Business Economics Report 2022

Running head: ECONOMIC BUSINESS REPORT
Economic Business Report
Name of the Student
Name of the University
Student ID

ECONOMIC BUSINESS REPORT1
Executive Summary
The business report discussed several aspects of economic theories of microeconomics
and macroeconomics and thereby explained how these are relevant to an organization strategy
formulation overall development and sustainability of the organization. The operations of the
organization is highly dependent on the concepts of demand, supply, production cost and other
factors. The impact of financial institution play a vital role behind the development of
organizations in an economy as they are the sole provider of funds and last but not the least,
money supply indicates various movements inside an economy and thus it is important for an
organization for its development.

ECONOMIC BUSINESS REPORT2
Table of Contents
Introduction......................................................................................................................................4
Task I...............................................................................................................................................5
Opportunity Cost and resource allocation...................................................................................5
Price elasticity of the product and its impact on pricing strategy of Costadema Ltd..................6
Task II..............................................................................................................................................7
Relationship between good Y and good X..................................................................................7
Reduced demand function of good Y..........................................................................................7
Calculation of equilibrium price and quantity.............................................................................8
Graphical representation of the equilibrium price and quantity..................................................9
Effect of government decision of fixing price at 8 GBP.............................................................9
Effect of change in regulation of market on demand and supply of the company....................10
Task III...........................................................................................................................................11
Fixed cost...................................................................................................................................11
Variable cost..............................................................................................................................11
Marginal cost.............................................................................................................................11
Revenue function.......................................................................................................................11
Profit function............................................................................................................................12
Computation of breakeven point...............................................................................................12
Significance of breakeven point................................................................................................12

ECONOMIC BUSINESS REPORT3
Impact of long run and short run cost on profitability of an organization.................................13
Task IV..........................................................................................................................................14
Evaluation of role of financial institution during financial crisis..............................................14
Role of Westpac during financial crisis.....................................................................................15
Concept of money supply and future strategy of the organization............................................15
Conclusion.....................................................................................................................................16
Reference.......................................................................................................................................18

ECONOMIC BUSINESS REPORT4
Introduction
The report the analyses several economic factors of a medium sized manufacturing
company named Costadema Ltd. The product of the company is costing machines. It is known
from the economic theory that resources are limited and demands are unlimited thus there exists
economic problem of resource allocation and scarcity. The report analyses relevancy of these
economic problem for the company. Along with that the analysis of the impact of the price
elasticity of demand of the product on the pricing strategy of the company under different market
conditions. The further considers the demand and supply function of the company and thereby
calculates its equilibrium price and quantity. It is observed that the government has fixed the
price of the product at 8 GBP and thus the impact of this decision of the government on the
supply and quantity demand of the product is a part of analysis in this report. Emphasis is given
on the influence of change in market regulation too. In addition to the above mentioned
discussion, the report includes the computation of revenue and profit function of the company
and along with focus on the break-even point, region of losses and profits, maximum output is
being given. The financial analysts can refer to the report to become aware of the impact of
different short and long term cost on the profitability of the organization before making any
strategic development in the future. The report further discusses the role of various financial
institutions in the period of financial crisis. With that, it explains the concept of money supply
and its relationship with business funding and its role in the area of exports and imports. This is
done in order to organization understands the importance of uncertain economic conditions that
may affect the future strategies of the company especially in the case of imports and exports.

ECONOMIC BUSINESS REPORT5
Task I
Opportunity Cost and resource allocation
Theory of economics explains the concept of opportunity cost as the cost which accrued
by an individual or firm when it chooses one option over the other (Buchanan 2017). It means
that if there are two mutually exclusive products options available with certain amount of return
for each then a firm manufacturing one product has to sacrifice the possible return from the other
(Zamora et al. 2019). This, foregone amount of return is the opportunity cost to the firm.
Therefore, the calculation of opportunity cost can be done by subtracting the return of option
chosen from rerun of option not chosen. The formula of opportunity cost thus can be given by
Opportunity cost=Return of option not chosen−Return of option chosen
For example, suppose and firm has a certain amount of resource by which it can either produce
mobile phones or cars. The return from manufacturing of cars is 100 GBP and that of mobile
phones is 75GBP. The firm choses to produce mobile phones and thus makes by using the above
formula it can be calculated that the opportunity cost of the firm is 25 GBP (Yang et al. 2018).
Therefore, it can be inferred that the firm made a bad decision by choosing the option of
manufacturing mobile phones as the opportunity cost is positive. Thus, opportunity cost helps to
understand in which option a firm should invest to make profit (Xenos 2017). Therefore,
opportunity cost is highly relevant to business organizations. Opportunity cost in business is
termed under implicit cost. The performance of a business depends on the risk and return of
investment it has made (Lemley 2019). Thus, when choosing one option it is necessary for a firm
to understand the risk and return associated with it and should consider the similar things for the
alternative option available (Simonsen 2018). Therefore, the business decision of a firm depends
on the opportunity cost of the options available and the firm should choose the one with lowest