theoretical along with empirical research in
fields of accounting, management, economics and finance with noticeable contribution along
with impacts to develop the disciplines (Barr and Et. Al., 2018). In Debenhams, managers
employ various emerging theories and concepts within modern practices. In aspect to 20th and
21st century, contemporary economic theories are as follows;
Traditional Economic Theories
Adam smith classical theory: The theory states that market tends to work effectively
when government of political system leaves them alone. The theory was propounded by Adam
Smith who wanted to encourage political leaders to accept free market approach for production
addition to commerce. In Debenhams, application of Adam Smith Classical Theory leads to
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availability of specialised equipment along with tools which allow employees to specialise
addition to enhance productivity. In 20th century, the theory was applied under situations to attain
cost advantage wherein exchange of products take place globally.
Neoclassical theory: It was developed on the basis of books of Carl Menger, Léon
Walras as well as Stanley Jevons (Sternberg, Nusbaum and Glück, 2019). Key focus of the
theory is towards supply and demand because of driving force behind production, pricing
addition to consumption of commodities. Within Debenhams, application of the theory implies
that preferences of consumers are invariant in aspect to current consumption or endowment. It
works with assumption that people have objective to maximise utility, considering which
organisations model their maximisation.
Contemporary Economic Theories
Behavioural theory: Richard Thaler is father of behavioural theory in economics. The
theory combines elements of economics and psychology for understanding the ways and reasons
people behave the way they do in real world. Using the theory, managers of Debenhams offer
insights into behaviour of employees that is useful in designing communication benefits. In the
pandemic, behavioural theory is used in Debenhams for reducing costs as well as time spent on
big data(Barr and Et. Al., 2018).
Nudge theory: It is economical concept which proses indirect suggestions along with
positive reinforcement as mechanisms for influencing behaviour along with decision making of
people or groups of people (Özen and Grima, 2020). In a company, for example, Debenhams,
when nudge theory is applied by altering the environment so to trigger automatic cognitive
processes for favouring desired results. In the pandemic situation, use of nudge theory assisted
managers to help people have more self-control for decision making, specifically for their
finances.
Comparison and Contrast of Traditional and Contemporary Economics Theories
Comparison among traditional and that of contemporary economics theories in context to
Debenhams:
Comparison
basis
Traditional economic theories Modern economic theories
Adam smith
classical theory
Neoclassical
theory
Behavioural theory Nudge theory
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Objective In Debenhams,
objective to use
Adam Smith
Classical Theory
is to give
everyone
freedom so to
produce addition
to exchange
products for free
trade and
promote greater
prosperity.
Neoclassical
theory is applied
in Debenhams
with objective of
focusing on
demand and
supply as
driving forces in
production,
pricing together
with
consumption of
offerings.
In Debenhams,
objective of
behavioural theory is
to analyse impacts
how consumers react
as well as behave
while purchasing its
offerings. In
pandemic,
behavioural theory
assists managers to
focus on how
behaviour of
consumers while
buying products
(Vidagañ and de
Arriba, 2018).
Nudge theory is
applied in
Debenhams with
objective of
shaping business
environment in the
manner that
influences
likelihood which
one option is
selected by an
individual over
another.
Implications In Debenhams,
Adam Smith
Classical Theory
implies that
business people
conspire
limitation to
customer as well
as wider society
that reflects
requirement of
government
actions.
Neoclassical
theory at
Debenhams
implies that
income is earned
in production of
commodities and
that value of
productive factor
shows its
contribution.
Within Debenhams,
implication of
behavioural theory is
to understand
common decision
mistakes which
people devices and
the reason for
making them.
Nudge theory
implies managing
change in
workplace at all
sorts, assisting
personnel to
improve decision
making and
thinking at
Debenhams.
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Contrast among traditional and modern economic theories
In Debenhams, managers apply both traditional and modern economic theories as they
both have common approaches that are they guide organisational managers to devise rational
decision making for managing market equilibrium. All the theories including adam smith
classical theory, neoclassical theory, behavioural theory and nudge theory aid business managers
to understand the ways scarce resources are exchanged in society. With these theories, strategists
of Debenhams study techniques and concepts useful to develop practices or policies in
government because they have deep understanding for the ways to develop efficiency in present
world.
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CONCLUSION
The above information concludes that a company operates in economy. Demand and supply
are the two wheel which maintain the overall flow of goods and services in the target market. On
the basis of economic expectations, organisation devise decision about what kind of product to
produce, how many personnel to employ, how to price them along with how much to pay. Key
theories of 20th and 21st century which are related to modern business practices are adam smith
classical theory, neoclassical theory, behavioural theory and nudge theory.
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REFERENCES
Books and Journals:
Barr, T. L. and Et. Al., 2018. Development of indigenous enterprise in a contemporary business
environment–the Ngāi Tahu Ahikā approach. Journal of Enterprising Communities:
People and Places in the Global Economy.
Grima, S., Özen, E. and Boz, H. eds., 2020. Contemporary Issues in Business, Economics and
Finance. Emerald Publishing Limited.
Özen, E. and Grima, S. eds., 2020. Uncertainty and Challenges in Contemporary Economic
Behaviour. Emerald Publishing Limited.
Sternberg, R. J., Nusbaum, H. C. and Glück, J. eds., 2019. Applying wisdom to contemporary
world problems. Springer.
Vidagañ, M. and de Arriba, R., 2018. Contemporary Art Resources for Teaching and Learning
Economics. Journal of Economics and Economic Education Research. 19(2). pp.1-8.
Jianchao, R.E.N. and Qing, H.A.N., 2018. Reason Analysis for Difference Between Consumer
Food Safety Risk Perception and Real Situation: From Information Supply and Demand
Perspective. Journal of Beijing University of Aeronautics and Astronautics Social
Sciences Edition, 31(4), p.75.
Shapiro, D.B., 2018. Payment to egg donors is the best way to ensure supply meets demand. Best
Practice & Research Clinical Obstetrics & Gynaecology, 53, pp.73-84.
Feng, G. and et. al., 2021, March. Research on the Demand Distribution of Aviation Equipment
Maintenance Spare Parts. In 2021 IEEE 6th International Conference on Big Data
Analytics (ICBDA) (pp. 301-304). IEEE.
Chen, X.M. And et. al., 2018. Spatial visitation prediction of on-demand ride services using the
scaling law. Physica A: Statistical Mechanics and its Applications, 508, pp.84-94.
Taghizadeh-Yazdi, M., Farrokhi, Z. and Mohammadi-Balani, A., 2020. An integrated inventory
model for multi-echelon supply chains with deteriorating items: a price-dependent
demand approach. Journal of Industrial and Production Engineering, 37(2-3), pp.87-
96.
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