Contemporary Economic Analysis: Demand and Supply Laws, Theories and Models

This report focuses on enhancing efficiency in manufacturing and interchange. It includes the law of demand and supply with movement along its curve and shift in demand and supply curve of Morrisons. It also compares emerging models and theories in 21st and 20th century contemporary economics.

CONTEMPORARY
ECONOMIC
ANALYSIS

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK 1............................................................................................................................................3
1. Law of Demand with movement along its curve and shift in Demand curve of Morrisons...3
2. Law of Supply with movement along its curve and shift in Supply curve Morrisons............6
TASK 2............................................................................................................................................8
Comparison among emerging models and theories in 21st and 20th century contemporary
economics ...................................................................................................................................8
CONCLUSION .............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Economics can be defined as science that deals with origination, dispensation and
consummation of services and commodities or analysing different choices of people,
organisations and government for efficient allocation of scare resources (Avanzini, Sanchis-
Gomar and Cervellin, 2019). This report shows Its mainly focuses on enhancing efficiency in
manufacturing and interchange. Economics is classified into two different categories that is
Macroeconomics and Microeconomics. Microeconomics is the study of decision making
regarding resources allocation done by individuals and businesses. In microeconomics,
behaviour of persons, different businesses towards changes in demand and supply of services or
goods with change in their prices is observed. Macroeconomics is the study of reactions and
actions of whole economy towards changes in economic factors. Its major focus is on
government fiscal and monetary policy, growth of economy from broad perspective.
TASK 1
1. Law of Demand with movement along its curve and shift in Demand curve of Morrisons
Demand: It is an economic element that refers to the desire or willingness of an
individual consumer to buy a particular commodity or service and readiness to pay its specific
price, keeping other factors constant. Rise in commodities price leads in reduction in its quantity
demanded and decrease in price of goods leads to increment in its quantity demanded of
Morrisons. Market demand refers to the overall quantity demanded among all the customers in
market in a particular period of time. Aggregate demand is described as entire demand of all
commodities and services floating in the economy. Morrisons have a separate budget with a
adequate amount of funds to spend for determining actual demand of their products so that they
can plan their production according to that and also no excess output is produced. There is a
minor difference among demand (it is between urge of customer's needs and units available for
them) and quantity demanded (it is number of units that a group of customers wants)
(Burkhauser and Sabia, 2018).
Law of Demand: It is the foremost fundamental economic concept. It works in order to
show the allocation of resources and price determination of different services and products that is
done by economies present in the market and can be observed in day to day market operations of
Morrisons. This law states that quantity demanded of a product and its price are inversely

proportionate to each other as the price tends to rise, demand for the same goes decline. Reason
behind this inverse relation is diminishing marginal utility. Which defines that the first unit of
any product that a consumer buys is used for satisfying their extreme essential requirement, then
consumed remaining other units of product for serving low valued need in economic behaviour.
It also defines the ways that consumer uses for full utilisation of a product in order to fulfil their
countless wants, and law of demand targets these immeasurable desires (Espenshade and
Hempstead, 2019).
Movement along the demand curve: Morrisons faces a stipulated demand curve for its
all products. There are numerous economic factors that impact demand and those impacts are
measured with the observation of demand curve.
Whenever quantity demanded of the particular product changes, due to changes in its
price, with no movement in other elements, this is described as the movement in demand curve
along with its quantity demanded. In this case, price changes effects the demand but demand is
continuously follows earlier respective demand curve. This movement can be either in
downward direction or in upward direction (Goss, 2019).
In above figure 1, OP is the price of product and OM is its demand. When price of
product raises from OP to OP”, its quantity demanded downs from OM to OL and the curve
moves in upward direction. AND, when price declines from OP to OP', its demand shows a rise
from OM to ON and the curve moves in downward direction.

