Demand and Supply in Contemporary Business Economics

Contemporary Business
Economics

INTRODUCTION
Economics is the study of people and their values in a specific production, distribution
and consumption of products and services. It mainly focuses on the behaviour and interactions of
the economist and their working(Opeskin, 202). It based on the various aspect of the market such
as demand, supply and change in demand and change in supply. This report is based on the
McDonald's, it is the American company which is founded in 1940 as the restaurant which is
operated by the Richard and Maurice McDonald in California. This report will cover the
demand and supply of the specific business and also evaluate the change in demand and supply.
Lastly, It will evaluate the theories and models which are emerging in 21st century contemporary
economics.
TASK 1
1.1 Explain the law of demand, movement with the demand curve & change in the demand
curve with the help of appropriate diagram.
Demand refers to the principle stating the consumer's desire in order to purchase the
specific goods and services and also the having the willingness to pay the prices of the specific
commodity.
Law of Demand:
The law of demand stated that there is the inverse relationship in the price of the
commodity and the specific quantity of the given goods and other factors will remain constant.
When the price of the product increases from P0 To P1 then the demand of the quantity
decreases form OQ0 to OQ1 and vice versa, other factors will remain constant. This law of
demand shows that demand of the particular gods is inversely related to the price of the given
commodity. In context to McDonald's, when they price of variety of burger increases, then the
demand for such good decreases as the people will love to buy the affordable food items.
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The above figure showing that demand curve which is downward sloping, when the price
of products increases form the prices p3 to p2 then its demand also comes down from Q3 to Q2
and then move to Q3. On other hand, when the price of the commodity from P2 to P3 then the
demand for such goods increases from Q2 to Q3.
Factors affecting demand of the specific good are as follows:
 Price of the commodity: As the price of the product increase then the demand of the
particular product will decrease, and the price of the goods and servcies deceases then the demand
for the particular commodity increases as people will able to buy the specific product in their
purchasing power.
 Price of substitutes goods: These are the commodity which are positive in nature as the
price of the substitutes goods increase then the demand of own goods will also increase
and vice-versa. For example, When the price of the Burger king's food item increases
then the demand for McDonald's item also increases as customer will buy the affordable
items.
 Price of compliments goods: When the price of the compliments increases then demand
for the own products decreases and vice versa. For example, when the price of sauces,
breads increase then it will affects the overall demand of their product and price of such
goods increase due to which there is decrease in the demand for such goods.
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