This report discusses the changes faced by Familymart groceries in its daily sales and identifies the best solution to deal with that issue. It explains the Law of Demand and Supply movement and fluctuations in demand and supply curve with influencing factors. It also compares and relates two modern theories of business practices.
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BM533 Contemporary Economic Analysis
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Table of Contents INTRODUCTION...........................................................................................................................1 Task 1...............................................................................................................................................1 1. Determination of Law of demand movement and fluctuations in demand curve with influencing factors.......................................................................................................................1 2. Determination of Law of supply movement and changes in supply curve with influencing factors..........................................................................................................................................4 TASK 2............................................................................................................................................7 Economic theories.......................................................................................................................7 CONCLUSION..............................................................................................................................10 REFERENCES.............................................................................................................................11
INTRODUCTION This report mainly discusses about the changes which are currently faced by Familymart groceries in its daily sales and they identify the best solution to deal with that issue. On the other side, company hire a recruited sales manager is not aware about the concept of microeconomics which basically includes the shift in demand and supply of the business(Jankovic, 2020). So, on that basis company want to know the meaning of law of demand along with its demand curve and it also show the factors which effect the demand curve of the firm. In another step organization want to the meaning of law of supply along with its supply curve and also wanted to know about those factors which effect the supply curve of the business. In last step company need a comparison and relation between two modern theories of business practices. Task 1 1.DeterminationofLawofdemandmovementandfluctuationsindemandcurvewith influencing factors. Law of demand :This is the theory of microeconomics which mainly shows the demand for goods and services at a given price. In general, the law of demand express that the price of a commodity and the demand of commodity have an opposite relationship. If the prices of a commodity increases then the demand of the commodity decreases on the other hand, if the prices of the product decreases then the demand of the product increases. Whenapplying this elements of economic in microeconomics and macroeconomics, economists estimate that only the price of the commodity changes and all other factors which influence the demand of the commodity(whichincludesincomeofconsumerandtasteandpreference)remain constant(Marx, 2022). There are some examples of law of demand which are as follows: Price of commodity falls, demand increases: If familymart groceries sell mangoes for 2 dollar each and the other day they decide to have a sell on mangoes and decrease the price of mangoes to one dollar each. On that basis law of demand theory say that the less price of the commodity would encourage more people to purchase mangoes. Including those peoples who would not normally purchase at the more value. 1
Price of commodity increases, demand decreases: If grocery store increase the price of apples to earn high profit on their sales then law of demand state thaton this price few peoples purchase apples. So, it basically means the demand of apples decreases(Halling, Yu and Zechner, 2020). Price of commodity remain constant, demand remain constant: If Familymart use various of prices to sell watermelon and has identified that they make the high profit by selling a watermelon at one dollar each and the demand still increases at that price. On that basis, the price and demand of the watermelon remains the same. From the above explanation of law of demand state the reason of daily changes in sales of the familymart groceries is the price fluctuation of their commodity. Sometimes it sell their product at high price or in lower price which create changes in demand of the product also. So, the best solution to deal with the problem is it necessary for the firm to stick on the one price. They can tested many different prices for their product and has identified that in which price company get earn more profit, with demand remaining high at that price. Then price of their commodity remains the same and demand remains the same(Hamory and et.al., 2021). 2
