Contemporary Business Economics: Law of Demand and Supply, Shifts and Movements, and Modern Theories

Contemporary
Business Economics

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK ..............................................................................................................................................3
Law of demand along with movement and changes in demand curve ......................................3
Law of supply with consideration of its movement and shifts along supply curve....................6
TASK 2............................................................................................................................................9
Compare and contrast and relate both 21st and 20th century to modern business activities......9
CONCLUSION .............................................................................................................................11
REFERENCES..............................................................................................................................13

INTRODUCTION
The report of Next plc is discussed about the changes which they faced in its daily sales
revenue and it identifies the better technique to deal with the issue. But the firm is not
understanding about the concept of microeconomics which mainly includes the shift in demand
curve and supply curve of the organization (Adeola and Evans, 2019). On that basis, firm need to
know the law of demand and law of supply concept and how it creates an impact on the demand
and supply curve of the company. In other task, company want to know about the theories which
show the relation between them in modern business practices.
TASK
Law of demand along with movement and changes in demand curve
Law of Demand
Law of demand refers that a higher price leads to a decrease in quantity demanded and that a
lower price leads to an increase in quantity demanded. Economist suggest that the term demand
cites the willingness and ability to purchase a particular amount of goods and services at each
price. Demand is basically based on ability to pay and if the consumer is not able to pay the
particular amount with respect to their purchases, they have no effective demand.
Figure 1 Law of Demand. 2021
From the above diagram of Law of demand, it can be concluded that the consumer preferences
changes according to the change in prices while assuming other factors affecting demand being
constant in market. When a price of a good rises, it leads to a fall in the demand. This happens
because a consumer is reluctant to spend more for the good with the fear of his limited disposal
income. Managers of Next Plc applies law of demand for setting prices of their products and to
get acquainted about consumers’ demand with respect to their products (Bril-Mascarenhas and
Madariaga, 2019).

Movement in Demand Curve:
The demand curve is a graphical representation of the demand function. When there is a
change in demand of a product due to change in price while keeping the other factors constant, it
is referred as change in quantity demanded. And when expressed graphically, it is shown as a
movement along the demand curve.
Figure 2 Movement along demand curve. 2021
(Source: Movement along demand curve. 2021)
The above diagram explained about the movement along demand curve with respect to price and
quantity demanded. Here, when price increases from OP1 to OP2 demand decreases from OQ1
to OQ2 ,which is called as contraction of demand. And when price decreases from OP1 to OP2
demand rises from OQ1 to OQ2 referred as expansion of demand.
Movement of demand curve can be possible in two ways -
Upward Movement along demand curve occurs when there is a contraction of demand due to a
fall in the quantity demanded in response of rise in the price of goods and services where other
factors remaining constant (Chamberlain, 2018).
Downward Movement along demand curve occurs when there is an expansion of demand or
increase in quantity demanded due to a rise in the quantity demanded due to a fall in the price of
goods and services where other factors remaining constant.