Contemporary Economic Analysis: Law of Demand and Supply, Comparison of Emerging Theories in 21st and 20th Century with Modern Business Practices

This report discusses the law of demand and supply, movement along the same demand and supply curve, and changes in demand and supply curve with its factors with reference to Sainsbury. It also compares emerging theories from 21st and 20th century with modern business practices.

CONTEMPORARY
ECONOMIC ANALYSIS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY
TASK-1
.........................................................................................................................................................3
Law of demand............................................................................................................................3
Movement along the same demand curve...................................................................................4
Changes in demand curve with its factors...................................................................................5
Movement along the same supply curve.....................................................................................7
Changes in the supply curve with its factors...............................................................................8
TASK – 2.........................................................................................................................................9
Making comparisonof emerging theories from 21st century contemporary economies with 20th9
century theories and relating them with modern business practices............................................9
CONCLUSION..............................................................................................................................12
REFERENCES................................................................................................................................1

INTRODUCTION
Economics is being referred as the study of the manners in which the people allocate
resources for production, consumption and distribution of products and services. From the last
decade, the idea along with their theories pertaining to economics have developed into
significant tools for making improvement in the human life. Further, the current economic
approaches are majorly associated with the behavioural economics suggesting that they vary
somewhat from the traditional economic methods (Cerreia-Vioglio and et.al, 2021). Based on
this, the main aim of the current research report is to focus on the law of demand and supply,
movement along the same demand and supply curve and changes in demand and supply curve
with its factors with reference to retail business that is Sainsbury, which is one of the leading
supermarket chains of UK. The final section of the report will emphasize on making comparison
of the 21st century theories and 20th century and will relate it with contemporary business
practices.
MAIN BODY
TASK-1
Law of demand
Sainsbury’s is an international supermarket company in United Kingdom and having its
operation worldwide. This company is producing its products in bulk quantity and selling them
globally. The law of demand states that quantity is inversely proportional to the price of the
products like any change in price will directly affects the change in demand (Cerreia-Vioglio,
2022). For example if the Sainsbury’s is increasing its price of the products then the demand
automatically decreases due the consumer will not pay more price and will go to other subsidiary
products. The law of demand is come from the law of diminishing marginal utility in which the
consumer will first satisfy their most urgent needs and then others by buying he economic goods
of the products.

Figure 1 Law of demand
From the above graph it has been cleared that Sainsbury’s is using law of demand at time
of increase or decrease in prices due to any change in its micro or macro environmental factors
etc. this graphs shows the total different quantities of products purchased by consumers in the
market at different prices. On the X-axis the quantity demanded is mentioned by all the
consumers in the market of Sainsbury’s. On the Y-axis all the different prices demanded by the
company is mentioned in this graph. With the help of this graph Sainsbury’s is changing its price
and measuring the quantity demanded for example in this graph at point P1 the quantity is Q1
means with high prices the quantity is decreasing the graph is from up to bottom. With decrease
in price the price shift from P2 to P3 the quantity increase from Q2 to Q3 that is inversely
proportional to price.
Movement along the same demand curve
Movement along the demand curve described when keeping all the factors same and there
is a change in demand of a commodity with change in prices the quantity demanded changes
(Otero, S., 2022). Sainsbury’s when decreases its prices the customers started buying in bulk
quantity of products due to low prices and vice versa.

Its been shown in the graph on X-axis all the quantity demanded is written and on Y-axis all the
different prices are mentioned.
 Upward movement of demand curve shows contraction of demand due to rise in the
price and decrease in quantity demanded like the graph shows with price P0 the quantity
demanded is Q0 which is the lowest. Sainsbury will increase its price for reducing the
quantity of the products.
 Downward movement of demand curve shows expansion of demand due to fall in price
the quantity demanded increases like the graph shows fall in price P2 will rise the
quantity demanded which is Q2. Sainsbury’s will decrease its price of products for more
demand of the products
Changes in demand curve with its factors
Any kind of change in the taste or preferences or population etc changes the demand curve
like different quantities are demanded at given price (Yu, and et.al., 2020). Many micro
environment factors affect the demand of the products like changes in the income of consumers,
substitute goods, consumer behaviours, etc directly affects the quantity demanded of the firm.
Sainsbury’s is producing different kind of products and services to different customers across the
world and many factors are affecting the demand of its products.

Figure 3 changes in demand curve due its factors
From the above graph it is clear that any change in the factors of demand like changes in
the income or populations or any other micro factors will lead to shift the demand curve like
changes in the quantity supplied with the same prices.
 Rightward shift of demand curve shows increase in the quantity demanded with the
same price due change increase in the consumer income, or no substitutes of the products,
or any change in taste of the consumer increases the quantity demanded. This demand
curve is profitable for the Sainsbury’s.
 Leftward shift of demand curve shows decrease in the quantity demanded due with
same price due to job loss of a customer , substitutes available, any change in taste etc
and decreases the profits of the firm.
All the company’s always try to increase its demand by analysing all the market and its factor
and try to overcome those factors with the help of various techniques and tools of analysis.
Law of supply
The law of supply states that the price of the goods increases the quantity supply of good
also increases other factors remaining constant (Brinca, 2021). Sainsbury’s is producing more
amount of products if the price increases due to high revenue. Like every supplier need to
maximise its profit through increase in the price so the Sainsbury’s will increase its price
products to earn more revenue and profits. If the market is in deflation and the prices decreases
the supplier reduces its supply of products.

