Contemporary Business Economics: An Analysis of Debenhams

This report provides an analysis of Debenhams, a UK-based department store, using economic theories and quantitative methods. It includes an explanation of the law of demand and supply, movement in demand and supply curves, and emerging theories in the 20th and 21st centuries.

Contemporary Business
Economics

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
TASK 1............................................................................................................................................1
Explanation of law of demand, movement in demand curve and changes in demand curve......1
Explanation of law of supply, movement in supply curve and changes in supply curve............4
TASK 2............................................................................................................................................6
Traditional economic theories:....................................................................................................6
Modern theory.............................................................................................................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Business economics can be described as field of economics that use different types of economic
theories as well as quantitative method for purpose of analysation of business enterprise and
different factors that contribute to diversity of structure of organisation and relationship of
company with capital, labour, product market (Antonova, 2020). This project report includes
analysation of Debenhams which is a UK based organisation that is operating in department
stores in UK. It was founded in 1778 in UK by William Debenhams. It is providing different
types of products and service to their customers including clothing, household, furniture and
other things. This project report includes explanation of law of demand and movement in
demand curve. It also explains law of supply along with movement in supply curve. Moreover, it
discusses emerging theories and models in 21st century and 20th century.
MAIN BODY
TASK 1
Explanation of law of demand, movement in demand curve and changes in demand curve
Demand can be described as quantity that is willing by consumer and also able to purchase
products at different prices in a given period of time. It can be any commodity that is implied by
consumer for purpose of acquisition of products and service, their willingness as well as their
ability for paying for it.
Law of demand:
Law of demand can be described as an inverse relationship among quantity as well as
price that is demanded for goods (Assaker, 2020). In this, increase in price of goods can results
in reduction of demand as consumer is reluctant for purpose of spending more and more money
for purchase. In same manner if prices of products decrease, it can result in increase in demand
of products and service as in this situation, consumer is more willing to purchase products and
service.
In below mentioned graph, price of products increases from p0 to p1 then it leads to
decrease in demand as demand curve shift from q1 to q0. It also shown in context of Debenhams
where decrease in prices results in increase in demand of products as people can afford these
goods.
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From above mentioned diagram, it ca be analysed that demand curve is shifting
downward which can be due to inverse relationship among price as well quantity of goods in
marketplace (Balcerzak and Pietryka, 2019). In this, increase in price of a commodity from P3 to
P2 results in reduction of quantity that is from Q3 to Q2.
This case can be applied in case Debenhams in which new launch of range of clothing is
launched every year with this, old collection can be obsolete with time due to change in fashion
trends and consumer choice ( Baporikar, 2018). New collection can lead to higher prices as these
are made according to current market trends. For instance, current collection of the Debenhams
can be of 100USD. If the prices of the products can increase with 150 USD, then it will lead to
decrease in demand of products as all people cannot afford these products. In same context, if
prices of collection of Debenhams is decrease to 50 USD, then it can be affordable by consumer
which increase demand of products.
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Above mentioned scenario can be in condition where other factors are constant where
demand of products can be fluctuated with the price (Barać and Bilić, 2021). Although, this
condition cannot work for Debenhams in real work scenario as other factors are changing.
Influence of external factors does not lead to change in demand curve but it leads to shift in
demand curve. There is different scenario that can leads to shift in demand.
Factors affecting demand of goods:
There are various factors which create impact over demand of specific products and
service which are mentioned below:
Price of commodity: Increase in prices of products will tend to decrease demand of
specific goods and service and in same manner, decrease in price of products results in increase
in demand of products as consumer can afford these goods easily.
Price of substitute products: Price of substitute products also create impact over
demand of products as rise in prices of products can results in fall down of substitute (Gökmen,
2021). In relation to Debenhams, increase in prices of products of Marks and Spencer will results
in increase in demand of products of Debenham as customer will prefer to buy cheaper goods.
Price of compliment goods: Increase in prices of complimentary goods can results in
reduction of demand of own goods and vice-versa. Compliments goods are those that are
positive in nature as prices of these gods are increase but its demand is decreasing in market.
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Taste and preference of consumer: These are the good which are of choices of
consumers and create major consideration in business (Koleva and Ivanov, 2019). Increase of
preference and needs of consumer in Debenhams cloth can leads to increase demand of such type
of clothes.
Explanation of law of supply, movement in supply curve and changes in supply curve
Supply can be described as fundamental economic concept that includes total goods that is
available for consumers. It is total amount f goods that is available for purpose of sales of goods
and service.
Law of supply;
Law of supply refers to a macroeconomic law according to which all factors are constant
and if there is increase in prices of goods then supply of goods will also increase. If prices of
goods and service is decreased then supply will also decrease (Gorcheva, 2019). In this, attempt
is made by supplier for purpose of maximisation of profit by providing more quantity of goods at
time of increase of prices of products. In relation of Debenhams, when there is rise in prices of
products in large market, company is increasing supply of goods and service in order to get more
profit.
From above mentioned picture, it can be analysed that supply cure is fluctuating
downwards and is having positive relationship between price and supply of goods and service in
large market. According to this graph, at time when prices of goods is at P3, supplier is providing
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Q3 quantity of goods but when prices of products is increases to P3 to P2 then it will result in
increase in supply of goods from Q3 to Q2.
There are various changes occur in external factors that can cause shift in supply curve
and can move from left to right. For instance, prices of furniture have increased then Debenhams
can get various incentives if they are focusing on furniture (Koleva and Todorova, 2020). It will
cause a shift in supply curve towards left side due to decrease in supplied quantity. This shift can
be seen in below mentioned graph as it is moved from AS1 to AS2 due to decrease in supply.
There is different circumstance occur in external environment that provide incentives for
