Contemporary Business Economics: Law of Demand and Supply with Reference to Tesco Plc

This report critically analyses the microeconomic concepts such as law of demand and law of supply with reference to Tesco Plc. It discusses the movement along demand and supply curve with the shift in demand and supply of Tesco products. Lastly, the report compares and contrasts the emerging theories and models in 21st century with that of 20th century along with its relation to modern business practices.

CONTEMPORARY
BUSINESS ECONOMICS

Table of content
INTRODUCTION...........................................................................................................................2
TASK A...........................................................................................................................................2
1.1 Law of demand, movement along the same demand curve and change in demand curve
with reference to Tesco Plc..........................................................................................................2
1.2 Explain the law of Supply, movement along the same supply curve and changes in supply
curve with reference to Tesco Plc................................................................................................5
TASK B...........................................................................................................................................8
Compare and contrast emerging theories and models in 21st century contemporary economics
with those of the 20th century, and relate both of these to modern business practices...............8
REFERENCES..............................................................................................................................11
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INTRODUCTION
Contemporary business economics is a field which involves the study and analyses of the
organization structure, issues and its relationship with the labour, capital & product market in the
present time using the economic theories and quantitative methods (Cerreia-Vioglio and
Rustichini, 2021). This report will critically analyse the micro economic concepts such as law of
demand and law of supply with reference to Tesco Plc. Tesco is basically one of the third largest
retail company of UK which offers variety of general merchandised and groceries products to its
local and international customers. The company operates in more than 11 countries with around
7005 stores all around the world. This report will discuss the movement along demand and
supply curve with the shift in demand and supply of Tesco products. Lastly, the report will
compare and contrast the emerging theories and models in 21st century with that of 20th century
along with its relation to modern business practices.
TASK A
1.1 Law of demand, movement along the same demand curve and change in demand curve with
reference to Tesco Plc
Law of Demand: This is one of the most important and fundamental concepts in
economics which state that there is an inverse relationship between the quantity demanded and
price of the goods and services. It means an increase in the price of product leads to the decrease
in the quantity demanded or vice-versa (Fatimah, 2021). According to consumer preference
theory it is identified that consumer understand the combination of two goods which are
preferred according to price of the good with the account of budgetary constraints in the market.
For example, Oat milk is a product that is offered by both Tesco and its competitors. That
is why, the demand for Tesco’s product can be changed due to another firm so the curve is
shifted or change according to the situation. There are different types of demand curve such as,
competitors, inflation, population, season and climate etc are affect the demand and supply of the
product.
Movement in demand curve
The main factors that affect the demand curve is price of the commodity because there is
different commodity which has its own price but customer always to towards the price which is
low in the markets. Also, it is affected the quantity demanded and the other factors remain
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constant. The price of Tesco’s oat milk much higher than the Walmart’s oat milk that is why is
the demand curve is expanded and contracted.
 Expansion of the curve-
From the above diagram it has been analysed that when the price of the oat milk is shifted p to p1
it affects the quantity demanded with the help of increasing in the commodity of oat milk by
shifted q to q1. So, it is understanding that’s when price of Tesco’s product is decreases on other
hand the demand for the commodity will be increases. There is inverse relation between quantity
demanded and price of the commodity and all the other things will be equal. It is also known as
the downward movement of demand curve.
 Contraction of the curve- From the above diagram it has been analysed that when the
price of the oat milk is shifted p to p2 it affects the quantity demanded with the help of
increasing in the commodity of oat milk by shifted q to q2 (Gilroy, Koffarnus and
Hantula, 2018). So, it is understanding that’s when price of Tesco’s product is increases
on other hand the demand for the commodity will be decreases. There is inverse relation
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between quantity demanded and price of the commodity and all the other things will be
equal. It is also known as the upward movement of demand curve.
Shift in demand curve
It refers to the situation which is related to the change in factor apart from the price of the
commodity. There are different types of factors on which demand curve is based. That is why the
demand curve is shifted right or left direction.
 Rightward shifting demand curve
From the above diagram it has been identified that when the price is constant and due to other
factor, such as competitors of Tesco are affected the demand curve and that is why the quantity
demanded shifted leftward to rightward direction. The demand for oat milk is shifted 5 to 10 unit
so the curve shifted A to B.
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Leftward shifting demand curve-
From the above diagram it has been identified that when the price is constant and due to other
factor, such as competitors of Tesco are affected the demand curve and that is why the quantity
demanded shifted rightward to leftward to direction. The demand for oat milk is shifted q1 to q2
unit so the curve shifted D1 to D2.
