Contemporary Business Economics

This study focuses on microeconomic concepts and theories of contemporary economics, specifically the law of demand and law of supply. It explores the application of these theories in real-world business practices, using Marks and Spencer as a case study. The study also compares the theories of economics in the 20th and 21st century and their relevance to business practices. Find comprehensive study material and solved assignments on contemporary business economics at Desklib.

CONTEMPORARY
BUSINESS ECONOMICS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
Task 1...............................................................................................................................................3
Law of Demand...........................................................................................................................3
Law of supply..............................................................................................................................5
Task 2...............................................................................................................................................8
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
The study is on microeconomic concepts and theories of contemporary economics. The law of
demand, movement across the curve plus change in the curve have been described. The law of
supply, movement across the curve and change in the curve have been illustrated. Marks and
Spencer is the organisation taken for the study. It is a retail enterprise in UK dealing in
diversified product range of merchandise. The study compares theories of economics of 20th and
21st century and which relate them to practices of business.
Task 1
Law of Demand
The law of demand says that factors being constant, price and demanded quantity of good and
service and goods are related in inverse proportion with each other. As the product price rises,
product’s demand will fall. The law of demand gives explanation about consumer choice
behaviour when price change. Consumers buy less of a product if they find the price increasing
and thus demand for good subsides. This is the natural behaviour of consumer choice (Salerno,
2020). It happens as consumer sees that the product can be done without if it is expensive and
not necessary for buying. This can also be said to be a case of marginal utility being diminished.
People utilise the first units of a good for serving necessities first and then utilize every
additional unit of the product for serving lower valued ends. Marks and Spencer have a product
range which cater to middle class segment and thus they follow the law of demand in pricing
those certain categories.

Movement along demand curve
The diagram shows the movement along demand curve. When the commodity’s price increase
from price P3 to P2, then the demanded quantity declines from Q3 to Q2 and then to Q3 and
again goes round.
The demand curve tells the total of demanded quantity at every price along the consumers in
market. The change in price is seen in the demand curve’s movement, however not by self
increasing or decreasing demand (Salerno, 2020). Magnitude and shape of demand changes in
answer to change of preferences of consumer, income and relating to economic commodities but
not to price change.
Change in demand curve
In economics, it becomes necessary for knowing the difference of concept of quantity and
demand which is demanded. Demand shows relation between requirement of wants of consumer
and units in number of economical goods. Demand change means change in position or curve’s
shape, which shows a shift in the graph of consumers’ wants plus needs talking of means
available.

Speaking on the other side, demanded quantity gives reference to point across the horizontal
axis. Change in demanded quantity means movement across demand curve due to price change.
Both ideas are many times conflated, however there is a mistake in it, increasing or declining
prices do not decline or rise, however the change comes with quantity being demanded.
Factors which affect demand
The shape along with demand curve’s position gets affected by many factors. The rise in
incomes are said to make demand increase for electronic commodities as people have a will for
spending more. Availability of the complementary products which have competition with given
economic commodity tends to decrease demand for the good, as same kind of consumer needs
can be satisfied. Also, availability of close complementary products have tendency to increase
the need for economical commodity, as usage of two goods may be valuable for consumers
rather than their usage separately (Mead and Ostrolenk, 2017). Marks and Spencer judge these
market factors such as income rise, substitute availability and accordingly it helps in right
product manufacturing with right price that can create demand.
The factors like expectations of future, change of environmental background conditions or shift
in real or perceiving the good’s quality may alter the curve of demand, as consumer preferences
pattern can be altered for the product to be utilised and how importantly its requirement is there.
Law of supply
It says that all factors keeping constant, quantity supplied and price of commodity are related
with the other directly. In simpler terms, with a rise in the price given for a good, the supplier
increase good supply in market.
Law of supply depicts the behaviour of manufacturer at the time of change in services and
goods’ price. With the rise in price of good, the supplier increase the supply so as to earn gain
due to high price.
The law of supply says that when price of commodity increases, suppliers try to increase their
gain by raising the quantity which has been offered for sale (Aziz, 2019). As organisations seek
to increase on revenue, they expect to receive high price and thus production will be more from
their side. Marks and Spencer has a category of products which are sold at premium. The sale of