companies that leads to increase in supply. One of essential components for clothing is fabrics
and material used for purpose of production of clothes. If prices of fabrics and material is
decrease that is results in profit for company and leads to increase in supply of goods and
service. It cause movement in supply curve in right side and moved from AS1 to AS3.
Factors affecting supply of the specific good are as follows:
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There are different factors that can create impact over supply of goods and service n
many was and explanation of these factors is mentioned below:
Cost of production: It is a factor that creating consideration over business and includes
things like wages of employees, raw material and other things which directly create impact over
prices of goods and service in target market (Le Corre and Burger-Helmchen, 2021). In relation
to Debenhams, increase in prices of labour, machine will lead to increase prices of products as
well as its supply in marketplace.
Government subsidies: Government is also provided subsidies to business which results
in decrease in cost of production but it increases in supply of goods. On the other hand, increase
in price of subsidies will result in increase in cost of product that create impact over supply of
products and service.
Technology: It is another factor that create impact over supply of goods and service as
organisation which is using advance technology can be produced well and reduce cost of
production which create impact over supply of goods and service.
Objectives of firms: There are different types of firms which are operating in market for
different objectives as some firm is profit oriented where as some are working for purpose of
social welfare of people. Debenhams is an organisation which is working for attaining higher
profit by selling their products and service. This organisation is selling its products at higher
prices which results in higher profitability and growth.
TASK 2
Economics theories are those theories which is emerged with the aim of construction of
explanation of economy as well as society. Modern economic theories have emerged from
classical theories like Keynesian and Marxian viewpoint (Peeva, 2019). Contemporary business
economics is one that is focusing on advance and empirical research in terms of finance,
accounting, economics and management that is contributing towards development of discipline.
Managers of Debenhams are using different theories as well as concepts in their practices. In
context of 20th and 21st century, these theirs is mentioned below:
Traditional economic theories:
Adam Smith classical theory: It is a theory that is that explains that market work effectively at
time when government and political party allow them to work freely. It is one of theory that was
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introduced by Adam Smith who is emphasis on accepting of free approach of market for purpose
of production of goods and service. This theory can be applied in case of Adam Smith Classical
Theory that provide specialise equipment and other tools to employees for purpose of
specialisation that improve their productivity. At time of 20th century, this theory is applied for
attainment of cost advantage where a person can exchange products.
Neoclassical theory: It is another type of theory that is emphasising on different factors that are
responsible for purpose of determination of prices of products and service that consist
competition in market, perception of consumers, product cost and other things (Viscusi and
Broughel, 2020). It is one of theory that is focusing on supply and demand that is considered as
key factors for purpose of production, consumption and pricing of goods and service in
economy. It was emerged as in the year 1900 for purpose of competing in classical economic
theories. In this, rational agents are allowed to make judgement in a concise manner where
individual can make preference for different domains like completeness, continuity, reflexivity
and other things. In this, different decision that is made by individual are rational that is focusing
on attainment of maximum satisfaction.
Modern theory
Behavioural theory: It is a modern theory that describe about irrational choices made by
humans at time of dealing with scarce resources. It is act as main head from other theories that is
emerged in relation to human behaviour (Welter, Baker and Wirsching, 2019). It is considered as
an essential branch that provide insights into different psychological factors that are require for
purpose of making decision of individuals. Profit maximisation alone is not required for purpose
of prediction of human behaviour and mostly in case where individua are reflecting scenario of
uncertainty. These types of emotional response that are reflected by people who are living in
society is not following traditional models of economics that is related to demand and supply. It
is a theory that aims at fulfilment of gap by taking into consideration of psychological factors for
purpose of creating influence over decision making process of people in society.
Nudge theory: It is another type of theory that is emerged as important part of behaviour
economics. It is described that different aspect of choice can be cause due to changes occur in
behaviour in people and allow them to make changes in incentives of economics. Nudges are not
compulsory instead it is described as place that allow people to understand situation. It is
considered as widespread application in terms of public policies that can be through subtle
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alteration in environment. Another aspect in this theory is that is it not brining any significant
changes in economic incentives that are present for purpose of targeted person.
Comparison
There are different differences seen in traditional economics in compare to contemporary
economic theories. As traditional theories are emphasising on believe that people of society
preferred to act in a specific manner whereas modern theories are taking inro account human
psychology role. It is important to consider that context in which a person make decision as it
helps to understand reason of making decision of people in specific manner. I this, it is essential
for economists to understand behaviour reflected by consumers that allow them to provide an
advice to business that is important for purpose of business operation. Traditional economics also
argued that business which are fails in creating positive surplus within consecutive period can be
ended up closing down their business but it is noticed that such types of rational thinking may
not always prevails as per view of behaviour economists.
Managers of Debenhams can apply both traditional as well as modern economic theories as
these theories have various common approaches that provide guidance of managers in order to
devise rational decision making for purpose of managing market equilibrium. All theories
including nudge theory, behavioural theory, neoclassical and classical theories aims to provide
understanding to manage scare resources in society. It also allows theorist to develop different
practices and policies in government that improve their understanding.
CONCLUSION
From above mentioned project report, it can be concluded that there are different types of
business that take place economy of country. Demand and supply are two main components of
economics which maintain flow of products and service in marketplace. These demand and
supply can be affected from different factors that create influence in market. It is essential for
business manager to understand these concepts in order to maximise their profits. In order to
meet expectation of business, it is essential for organisation to take different decision and also
needs to consider different components of economics. There are different theories in economics
related to 20th and 21st century that provide guidance to managers of company.
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REFERENCES
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