Also, the rise in cost of supplementary goods the demand curve is moved to the leftward
direction, the customer is buying the good according to look after the other factors that can be
affected the demand curve. Such as, Tesco analysed that the demand for cold drink is increases
in summer on the other hand the demand for cold is decreases in winter season because the
preference of customer is changed according to situation.
1.2 Explain the law of Supply, movement along the same supply curve and changes in supply
curve with reference to Tesco Plc.
Law of supply
The law of supply states that all the factors are remain constant (citrus paribus) the price
and quantity supplied are directly related to each other. When the price of the commodity is
increases on the other hand the supply of goods are also increases in the particular market. Also,
law of supply is depicting the behaviour of producer at the time of price changes of services and
goods (Sulkowski, 2018). When the goods price of the commodity is rises the supply will be
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directly increases with reference to earn more profit just because of higher prices. For example,
when the price of oat milk is increases and the other factor remain constant at this situation the
quantity supplied will also increases. Producers are supply more so that it helps to sale all the
product at the right time.
Movement in supply curve
Movement along the supply curve are known as the graphical representation for alteration of
services and goods supply on the basis of its prices and all the other factors will be remain
constant. When the price of commodity changes on the other hand the supply will also change
and the movement will happen on the basis of expansion and contraction of the supply curve.
 Expansion of the curve-
The above diagram shows that there is inverse relation between price and quantity
supplied because when the price of the product is increases 80 to 116 the supply curve
also expanded and the quantity supplied are increases from 60 to 70 unit. Also, this
movement are known as the expansion of supply curve (Cutler and Lark, 2020). For
example, Tesco increases the price of edible oil from 80 to 116, also the quantity supplied
by producer will be increases because consumer will be going to purchase the product at
the increasing rate for advance. This strategy helps to use the old stock of the products in
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order to increases the price and mark discount on rate so consumer attracts from these
and buy the product.
 Contraction of the curve
In this situation in which there are supply curve contradicted because there so many
factor that affected the quantity supplied such as income of consumer, season & climate,
population, inflation etc. For example, in the winter season the sale of ice-cream are
decreases that is why the supply are also decreases. On the other hand, in summer season
people are more likely to having ice-cream that is why the sale directly increases and the
quantity supplied are rises due to season ad climate factors.
Shift in supply curve
 Rightward shifting supply curve
From the above diagram it has been identified that the price of the commodity is remain
constant and the quantity demanded are changes because of other factors such as income of
consumer, competitor etc. That is why the supply curve is shifted to rightward direction in
order to increases the supply of the commodity (WALTERS, 2021). For example, the income
of consumer is increases so the supply will also increase because the consumer is able to but
the particular product at the same price with reference to high level pf income.
 Leftward shifting supply curve
This diagram is shown price of the commodity is same but the supply curve is shifted
because of other factor such as income of consumer when the income of consumer is
decreases the supply curve will also shifted to leftward direction in order to consumer
will not able to buy the product at the same price and that is why the price of the
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commodity will remain same. For example, Tesco supply its products all over the world
but due to change in tax rate the supply curve will affected in such a way the tax rate
increases for India on the other hand the curve will shifted to leftward direction. That is
why Tesco has generated more revenue in the season of summer and also help to
increases the productivity of the organisation. Some of the determinants of demand curve
which can be affected such as number of sellers, price of other goods, price of input,
expectation about prices and technology.
TASK B
Compare and contrast emerging theories and models in 21st century contemporary economics
with those of the 20th century, and relate both of these to modern business practices.
Neoclassical theories
The contemporary theory economies emerged in 20th and 21st century with reference
to Neoclassical theories and Keynesian economics which are impacted the behaviour
in business. In 1900 neoclassical theory developed in order to focus on the demand
and supply that are drive force in market. In context to this theory, it has been
analysed that’s there are pricing, production and consumption of serves and good as
are depend on the market forces such as supply and demand (Brinca, Duarte and
Faria-e-Castro, 2021). Also, this theory is helped to believed in concept of the perfect
competition and this is linked with modern business practices in which there are
decision of total production are highly depend on the need of market. Further, there
are all types of business are highly affected by the demand and supply of the
products and pricing decision. In refers to this theory economist are states that
perception of consumer about technology and product which are directly impacts its
price. Different types of process are adopted by the firm in order to transform the
input and output on the basis of market condition without controlling the prices.