these products is done with a customer segment in mind and on getting good response, the
production of these products have increased (Mead and Ostrolenk, 2017).
The law of supply is intuitive which can be seen from the examples below:
 When the college students learn that a job in engineering in computers is more payable
than being a professor, then supply of students shall increase.
 As customers buy more cupcakes than doughnuts, bakeries shall raise the production of
cupcakes and reduction shall come in production of donuts so that profit can be
increased.
 When an employer gives overtime, the number of working hours increase of employees.
 Marks and Spencer analyse the product categories which sell more and thus they are
marketed more and are kept in larger quantities at the stores which can increase profits
for the company.
Factors and drawbacks affecting law of supply
Production Cost: When there occur change in raw materials’ cost or labour for producing unit of
supply, volume can change too on assumption that selling price is kept same. The variable cost
which affects margin of profits is a great factor in knowing the production quantity.
Technical change: Advanced technology can increase the efficienctness in which units are
manufactured and lessens the production cost.
Tax: The taxes imposed in goods production limits on the profitabiltiy. If a producer requires
remitting a sales portion as tax, the producer is less inclined for increasing supply (Aziz, 2019).
Legislation: There are regulatory laws which can be put in place which limit given product’s
quantity which can be produced.
Uncertainty period: Producers may get inclined for reduction in supplies which can offload older
inventory. This happens in situation of high business risk.

Movement along supply curve
The diagram states supply curve which is upward in slope and thus positive relation is seen
between quantity being supplied and price. When the good’s price was at P3, quantity Q3 was
being supplied by suppliers. With the rise in price, quantity which is supplied also rises.
The supply curve is sloping upwards as over time, the supplier can get to know quantity of the
goods to manufacture and later which can be brought to the market. At a given point of time, the
supply which seller brings to market is fixed and seller faces decision of either selling or getting
to withhold stock from sale, it is the customer demand which set the price and sellers can charge
which the market can bear. If demand of consumer rises as time passes, the price shall rise and
suppliers can seek new resources for production (Xinyuan and Xiuguang, 2017).

Changes in supply curve
Supply curve changes due to the various factors or elements. The demand in the market is
a one key factor that influences the supply curve. Along with the demand there are various other
elements that can demonstrate as the market condition. The recent covid situation that could
completely destroy the production cycle. In such a time the supply of the products in market are
keep on changing (Rasch, 2019). This creates a huge impact over the supply situation of different
products even after having the huge level of product demand in the respective market. Changes
in supply curve also impacted due to the inflation rate in the country. This can certainly indicate
that if the currency value get increase than the supply become more stagnant in the market and in
case of the opposite situation the entire situation get affected.
Task 2
The theories of economics are kept on changing that also create impact over the business
operations and the functions of the business entity. The world has changed drastically in the 20th
century as compare to the 21st century. The changing nature of the society could lead to many
changes in the potential theories and practices associated with the business sector. In the 20th
century the world was different that could also offer the restricted scope for the theories and
practices to be used and explored in against to undertake the best level of economic theories and
practices for the business environment. The previous theories were more like basic and did not
consume the focused approach towards achieving the overall business conditions. The traditional
theories of economics were certainly associated with the demand and supply of the products in
the market (Liu, 2017). The theories of economics in the 20th century were more like a basic
economics that certain demonstrate that if the demand of the product gets increase than the
supply of the same would also get a hike in the respective market. This is a basic rule of
economics that certainly demonstrate the basic nature of the economies and market. This is
obvious that if the seller gets to sale a certain product in bulk this would also motivate the same
to the seller to focus over more supply of the much demanded product under the target market.
The traditional approach of the economic theories was more limited in nature that could only
offer the basic characteristic of the market and its nature. The 20th century when the technology
ad society were only aware about the limited level of resources and amenities that could not offer