This shows change in the price, keeping remaining economic factors constant moves the
curve.
Shift of the demand curve: When the quantity demanded of a product changes at all
potential prices, because of change in other factors more than one along with price. The other
factors can be defined as income level of consumer, price of substitute goods and consumers
tastes. In such cases, demand adhere different curves for each other factors and price as well
(Hudson and Day, 2019).
In the above figure 2, it has been shown that if change in consumer's income leads to shift
in the curve. Hence, when income of consumer rises, they agrees to buy product at different
potential prices and their also increases. And, when income of consumer decreases their
purchasing power and desire also decreases, also they start negotiating with prices (McAulay and
Tomkins, 2021).
Factors affecting demand of a product or service:
Complementary products: These are those goods which are used together, without one
there is no sense of using another such as car and petrol, if price of petrol or diesel rise then this
automatically cause in the reduction of demand of vehicles.

Substitute goods: These are those products which are used in place of other, these goods
replaces their substitutes such as contact lenses and spectacles, if there is rise in the price of
contact lenses then demand of spectacles will automatically leads to rise.
Future expectations: If market situation shows that price of a particular good will leads
to rise in coming time then demand of that particular product also rises in current time.
2. Law of Supply with movement along its curve and shift in Supply curve Morrisons
Supply: It is a primal concept of microeconomics that indicates to the total quantity of a
particular commodity or services that is a producer or manufacturer made available to their
consumers. Supply and demand concepts are directly related to each other and supply is
dependent to the demand of the respective product. If consumers demand a product more and
ready to pay at each price then definitely supplier will increase supply of that good. Generally, a
time will occur in the market when the situation will achieve the equilibrium point then demand
and supply of Morrisons will reach same level and become equal. At this price point, there is no
excess of supply and also no shortage of goods. This will maximised both utility of consumer as
well as profit margin of supplier. In case of monetary market, supply of money refers to amount
of liquid assets present in financial market, liquidity of these is determined by the economic
authority of the country. Willingness of a producers regarding quantity supply of goods is known
as supply schedule (Nelson, 2019).
Law of Supply: A microeconomic law that describes, if the price of a specific services or
product will raise then quantity supply of that same product and service will also rise, and if
price of goods fall then its quantity supply will also decline, keeping other factors same. Law
states that, whenever price of product goes up, producer tries to maximise their margin of profit
by attempting all possible ways and supply quantity of item as much as they can. This depicts
behaviour of producers, businesses and suppliers of Morrisons induces more resources to meet
the demand in the market for their goods or services because they want to earn as much as
possible revenue they can before reaching the situation of market equilibrium, Morrisons can
only maximise profit in the early stage because as the price goes down demand increases and
supply will also goes down but when price and supply both goes up, then there is less number of
consumers who are willing to purchase that particular product. Supply and price of products or
services are directly proportionate to each other and share a positive relation (Nutbeam, 2021).

Movement along the supply curve: Morrisons has a determinate supply curve. When
price of an item of Morrisons shows a change in it, remain other elements same as before, with
effect to this quantity supply of that respective item changes automatically. This changes leads to
movement in supply curve might be in expansion or in contraction. Expansion refers to increase
in amount of supply due to increase in price. And, contraction refers to decrease in the quantity
of supply because of decrease in the price of good. Graphically, it is represented as movement in
upward or downward direction (Swank, 2020).
In the above figure, OP line represents price of commodity and OQ line represents supply
of the same commodity. When price of item rises from 10 to 30 in the vertical measurements, its
quantity supplied also rises from 10 to 30 in horizontal line. This shows the movement in supply
curve as before the curve is on point A and will rise in both the things it raises from A to B.
Shift in the supply curve: When the quantity supplied of an item shows a change at all
determined prices, due to change in any factor other than price. The other elements can be
explained as price of substitute goods, price of complementary products, level of consumer's
income and change in government policy. In these cases, supply adhere various curves for
representing each factors (Vaughan and Geddes, 2020).
Factors affecting supply of a product or service:
Production Cost: A product's supply and its production cost are inversely concerned to
each one, if there is increase in production cost then supply will shrink in order to procure scare