Figure 4 Law of supply
This graph shows on the X-axis the quantity supplied is mentioned and the Y-axis all the
price is mentioned law of supply curve increase as he price increase from P3 to P1 and quantity
increases from Q3 to Q1.
Movement along the same supply curve
Movement along the supply curve shows change in supply of products with change in the
prices of the products (Dai, 2022). Sainsbury’s supply of products quantity changes with change
in the price of the products and vice versa.
From the above graph it shows that change in price directly changes quantity supplied and
the supply curve changes.
 Expansion of supply will results in increase in prices and increase in the quantity
supplied. Sainsbury’s at the time of inflation increases the price of the products so that

supplying more quantity products result in more profits and high revenue of the firm.
Every company wants this supply curve for their products.
 Contraction in supply will results in decrease in supply of products due to decrease in
prices. Sainsbury’s is reducing its prices so that quantity of the supply can be reduced due
to deflation in the market (Yan, Y. and Wang, X., 2021). This situation creates loss to the
company and less income in the market. It creates less profits to the company and
downward supply curve.
Changes in the supply curve with its factors
Similar as the case in the demand curve, the changes in the supply curve takes places
when the other factors that impacts the supply of goods to the market supplementary to price
alters. These factors consist of regulation of the government, condition of the weather and
amount of taxes. In case, if there is any alteration in these factors, it will compelthe supply curve
to move either in the right direction or in the left direction. This movement can be supported with
an example. Supply can be impacted by varied factors as mentioned above and types of suppliers
(Dwivedi, 2016). In situation, when suppliers are quite more, the quantity of products being
supplied will also be more. Because of this augmentation in the supply, the supply curve will
move in the right direction. However, when the quantity of suppliers is less, the number of
products supplied will also be lesser. The supply curve in this scenario will move in the left
direction.
In addition to this, the number of products that needs to be supplied is also been
influenced by the prices of the resources such as when there is an increase in the prices of
resources, the cost of production will also increase and the profit margins of the company is
decreased. Moreover, the taxes along with subsidies also influences the profit margins of the
suppliers. For instance, because of the higher amount of taxes, the profitability of the suppliers of
the Sainsbury decreases and there has been increment in the cost (Chen, 2017). Because of this,
they supply lesser quantity of materials and this highly affects the production level which
impacts the overall supply.

Figure 2: Changes in the supply chain
Even the technology also supports in enhancing the efficiency of the production.
Pertaining to this, there has been increase in the productivity and supply also increases. As
defined in the above figure, the supply curve shift towards right that is from Q1 to Q2.
Nevertheless, a minute alteration in the supplier’s expectations about the future prices might
impacts the current supply level.
TASK – 2
Making comparisonof emerging theories from 21st century contemporary economies with 20th
century theories and relating them with modern business practices
In the present time, the current global economy is being engaged in the international
trade, due to which different economic problems have been raised.The international
communication throughout the national economies helps in fostering development of the
economies. This again enables contentment of the requirements of the human, augmented growth
of the economy and enhanced production. Through the commencement of the 19th and the 20th
century numerous alterations in the economics was started observing right from the science of
economies or from the political economy. Nevertheless, the current global economic problems
encompass depression, pandemic, recession, credit availability and economic inequality. Thus,
developing enhanced notion in regards with these problems will support in resolving different
current business problems (Galí, 2018). Talking in relation with the economic theories and
models from the 21st century, they have been developed from the models and theories of the 20th
century. From the past centuries, the novel economies of the millennium have been imprinted

from the neoclassical economics. The alteration in the approaches along with the theories have
altered radically all through the first half of the current century. The models have changed from
20th to 21stcentury mainly because of the impact of the enhancement of the technologies.
Furthermore, the multitude of financial speculations that were predominant in the twentieth
century were not fruitful enough in tending to the significant job of the public authority as the
powers in the market stemmed towards contend business balance. Throughout the 20th century,
economics was undertaken as a social science. Some of the known economists such as Irving
Fisher along with John Maynord Keynes stressed on the emotional characteristics for explaining
the behaviour of economics. Nonetheless, due to the mathematical revolution all through the
years 1940s, the economic theories and models have initiated altering their strategies (Dutt,
2015). Keynes have developed micro foundations and Paul Sammuelson plus John Hicks have
initiated optimizing the economic agents in 1950s. Because of this, there has been expansion of
rational models that have their consequences in the 21st century as well.
As per Comert (2019), the main philosophy of the modern Keynesians isgrounded on the
General Theory of Keynes which was founded on the conventions that both prices and wages are
adhesive. One can study the Walrasian general equilibrium theory along with the Keynesian
economics contrarily deprived of taking into account the prices to be adhesive. These are
amongst the emerging theories of economics in the 21stcentury. The two main philosophy of the
current century is the Keynesian economics and the microeconomic theory. Nevertheless, the
Keynesian economics is being regarded as one of the most important theories in the
contemporary world. there are different consequences and relation of this theory in the present
world. it states that the free-market economies may support any rate of unemployment as in
equilibrium. In this current world, steadiness is selected by confidence which is defined as
animal spirits by Keynes (Sepashvili, 2020). On the other hand, the notion being obtained from
the microeconomic theory assumes that the individuals are rationale and goal oriented in their
thinking. Further, the theory recommends that peoples does not make any methodical mistakes in
prediction.
Both of these theories that is microeconomic theory and Keynesian economics are
relevant in the present world in relation with the modern business practices. The system of
market might result in different results which are inadequate with higher rate of unemployment.
According to Oravský, Tóth and Bánociová (2020), in the present condition being developed by