the advanced level of knowledge and information for the economist. In that time people were not
aware about various aspects and factors that part of the business environment.
In the time of the 20th century technology were also not developed that could also not
measure the overall impact of the economic theories adopted and used. This is all about the basic
economics that is related to the basic nature of the market in which only such product supply are
focused that consume more demand in the market. All such products that are not much
demanded in the market would be out of the focus area of the business enterprises. The time has
changed allot. Today the 21st century is well advanced and modified the technology has been
emerged significantly. Today the world and society become modern that could offer more
advanced and modified level of technology that could meet up the overall need and requirements
of the market. The technology could also offer more advanced level of theories like macro
economics and micro economics. These are the two structure of thee economics models today
the world is witnessing. Macroeconomic contain various factors that create an impact over the
business outcomes and demand of the different products companies and business entities offer to
its customers. Macro economics contain the wide range of business environment factors that
significantly influence the overall performance and demand of the product in respective market
(Rasch, 2019). Macroeconomic is well diversified that also allow the businesses and entities to
identify various elements and aspects that can offer the best level of business growth oriented
policies and practices. This is the advanced level find of the 21st century of modern policy when
the companies get to develop the policies related to economics that can certainly create a balance
between the demand of the respective product and the supply of the same in the respective target
market.
The economic aspect has more advanced with support of the other part of the economic
theory that is associated with the micro economic. This consumes different economic policies
such as monitory policy, policy related to the application of money and financial resources and
many such policies. This is a economic policy that is associated to influence the supply of the
money and the financial resources under the respective market. In economic context this is a
approach that is about to control the supply of the financial resources and the funds (Jarmin,
2019). Currency value is also a part of this economic feature. Micro economic is directly
associated with the demand of the currency in the market and also with the supply of the same in
the respective target market.

There are various other policies that is related to the inflation and many such practices.
The role of the economic theory has become much advanced in the 21st century when the all
decisions are made on the currency value and its supply. Government not only try to control the
entire market but also it gives emphasis over controlling the value of the currency in the
respective market. This has been certainly indicated that the modern economic policy adopted by
the government is more modified and advanced in comparison to the policy adopted in the 20th
century. The time has changed immensely due to the advanced level of growth and development
of the economies. The modern requirements are also such that it offers the government to adopt
the different policies for all its different needs and requirements. This is essential for the
government to certain adopt the different policies to overcome all different needs and
requirements of the government to control the economic situation of the country (Jarmin, 2019).
The different segregation has been designed by the government in current time to manage the
entire economic situation make it more significant for the government to design the perfect
policy in order to manage the economic condition and situation of the market. The modern
demand of the economic market is much more advanced than the earlier part of the 20th century.
The world has changed immensely that also require to modify the economic policies that can
deal with the all changing needs and demands of the policy making in the market.
CONCLUSION
Law of demand is a concept that is about the more the demand in the market the more
supply would enforce of the same product. The law of supply also work in the same way. The
modern time has changed allot. The economic policies has been well advanced and modified in
the 21st century as compare to the 20th century. The time has changed immensely when the
policies related to the economics have been transformed immensely. The modern time is such
that the economic policies have been segregated into the micro economics and the macro
economics concept. This offer the more professional approach to manage and control the
economic situation of the country.

REFERENCES
Books and journals
Salerno, J., 2020. The Wealth Effect and the Law of Demand: A Comment on Karl-Friedrich
Israel. Quarterly Journal of Austrian Economics, 22(4), pp.579-595.
Franks, E. and Bryant, W.D., 2017. The Uncompensated Law of Demand: A ‘Revealed
Preference’approach. Economics Letters, 152, pp.105-111.
Dean, E., Elardo, J., Green, M., Wilson, B. and Berger, S., 2020. Demand and Supply at Work in
Labor Markets. Principles of Economics: Scarcity and Social Provisioning (2nd Ed.).
Aziz, I.J., 2019. Economics and culture. Buletin Ekonomi Moneter dan Perbankan, 22(1),
pp.282-302.
Notni, J., 2021. PSMA-Targeted Therapeutics: A Tale About Law and Economics. Journal of
Nuclear Medicine.
Rasch, F.A., 2019. BASIC ECONOMIC PRINCIPLES: The Short Guide: Everything You Need to
Know About Economics. IJBMR.
Jarmin, R.S., 2019. Evolving measurement for an evolving economy: thoughts on 21st century
US economic statistics. Journal of Economic Perspectives, 33(1), pp.165-84.
Liu, E., 2017. Industrial policies and economic development. Work In Progress.
Mead, E.S. and Ostrolenk, B., 2017. VII. The Repeal of the Law of Supply and Demand.
In Voluntary Allotment (pp. 83-95). University of Pennsylvania Press.
Xinyuan, L.I.U. and Xiuguang, L.I.U., 2017. A Rethinking of “Supply Creates
Demand”. Journal of Chongqing Jiaotong University Social Sciences Edition, 17(2),
p.63.

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