Contemporary Economic Analysis: Law of Demand and Supply, Emerging Theories and Models

BM533 Contemporary
Economics Analysis

Table of Contents
INTRODUCTION ..........................................................................................................................3
Task 1...............................................................................................................................................3
1.1 Explain the law of demand movement along demand curve and changes in demand curve
due to other factor. ....................................................................................................................3
1.2 Explain the law of supply, movement along the same supply curve and change in supply
curve with its factors...................................................................................................................6
TASK 2............................................................................................................................................8
Draw comparison between emerging theories and models related to modern business
environment. ..............................................................................................................................8
CONCLUSION .............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Economic analysis is referred to the activity which ensures optimum utilization of limited
resources. A study which is done to understand the economic system for an sector of business or
industry in order to determine whether system is operating effectively. This evaluation helps to
know the organisation about how much profit it is going to make (Alpidovskaya, and Popkova,
eds., 2019). In this report, law of Demand and its movement along the demand curve and
changes in demand due to other factor. Also in context of Law supply al the information are to
be discussed. Detail study of these laws are to be made in context of a retail organisation. In the
next part comparison and contrast of emerging market theories are to be evaluated that can be
applied in modern business.
Task 1
1.1 Explain the law of demand movement along demand curve and changes in demand curve due
to other factor.
Demand is the willingness of customer to purchase a product at a prevailing price at
particular point of time. Law of demand states that quantity demanded and price of the goods and
services is inversely proportionate. This is due to presence of diminishing marginal utility. The
satisfaction achieved by the consumption of the first unit of a product keeps on decreasing with
additional unit consumption this is law diminishing marginal utility. It is the most fundamental
principal of economics which defines that increase in price will lower the demand of product.
The law of demand is applicable to the all the good except Veblen goods and Giffen good.
Veblen goods are those categories of product and services which comes under luxury while
Giffen good is a low income, non-luxury product for which law demands is not applicable
because demand of the product increases with increase in price. Giffen goods are non-luxury and
goods. For the analysis of law example of electronic item shop is taken, if the price of electronic
item increases. The demand of the electronic product decrease in the market (Himawan, and Mita
2019).
Movement along the demand curve

This is defined as increase and decrease in demand curve because of changes in price of the
goods and services with other factor remaining constant. The movement of the demand curve is
in upward and downward direction along the demand curve.
The demand curve moves in upward direction when the prices of the product increase and
demand decreases. And it goes downward when the price of the decreases leading to increase
demand of the good and services.
As the figure depicts that quantity demand goes from M to L in response to price increase from p
to p''. and when price goes down from p to p' the quantity demanded goes to N from M. this
changes in response to particularly price when other factor remains constant (Khovavako, 2020)
.For example: Amazon sales electronic items on its website if the price increases for any reason
the customer will not buy electronic item from the website. While in case if Amazon is giving
special offer and discount demand for the product increases.
Shift in demand curve
when there is alteration in quantity demanded at tentative price of a particular product the
demand curve for that organisation or sector shifts. The shifting of the demand curve takes place
from left to right or either way.
The shift in demand curve takes place because of other factors that were supposed to be constant.
Such as change in trends, income, climate, customer preference, customer expectation in future.
Taking a example of Amazon electronic retailing changes in demand with respect to each factor.