resources. Morrisons have some limited resources so whenever their resources become expensive
they reduce production units and supply will directly declines.
Technology: Sometimes introduction of new technology are expensive but are necessary
to implement for producers then in order to implement those new trends suppliers loose control
over supply. Morrisons introduce new technology in their manufacturing process which reduce
time and cost of their production and enhance their productivity as well, this lead an increase in
their supply of goods because they are free to focus on distribution of goods.
Calamities: Sometimes, natural calamities such as war or pandemic make people to buy
some particular product, then supply of that good increases suitably (Velamuri, 20220).
TASK 2
Comparison among emerging models and theories in 21st and 20th century contemporary
economics
Economic theories: It is a collection of principles that highlights the difference of
various economic activities. Few of them explained specific phenomena's of economy and some
facilitates a country's economy with different framework for smooth running of everything in the
economy. Economic theories and models are the mother tongue for every public policy, the
rationale for multi billion dollar investments, and the tools used to tackle global poverty and
manage whole economy. Some economic theories and models are described below:
Classical economics: A set or area of numerous ideas that are established by Father of
economics- Adam Smith and John Stuart Mill. This theory states that economies in different
structure of market are the systems of frameworks that are all self regulated and ruled by law of
exchange or production. On the basis of this, Adam Smith gave the concept of invisible hand,
which is a emblematic concept and provides justification of all free markets that consists of
individuals within their self owned interest for generating social benefits and benefits for public
as well (Dickson and Ginter, 2019).
Keynesian economics: This is the foremost theory of macroeconomics, which consists of
various models that provides explanation regarding the aggregate demand affecting economic
phenomena such as inflation, deflation and output. This theory shows the overall expenditure
occur in the economy and its impact on final outcomes and rate of employment. It is taken into
consideration some sides of demand theory that observes changes happens in the short run into

an economy. It believes that interruption from government or administration can solidify the
economy. Keynesian theory is the very first that divide the theory of economic behaviour and
market that is based on incentives made by an individual with theories of wide nation economic
aggregate elements.
Malthusian economics: It is the thought that says, whenever population of any country
will goes high and reaches out of ability of nation to arrange resources, then scare resources will
equally distributed among all individuals which cause in insufficient resources to each person
which reduces their living standard. This theory is by Thomas Robert Malthus, he is mainly
famous for his exponential formula that is used for forecasting the growth of population, this
formula is known as Malthusian growth model. Later on, this theory was condemn by few
economists and then disproved. Other economists believes that if population grows continuously
then new technological enhancements will also happen which update living standard of people.
Marxism: This theory is mainly a socioeconomic theory. This theory in given in the
context of capitalism's impact on labours, economic development and productivity. Karl Marx,
father of Marxism theory, states that there was a need of labour revolution for capsizing
capitalism in faction of communism. It highlights the struggle and conflict between different
classes in society, and how upper social classes degrading lower classes of society, era of
dictatorship ends but somehow in societies it was maintained by high class people. It explains
phenomena of societies with analysis of situation of materials and economic activity needed to
meet resource need of an individual. Assumption in this theory are economic organisations
influences other social occurrence combining broad societal relations, legal systems, ideologies
and political institutions. Mainly, this economic model or theory is a criticism of capitalist
society and indicates towards a global revolution that will started by worker's for their rights and
proportion across the world (Wijeweera, Villano and Dollery, 2021).

CONCLUSION
As detailed in the above report, that economics act as the backbone of every country
without it decision making regarding utilization of limited resources is impossible. It includes
various concepts and elements that helps Government and other Administrators in planning all
the activities that will lead to economic growth and are very crucial for livelihood of population
of the country. Branches of economics that is micro and macro are discussed further in report
along with this comparison among different emerging models and theories of 21st and 20th
century. This report also highlights changes in consumer's behaviour and their impact on demand
and supply of different services or commodities due to shift in prices in the economy and how
these shifts in economic indicators impacts profit of organisations. Furthermost, there was a
comparison among Keynesian, Marxism, Malthusian and classical economic theories and
models, which focuses more on thoughts behind these theories and their effects as well.

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