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Factors which influence the demand curve of Familymart groceries: Income of consumer: The demand of a commodity is mainly depends upon the income of consumer. If consumer income is high then it purchase more and the demand for the commodity is also high but in case if income of the consumer is low then it purchases less and demand for the commodity is also decreases. Taste and preference of the consumer: This is one of the most important factor which creates an impact of the demand of the commodity. If taste and preference of the consumer in some particular product is higher then its demand would be higher and the demand curve also lie at a higher stage. Basically the taste and preference for various commodity fluctuated and it shows the result of changes in demand for them(Alok, Kumar and Wermers, 2020). Advertisement expenses: This promotional technique of the firm which helps to promote the sales of the product is an important factor to identify the demand for a commodity. The main objective of the advertisement is to influence the consumer in favour of the commodity. Advertisements are shown in various media which involves newspapers, television and radio. Advertisement are repeated so many times so that customer are influence about their good quality. When advertisements prove themselves better then its cause an increase in the demand for the commodity. Customer expectations with respect future prices: This factor in economics also influence the demand for commodity is customers expectations with respect to the future price of the product. In some cases consumer estimate that in the near future the prices of the product would increases, then in the present they would purchase the more quantities of the commodity so in the future they no need to pay higher prices. On the other hand if consumer expect that the price of goods decreases in future, then in the present they will postpone to consumethe goods that means the demand for the product will decrease in present(Yuelin, Yujie and Xiaohui, 2021). 3
Changes in demand curve: 2. Determination of Law of supply movement and changes in supply curve with influencing factors. Law of supply:This theory of microeconomics is fundamental concept of the law of supply that show the supply at a given price. The law of supply is basically means that when the price of goods increases then the supplier will also increase the supply of the product. Similarly, if prices of the product decreases then the quantity of the product they will supply is also decreases. When applying the law of supply concepts, economists estimate that when the price fluctuated all other factors who affect the supply which involves (consumer mindset and cost of material) are remain same. On a graph with quantity show the dependent variable on the horizontal axis and price show the independent variable on the vertical axis, the law of supply create an upward slope is know as supply curve. Which basically show the relationship between the cost of a commodity and the amount of quantity that suppliers can supply(Igami and Sugaya, 2022). The law of supply is closely related to the law of demand, which state that increases in price leads to decrease in demand, and decrease in prices leads to increase in demand. The customer demand curve is graph showing the relation between the cost of product and customer demand it is a downward sloping curve and cut the supply curve at the market equilibrium point, it's happen 4
when the demand for a commodity and the supply are same. There are three examples for the law of supply which are as follows: when the price of the commodity increases, then supply increases: if prices of the apple in familymart grocery store is high then the supplier also increase the supply of apple that means it harvest more and work overtime to increase the supply of apples and offer more to the public. When the price of the commodity falls, then supply also falls: If the price of the mangoes in familymart grocery store is decreases then the harvester less harvest and it decrease the supply of mangoes in the market. Different price, for the different suppliers: If a employer offers employees time and half pay for overtime hours, then it increase the productivity of the workers and more willing to supply with more overtime hours; if a supervisor offer a more pay for overtime hours, then workers will supply in less overtime hours(Alhassan, 2018). From the above explanation of law of supply state that the reason of daily changes in the sales of grocery store is the price changes of their product. If company sell their products sometimes in high price or in low price then it's create the fluctuations in the supply of the product also. If price of the product increase then supply increases. Similarly, if price of the product decreases then supply also falls. So, the best solution to deal with the problem company need to fix its price of the commodity or it can say that in equilibrium price in which company get more demand and good supply as well. So it can reduce the fluctuations in sales of the organization. 5
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Factors which influence the supply curve of the familymart grocery store. Improvement in technology: If new technology is coming into the market then it create less cost to produce and increase the profit in the available price and the supplier produce more and work overtime to supply more in the market. In case of familymart groceries they need to use some innovative technology to increase their sales like innovative packaging of the product(Jankovic, 2020). Company targets: Generally, the supply of the commodity move towards the higher prices. Which means higher supply assist to fulfil the objectives of the firm and maximisation of profit.But some organizations sell their goods in less prices that could not increase the firm profit. These are the companies which are not focusing on the profit, they only want to maximise the organization goodwill and its growth in the economic market. Government schemes: The government of economy always set their policy in terms of market activities. It includes some government policies like taxes increase the cost of manufacturing of the organization and it reduces the supply of the firm. Thus, it reduces the profit margin of the organization. But in some cases government schemes are also useful when it provide tax relaxation and subsidies it also increases the quantity supplied and create high profit for the firm. 6