the pandemic covid19, the economic activities throughout the world has been impacted.
Nonetheless, through the notion of Keynes and Walrus, fiscal policy is not a suitable retort for
the financial disaster. Moving further, the Keynesian theory is applicable to different paths of
contemporary business in the present world. the microeconomic theory along with the Keynes
theory can be functional to resolving the economic crisis of the modern times. The Keynesian is
being regarded as the most promising theory out of all modern theories of 21st century. It is the
real time to drip the theory of natural rate. It would be beneficial for the economies to return to
the General Theory. For stabilising the real economy of the present world, general theory of
Keynes is crucial for searching out manners of policy formulation.
Presently, the world is coming across with severe crisis and to manage this situation, the
economic models and theories can be applied. It is important that policies should be formulated
for the purpose of managing the aggregate demand. In addition to this, it is also important that
are required to address the economic recession and stop such recession from taking place in the
near future. The fundamental tools suggested by Keynes or economists who are followers of this
theory involves the economic along with fiscal policies (Gomułka, 2017). For managing the
economy at the time of crisis, it is crucial to devise effective policies. Not a single business can
uplift the economy from such crisis such as pandemic covid19. Thus, the spending of the
government is the best possible solution for improving the economic situation of the country.
The main issues which the economy around the globe is coming across in the present time is that
related with unemployment. Consequently, for fighting out this unemployment level, the
Keynesian theory can be applied to the present condition.

CONCLUSION
From the above analysis, it can be concluded that the research report has significantly
analysed the law of demand and supply curve and has also setup that they vary with each other. it
was originated from the study that the demand curve is downward slopping and the supply curve
is upward slopping. Irrespective of the variation, the report has found out that both kinds of
curves can shift at one time if other factors which impacts them other than price changes. It has
also been evaluated that the emerging model and theories were slightly dissimilar from the
theories of 21st century.

REFERENCES
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Yu, and et.al., 2020. Modeling and prioritizing dynamic demand response programs in the
electricity markets. Sustainable Cities and Society, 53, p.101921.
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.
Dai, F., Xu, L. and Zhu, Y., 2022. Higher education expansion and supply of teachers in
China. China Economic Review, 71, p.101732.
Yan, Y. and Wang, X., 2021. Global Contraction and Local Strengthening of Firms’ Supply and
Sales Logistics Networks in the Context of COVID-19: Evidence from the Development
Zones in Weifang, China. ISPRS International Journal of Geo-Information, 10(7), p.477.
Cerreia-Vioglio, S., Maccheroni, F., Marinacci, M. and Rustichini, A., 2021. Law of demand and
stochastic choice. Theory and Decision.
Chen, X., 2017. Elasticity as Relative Slopes: A Graphical Approach to Linking theConcepts of
Elasticity and Slope. The American Economist, 62(2), pp.258-267.
Cömert, M., 2019. Revival of Keynesian Economics or Greening Capitalism:“Green
Keynesianism”. Sosyoekonomi. 27(42). pp.129-144.
Dutt, A.K., 2015. Keynesian growth theory in the 21st century.In 21st Century
Keynesian Economics.London:Palgrave Macmillan.
Dwivedi, D.N., 2016. Microeconomics: Theory and Applications. Vikas PublishingHouse.
Galí, J., 2018. The state of new Keynesian economics: A partial assessment. Journal of
Economic Perspectives, 32(3), pp.87-112.
Gomułka, S., 2017. The Global Economy in the 21st Century: Will the Trends of the20th
Century Continue?Central European Economic Journal, 2(49), pp.62-72.
Oravský, R., Tóth, P. and Bánociová, A., 2020. The ability of selected European countries to
face the impending economic crisis caused by COVID-19 in the context of the global
economic crisis of 2008. Journal of Risk and Financial Management. 13(8). p.179.
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Sepashvili, E., 2020. Digital Chain of Contemporary Global Economy: E-Commerce through E-
Banking and E-Signature. Economia Aziendale Online. 11(3). pp.239-249.
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