Contemporary Business Economics: Law of Demand and Supply with McDonald's Case Study

This report covers the concept of demand and supply with the change in law of demand and supply of given goods in the target market. It also compares emerging techniques of 20th and 21st century economics with modern practices of business management using McDonald's as a case study. The report explains the law of demand and supply, shift in the demand and supply curve with appropriate diagrams. It also discusses traditional economic theories like Adam Smith classical theory and neoclassical theory, and modern economic theories like behavioral theory and nudge theory.

Contemporary Business
Economics

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK 1............................................................................................................................................3
1.1 Explain the law of demand & justify the change in the demand curve with the help
appropriate diagram................................................................................................................3
1.2 Define the law of supply, shift in the supply curve & define change in supply curve with
appropriate figure...................................................................................................................6
TASK 2............................................................................................................................................9
Compare & contrast in emerging techniques & models in 21st century economics with those
of the 20th century & define them with practices of business management..........................9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Economics is the concept which is concern with wealth, scarcity & choices of resources.
Also finding the ways to reconciling the unlimited wants with the available resources. It is
basically related to the creation, consumption and transfer of wealth and this basically
encompasses the areas of microeconomics that is demand and supply, ensuing the flow of goods
in the target market(Cohen and Flood, 2022). In this report, McDonald's is the considered
business organisation, It is the American multinational organisation which is dealing in fast food
restaurants and headquartered is in Chicago, Illinois, U.S. T his respective report will cover the
concept of demand with its change in law of demand & concept of supply with the change in
supply of given goods in the target market. Moreover, it will compare the emerging techniques
of 20th & 21st century with the modern & advance working of management.
TASK 1
1.1 Explain the law of demand & justify the change in the demand curve with the help
appropriate diagram.
Demand is the concept of analysing the choice and want of the human being for buying
the specific commodities & services also having the capacity to buy the particular commodities
& services in the large market.
Law of Demand
This states that the prices of the commodity that is being purchased by the consumer and
the total amount of demand is oppositely related to each other as rise in the prices of
commodities tends to slow down the entire demand of commodities in the market(Reeves, 2021).
On other hand, fall-down in the prices of goods tends to implied hike in the entire demand of
commodities in the target market. In consideration to McDonald's, favorable prices tends to rise
the overall demand of goods in the target market and vice-versa.

From the above demand curve, it can be illustrated that fall in the demand of goods from
Q2-Q1 is due o the increases in the prices of goods in the target market. With the help of this
diagram, it is clearly integrated that increases or decrease in the demand of goods impact the
overall purchasing behavior of the buyer.
Following are the factors that are affecting the law of demand and also deviates the
demand & they are as follows
 Commodity price: There is the opposite connection in the given prices and the total
amount of goods purchase by the consumer as rise in the prices of products leads to fall-
down the overall demand of commodities in the concerned market whereas the reduction
is the prices of commodities and services make increase in the demand of commodities in
the target market(Tang, Law and Harun, 2022). In context to McDonald's, as the products
are affordable then the demand for such commodities tends to rise in the target market &
in case when the demand for goods which are not affordable due to the high prices then
the respective demand for goods tends fall in the target market.
 Price of substitute goods: These are the commodities which can be effectively changed
by other goods as due to the similar level of satisfaction level which is being get from the
commodities. There is direct relationship in the demand & the prices of the substitute
commodities. In context to McDonald's, rise in the prices of substitute goods for say

burger from burger king then respective demand for McDonald's burger tends to rise as
they are giving same level of satisfaction.
 Price of compliments products : These are the commodities that are used as the
conjunction to the other goods as they are not solely used nor separately have their own
existence.(Xie, Sundararaj and Mr, 2022). For example, Burger bun is the complementary
good for burger as rise in the prices of these decreases the demand for burger and vice-
versa.
 Income level of buyer: This the basis of buying any of the commodity in the large
market as when the people are having sufficiency purchasing power to get the product
then the respective demand for the commodities tends to increase in the concern market.
In consideration to the McDonald's, people with higher income level purchase and vice-
versa.
 Future availability of commodities: It is being considered as the future availability of
commodities in the concerned target market and as the consumer is expecting any of the
limited quantity in the given commodities in near future, the demand for commodities
tens to rise in the concerned market. In relation to McDonald's, as the demand of goods
reduces which is justifying the availability of goods in near future.
Change in the demand curve :
It is referred as the varation in the whole demand due to variation in the certain factors
which involves the prices of commodity, taste and choices of their buyer and the income of the
buyer, future expectations of the buyers. These all aspects impact the the respective demand of
goods in the target market and the curve will shift to the right or left.