According to behavioural economics, it is focus on the altruism that refers to the
human behaves which are depend on fairness and emotion rather than rational
behave. In contrast to Neoclassical economists are argued on the consumer personal
satisfaction and utility. The purchase decision is totally based on the evaluation of
utility for the product that offers and people are more rational while making the
economic decision. It is stated that there is the assumption of modern business
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practices which are highly focus on adding the value to their products which can
maximise utility of consumer. There are some of the assumptions which are related
to modern business practices that is highly focus on the value on which product can
be maximise the utility of consumers (Kakarlapudi, 2020.). According to theory there
are, arising the utility which are maximise the profit from produced item. Moreover,
in the modern business it is focus on the employing best and expertise for
development of product which can be helped by the help of maximise utility of their
produce.
On the other hand, the development of future neoclassical theory saw the
growth of imperfect and monopolistic competition. The development of both the
competition there are some of the degrees that control pricing and the output decision
by product differentiation. However, it has been criticised that neoclassical theory
have the rationality assumption. Also, the rationality assumption is ignoring the other
side such as vulnerable side of human and emotional responses. The modern market
is impacting the decision of producer and altruism concept related to behavioural
economies are help for overcoming the limitations that are related to neo-classical
economics.
Keynesian economics
According to this model there are realities of 21st century which are focus on the
economic policy and behavioural economics. The are different types of economics
policies that are formed with the government which help in equitable growth and
development of economic. Also, the relevance of growth theory is increased in the
21st century and advocated the monetary and fiscal policies which are help in the
contraction and expansion of the government taxes. On the basis of Keynesian
model, the policy of economics is stimulated the demand in economy and also help
for pulling the world economy out of depression (Crawford, 2020). This theory states
that fiscal stimulus focusses on the injecting government which are spending the
leads that are developing the activities for business and also help to spending more.
The business decision is expanded the large output which are depend on the
monetary and fiscal policy of government. According to Keynesian economics the
consumer is becoming the source of income for business and the other decision
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related to equipment, wages, energy, material and investment that are done by them.
In the 21st century there are operating the cycle of the function for the environment
which are start from spending the workers for the market to spending decision of the
business which are again turns for worker’s income.
The model that defines that to the consumers and more spend and safe less. The, Keynesian
model which stated the relationship between three things such as savings, investment
and economic growth (Sharpley, 2020). Government was intervention played an
important role in the Keynesian economy and show more high participation of
government spending in the markets. There were modern business practices that is
highly dependent on government spending more helps for bringing the economy was
out of crisis.
CONCLUSION
It has been concluded that economies are depend on the various factors such as
demand, supply, price etc. all the factor are affecting the scale of the economy. The
report discussed about the law of demand and supply with its movement that are
related to contraction and extraction of supply curve. There are also explained about
the shift in demand curve which is stated that leftward and rightward shifted the
demand and supply curve on the basis of other factors. Moreover, the report analysed
the economies models which are developed in 20th and 21st century related to demand
and supply curve that impact on the business decision and practices. Lastly, there are
other non-prices factors which are leads to change for quantity demanded and
supplied.
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REFERENCES
Books and journals
Cerreia-Vioglio and Rustichini, A., 2021. Law of demand and stochastic choice. Theory and
Decision, pp.1-17.
Fatimah, A.T., 2021. Mathematical Reasoning of Vocational High School Students on
Mathematical Tasks in the Law of Demand Context. AlphaMath: Journal of
Mathematics Education. 7(2). pp.101-113.
Gilroy, S.P., Koffarnus, M.N. and Hantula, D.A., 2018. The demand curve analyzer: Behavioral
economic software for applied research. Journal of the Experimental Analysis of
Behavior. 110(3). pp.553-568.
Sulkowski, A., 2018. Blockchain, business supply chains, sustainability, and law: The future of
governance, legal frameworks, and lawyers. Del. J. Corp. L.. 43. p.303.
Cutler, A.C. and Lark, D., 2020. The hidden costs of law in the governance of global supply
chains: the turn to arbitration. Review of International Political Economy, pp.1-30.
WALTERS, A., Suppose now that the supply curve defines the minimum quantity that will be
supplied at the going price. The movement from S0'S0 to S2'S2 must now be interpreted
as a decrease in supply, since the purchaser has to pay a higher price for the same
quantity. Similarly, a change from S0'S0.
Brinca, P., Duarte, J.B. and Faria-e-Castro, M., 2021. Measuring labor supply and demand
shocks during COVID-19. European Economic Review. 139. p.103901.
Kakarlapudi, K.K., WHETHER TECHNoLoGY oRIENTATIoN MATTERS FoR SKILL-
BIASEd WAGE INEQUALITY?.
Crawford, T.H., 2020. Actor-network theory. In Oxford Research Encyclopedia of Literature.
Sharpley, R., 2020. Tourism, sustainable development and the theoretical divide: 20 years
on. Journal of Sustainable Tourism 28(11). pp.1932-1946.
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