Contemporary Economic Analysis

Contemporary Economic
Analysis

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TABLE OF CONTENTS
INTRODUCTION.....................................................................................................................3
TASK 1......................................................................................................................................3
Concept of law of demand and the movement and shift in the demand curve.........3
Concept of law of supply and the movement and shift in the supply curve...............7
TASK 2....................................................................................................................................11
Comparing and contrasting the contemporary theory of economics of 21st century
with 20th century and relating to the modern business practices...............................11
CONCLUSION.......................................................................................................................13
REFERENCES......................................................................................................................15

INTRODUCTION
Micro economics refers to the study of the individual, household or the
business entities behaviour in the decision-making process and also in respect to the
allocation of resources. It mainly applicable to the market of goods and services and
also deals with the individual issues. This report presents about the microeconomic
concepts in relation to the Tesco, which is the largest retail giant in UK. It covers the
complete concept of demand and supply and also comparing the contemporary
theories of economics of 20th century and 21st century.
TASK 1
Concept of law of demand and the movement and shift in the demand curve
Law of demand
The law of demand refers to the inverse relationship between the quantity
demanded and price of the product and services assuming other factors to be
constant. When the price of the product increases, the demand of its falls ( Mazurek,
García and Rico, 2019). This law explains about the consumer choice behaviour with
respect to the change in the price. In the market, when the price of product rises, it
consequently leads to the fall in the demand of that product, which is the natural
consumer behaviour. This happens because consumers hesitate to spend more with
the fear of losing out more cash.

From the above diagram, it can be seen that demand curve is a downward
sloping. When the price of the good increases from p3 to P2, then the quantity
demanded of the good falls to Q2 from Q3 and vice-versa.
Movement of the demand curve
When there is a change in the demand of the good in terms of quantity with
respect to the change in the price and other factors remaining constant, the change
in the quantity demanded is indicated as the movement on the same demand curve.
It is very important to understand that factors like consumer income, tastes and
preferences, price of other goods and so forth, will remain constant and the only the
price of the good will change (Karl and et.al, 2019). In such scenario, the change in
price affects the quantity demanded of the good but demand will follow the same
curve like before. This is known as movement of the demand curve. This movement
can be in upward and downward direction.
It can be seen in the diagram, when the price of the good was at OP level, the
demand of eth good was at OM assuming other factors constant. But when the price
of the good increases from OP to OP”, the quantity demanded decreases to OL and
demand curve moves at the upward level. In case when price decreases from OP to
OP’, the quantity demanded increases to ON, making the demand curve moving in
the downward direction.
Therefore, the change in price leads to the movement in the demand curve
either upward or downward.
Shift in demand curve with its factors
The shift in the demand is caused by the change in the underlying
determinants of demand (Browning and Zupan, 2020). The increase in demand
shows a rightward shift and the decrease in demand shows the leftward shift.