Price of raw material: It describe the impact of raw material in profit making . The firm necessary to increase the raw material for producing the finished products. Raw material create an impact on the company profitability if the price of raw material which are using to increase in the manufacturing of the products(Fackler, Mueller and Stegmaier, 2021). If this situation happens in the market, then firm sell low commodity. This familymart groceries business going through from this factor at the time of production. Change in Supply Curve: This digram show the changes in the technology and innovation, cost of production, price of Raw material, prices of other product and government policies. TASK 2 Economic theories The elements and ideologies which leads and manage the changes in environmental factors to maintain the consistency in economic development. These theories provide facility of interest rates, government involvement in order to their rules and obligations and other factors of 7
an economy(Wright and Phan, 2020). The managers of organization Familymart groceries has used traditional and modern economic theories in relation to the modern practices which are given below: Traditional economic theories Economic theory of Adam smith – This type of theory is discovered by Adam smith under the idea that markets be possible to work better if there is no government involvement. Adam smith clearly include in its theory about how the resources of countries would normally better use by logical people and consider government involvement as potentially devastating to economic development. When government demoralised international trade, then the smith's laissez-faire concept to economic policy and procedure come into the existence. The monopoly control of equal group as well as policies which related to the direct commerce which are involved by government was argued by smith. In this theory, it specify that the generation advantage for the country by permitting individual to choose how to use their money, labour, land and equipments an how they saw the procedure of fit. This theory recommend that to become result in a self-organising system, it is good to permit individual to pursue their own interest. Keynesian economic theory – This is the theory of macroeconomic which describe in detail about the overall spending in the economy and its impact on outcomes, employment and inflation. This theory was introduced by the british economist john maynard keynes during the period of 1930s in an attemptto know the great depression. Keynesian theory is analysed as 'demand side' theory that express the changes in economy in the short duration. It recommend that if overall demand in the economy fell, the resulting weakness in jobs and production would bring out a reduction in price and wages . The usage of this theory in organization familymart groceries is involved when the government of any country increase the supply of resources then it will give an outcome in an increase in demand of commodity(Caruso, Canon and Mueller, 2021). This keynesian theory can be taken into consideration by familymart groceries is an exclusion to demand law which says that if the price of products increases then similarly, there will be reduction in demand of them or vice-versa. In comparison to the organization familymart groceries, this theory is advantageous for increasing the opportunities of employment, decline in inflation rate which leads to reduction in prices and decrease in rate of interest as well. 8
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Modern theories Nudge theory: This theory of nudge is recommending the influence of short advised and positive argumentation on customer behaviour. Leading of nudge theory criticised that the placingof nudges is very crucial aspect of a firm as if nudges are better placed then, they may declinethemarketfailure,savethemoneyofgovernmentandassistinincreasingthe productivity of funds use. With the application of nudge theory in familymart groceries, the organization promotes desirable actions as well as improve productivity in order to uses of funds. Behavioural theory: This theory is developed by Richard Thaler which has a better composition of psychology and economic factor(Khrapkina, Kobets and Stratonov, 2021). In firm familymart groceries, application of the theory in business practices use of shortcuts or rules of thumb for making fast decisions. In modern world, companies initiate for knowing that customers are irrational and apply the theory for decision-making policies of organization which creates shareholders value while when done productively. Comparison and contrast In the business of familymart groceries, the application of traditional theories are complete with the assumption that logical people devise rational opportunities with a main aim ofincreasingeconomicwelfare.Similarly,thistheoryareappliedforconsideringsuch circumstances which includes spending, taxation policies and borrowings from fiat currency which are completely controlled and not operationally affected through revenues of federal government. By using the traditional and modern theories on the familymart groceries, it can be concluded that there is one factor is same in all these theories as they are somehow useful in seperate terms according to the status and components of the organization and sanctioning managers and analysts for knowing macroeconomics problems in the economy. 9
CONCLUSION As it is concluded from the above report familymart groceries business need to stick in one price of the product to stop the changes in the sales. Because the prices of the commodity affect the demand and supply of the firm. So, company necessary to fix the price of the commodity in which company having higher demand of their product and more supply as well. In another task it discuss about some important theories of economics which are used in 20thand 21stcentury in the economy. 10
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