From the given diagram is it being stated that the respective demand curve shift from d0
to d1 as when the demand of goods tends to fall-down and in consideration to the forward
looking in the demand curve will shift the demand curve to the right side as d0 to d2. There is
the variation in the certain demand due to certain elements & involves the taste & choices of
buyer, price of goods, income level of consumer & many more.
1.2 Define the law of supply, shift in the supply curve & define change in supply curve with
appropriate figure.
Supply is providing something that is wanted or needed can be in the large quantities and
over a given span of time. It is defined as the total amount of goods which are available for the
sell in the target market. This is the basic concept which describe the total availability of goods
over a particular period of time.
Law of supply:
As per this law, there is the direct connection in the quantity supplied as the prices of the
particular commodities & services in the target market. Keeping all the factors on the same
platform and change in the prices of goods tends to impact the overall supply of goods in the
target marketplace(Otero, 2022).In context to McDonald's, increase in the prices of burger tends
to increase the overall supply of commodities in the target market.

From the above given curve, it is being given that the increase in the prices of
commodities tends to increases the supply of products in the market and when the given prices
rises from p3 to p2 then the respective demand rises from q3 to q2 in the target marketplace.
following are the factors that do impact the law of supply:
 Costs of production: It is clear that when the firm is having the sufficient raw material to
manufacture the goods in the market and they can fulfill the needs of the target market so
then the supply of commodities tends to rise. In relation to McDonald's, when they are
having the sufficient raw material to offer the products and services then the respective
supply for the same increases and they can right fulfill the needs of the target market and
generate more revenue. On other hands, insufficient raw material tends to slower down
the supply of goods in the market.
 State of Technological: In the modern world, goods and services are being
manufactured with the use of advance technology and resources. It is clear that when the
company is using the upgraded methods of production and offering the advance products
then the respective supply of goods tends to rise by which they can rightly ensures the
huge profitability and revenue in the target market (Blatchford, 2021).
 Objective of companies: McDonald's is working with the sole objective of generating
more revenue so that they can sustain in the market for long period of time. When they
are working for generating more revenue then they make all the efforts for increasing the
supply of goods by which they can sale their product at higher prices. They are operating

their business by giving franchise in the market so that people can easily reach to their
set target.
 Rivals in the market: This is the basis for every market that large number of competitors
tends to give competition to the existing firms and this is being derived that the rise in the
number of firms operating in the same industry tends to decrease the supply of existing
firms(Gernaat and et. al., 2021). In context to McDonald's, there are many big firms in
this industry which are operating for say Burger King is the firm which is operating its
business in the market and ensuring the huge profitability and revenue but this resist the
increase in the supply of goods which is being offered by the McDonald's.
Change in Supply Curve:
This concept tends to implied the supply curve to shift to the right or left due to the
increase or decrease of supply in the target marketplace(Ishii, 2021). For instance, rise in the
supply cure sift the curve from S0-S1 & decline in the overall supply tends to shift the curve to
the left from S0-S2.
From the above curve, it is being derived that as the prices of products tends to reduces
then it implied in decreasing the supply of goods in the target marketplace. It is being derived
that the increase in the supply of goods tends to shift the supply curve to the right from s0-s1.

TASK 2
Compare & contrast in emerging techniques & models in 21st century economics with those of
the 20th century & define them with practices of business management.
Contemporary economics involves the certain theories along with the effective research
in the domain of management, economics, finance with the better contribution and the impact by
which they can maintain the disciplines(Harjoto and Rossi, 2021). In context to McDonald's, the
owner of the company is using certain theories and concept with the modern practices. In context
to 20th & 21st century, certain theories are given below:
Traditional Economic Theories
Adam smith classical theory: According to this theory, it states that the market can work
in an appropriate manner when there is no restrictions of government and it is being stated by the
Adam Smith who wants to motivate their leaders to do the free market approach for the
manufacturing and production. In context to McDonald's, This theory needs a specialized
equipment along with the certain tools so that their employees can rightly contribute to the better
productivity of the company.
Neoclassical theory:This theory is being developed by Carl Menger and their fellow
members and their key emphasis is on the demand & supply as these are the forces behind the
overall production, pricing & the consumption of commodities. In relation to McDonald's, this
theory says that the choices of the consumer in consideration their their endowment. This
basically works with the assumption that the people have their sole aim to increase its utility.
Contemporary Economic Theories
Behavioral theory: This theory is invented by the Richard Thaler & it combines the
elements of economics & psychology for analyzing the method and the certain reasons in which
the people act in the real world. With the use of this theory, McDonald's, gives the insights in the
overall behavior of the workers so that they can have the benefit of communications.
Nudge theory: This is the concept that is having the indirect relationship along with the
direct reinforcement which basically influence the behavior of the people for better decision
making (Marozau, Guerrero and Urbano, 2021). In relation to McDonald's, when this theory is
being applied by altering the business environment by which they can trigger automatic
cognitive process so that they can have the appropriate results. During the pandemic, use of this
theory helps the manager to take people more confident for their decision-making.

Comparison and Contrast of Traditional and Contemporary Economics Theories
In relation to McDonald's, caparison among the traditional and modern economics theories are
given below:
Basis of
Compariso
n
Traditional economic theories Modern economic theories
Adam smith
classical theory
Neoclassical
theory
Behavioural theory Nudge theory
Objective In consideration
to McDonald's,
their main
consideration to
use this theory so
that they can
give the freedom
to every business
and in their
department to
produce and
exchange their
goods with free
trade to advertise
more prosperity.
This theory is
being applied in
McDonald's with
the main aim of
focusing on the
supply and
demand in the
market as this
drive the
production,
pricing together
with the
effective
consumption of
goods.
In context to
McDonald's, the sole
objectives is to
evaluate the
influence of
consumer also their
behaviour while
they are making
purchase. This
theory guide the
manager who to
understand the
behaviour of the
buyer.
This theory is
having he
objective with
McDonald's to
shape the business
environment in an
appropriate
manner by which
they can influence
the living of the
people.
Implicatio
ns
In context to
McDonald's, this
theory is being
used so that
people can
conspire the
limitation to their
buyer also the
Neoclassical
theory in
McDonald's
implies that the
overall income
is being
generated with
the higher level
With this,
McDonald's can
understand the
implications that the
common decision
mistakes that the
people devices and
the respective reason
It is the theory
which implies in
getting change
within the
organisation,
helping the
employees to
enhance their

society which
can meet the
requirement of
the government
actions.
of production
and the value of
the productive
aspects with its
contribution.
for making them. decision-making.
CONCLUSION
From the given report, it is being summarised that demand & supply are the two wheels
that is ensuring the flow of goods and services in the target market. Price of commodity, income
of consumer, taste and choices and future expectations are the factors which influence the
demand of goods. Where as the cost of production, state of technology, objective of firm are the
certain aspects which is impacting the supply of given goods in the target market. Moreover,
there are various theories which are being used for analysing the modern business practices that
are Adam smith classical theory, neoclassical theory, behavioural theory & nudge theory that are
ensuring to the betterment in the entire operations of the economy and the company by which
they can ensures the systematic working at all the levels of organisation.

REFERENCES
Books and Journals
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Reeves, T., 2021. The Inviolable Law of Demand. Available at SSRN 3930186.
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replenishment model using the logit demand function. Decision Sciences, 52(2), pp.512-
534.
Otero, S., 2022. The law of supply and demand rules monolignol transport. The Plant Cell.
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Colliers. In British Trade Unions 1707–1918 (pp. 373-386). Routledge.
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accuracy of the precision hydrostatic spindle with mid-thrust bearing layout. The
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Ishii, Y., 2021. Electricity Demand and Supply Curve Estimation with Neural Network. IEEJ
Transactions on Power and Energy, 141(5), pp.384-390.
Gernaat, D.E. And et. al., 2021. Climate change impacts on renewable energy supply. Nature
Climate Change, 11(2), pp.119-125.
Harjoto, M.A. and Rossi, F., 2021. Market reaction to the COVID-19 pandemic: evidence from
emerging markets. International Journal of Emerging Markets.
Marozau, R., Guerrero, M. and Urbano, D., 2021. Impacts of universities in different stages of
economic development. Journal of the Knowledge Economy, 12(1), pp.1-21.