Economics for Business

This report examines the impact of COVID-19 on the UK economy and the strategies implemented by the government to overcome the challenges in the food sector. It discusses the change in supply and demand curves, the equilibrium of quantity and price, and the policies of price control, taxation, fiscal policies, and poverty programs.

Economics for Business

EXECUTIVE SUMMARY
Economics can be define as social science that consider production, distribution and
consumption of goods and services. It examine how government, bushinesses, nations and
individuals make decisions relating to allocation of resources. There are various factors which
influence the supply and demand of goods and services in many ways. This report is formulated,
in order to interpret the use of theories and economic principles which will study the impact of
COVID-19 on an economy. This report is further divided in two parts – Part 1 is associated with
shift in demand and supply curve due to change in prices along with the impact of COVI-19 in
maintaining the equilibrium point. Part 2 is consist of strategies that are formed to overcome
the negative impact of this pandemic.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................4
TASK 1............................................................................................................................................4
Explanation regarding change of supply and demand curve......................................................4
Movement of supply curve..........................................................................................................4
Movements of demand curve. .....................................................................................................6
Explanation of equilibrium of quantity and price.......................................................................7
TASK 2 ...........................................................................................................................................8
Brief explanation regarding issue and problems UK government face within food sector of the
country and strategies or policies they use to overcome theses problems...................................8
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Business economics is field of applied economics as it studied the environmental, market
related, organisational as well as financial issues which are faced by the corporations (Ashraf,
2020) . This report is formed in order to define how theories and principles of economics are
helpful in evaluating the importance of supply and demand over the UK economy. In this
context, food sector of UK is selected for this report. This report also throw light on, how
COVID- 19 became the reason of shift in supply and demand curve. Further this report, also
involve all those policies and strategies that UK government implement in order to overcome the
loss that arise because of Corona virus pandemic.
TASK 1
Explanation regarding change of supply and demand curve.
Movement of supply curve
Supply: According to Krugman & Wells, supply is the fundamental concept of economics that
explains the total amount of goods and services that are available to customers. It is the ability
or willingness of producers to generate goods and services and then take them to market. Any
change in supply implies to shift (right or left) in relationship between price and quantity.

Explantation of movement of supply curve which is applied to UK food supply examples are
mention below-
Supply curve: According to Krugman & Wells, supply curve is a graphical
representation that display correlation between cost and quantity of goods and services that are
supplied during a given period of time. Movement of supply curve is explained as under-
Supply curve shift to left: Leftward shift in supply curve occurs when there is a decease
in supply of commodities at the same price (Cha and Seo, 2019).This shift may happen due to
increase in production which makes suppliers to charge higher prices as compared to before so
that they can supply given amount of output.
Shortage in supply: During COVID-19 consumers of UK have started stockpiling some
specific goods and that time retailer reaction was very slow towards this situation due to which
some goods cannot maintain their supply according to demand. This make supply curve to shift
to left. This made supply to shift from S to S1 with the change in from Q to Q1
Supply curve shift to right: Supply curve shift to right wards when supply of
commodities is increased when prices are kept same. This situation occurs when there is
favourable alteration in non price factors in production of commodities.
Change in taxation: During COVID situation UK government has reframe their taxation
policies. They have tried to reduce taxes on food items for the betterment of their citizens . This

step of government helps people and they pay less in this recession situation. In this situation
supply shifted to S1 FROM S.
Movements of demand curve.
Demand: Demand is an economic principle which states consumer desire to purchase as well as
their willingness to pay for the goods and services they acquired (Colombelli and Quatraro,
2019). It can be market demand, which is the total quantity that customers demand in a market or
may be aggregate demand which implies total demand for services and goods in an economy.
Shift in in demand curve implies change in determinants of demand other than price.
Demand curve: In economics, demand curve display graphical representation of
relationship between price of product with quantity of product that are demanded. Movement in
demand curve is mention as under-
Demand curve shift to left: Left shift in demand curve indicates decrease in demand of
various goods and services. This decrease means goods or services are demanded less at every
level of price.
Change in income: Due to COVID-19 many UK citizens have faced termination from
their jobs which has forced them to limit their food requirement that results in decrease in
demand of other products. This change has shifted demand curve towards left. This change in
income has change the demand from D to D1 when quantity changes from Q to Q1

Demand curve shift to right: Right shift in the demand curve represents increase in
demand of services and goods. This also shows that demand has increase at every level of price
for the goods demanded.
Demand in specific products: During COVID-19 demand of medical items have
increased by the people as well as in the hospital. Everyday new -new researches are being made
regarding various medicines this boost the demand of various medicines and vaccines. UK
government was also working on the manufacturing of vaccine this also give rise to the demand
of medicines. With the increase the demand of medical requirements demand shifted to D1 from
D.

Explanation of equilibrium of quantity and price
Equilibrium implies to that state in which demand and supply maintain balance between
each other and this balance results in price stability. It is the function of market, that with the
help of price mechanism it will equate balance between supply and demand. Generally the
situation of over supply occurs when prices go down that result in an increase in demand. On the
other hand, situation of under supply occurs due to an increase in prices which results in decrease
in demand. Products that have readily substitutes available are to be elastic, which means
consumers will easily replace products with another if their prices increase. Product with no
substitutes are considered to be inelastic and customers are forced to buy them at any given
price.
Product market also plays a vital role as prices in monopoly, perfect and oligopoly
market differ with the equilibrium point. COVID- 19 pandemic situation has directly influenced
the supply curve of market economy. In this situation, point of equilibrium can be attain when
the prices of food items matches with the supply.
Explanation of shortage and surplus, which are applied to the above situations that are used in
above graph are as under-
Problems of shortage of food items become a major problem for the UK government.
UK citizens was so panic due to every day increase in dead rates in the country that they have

started to stock food items. This stockpiling come as a major hurdle in the way of suppliers as
they are not able to meet demand level. Along with this, lack of availability of packing, labelling
requirements and logistics leads to an increase food loss which automatically affect the supply.
People have no jobs or paid less in this pandemic situation that give birth to the problem of
recession in the country. No job or less payment further results in slow down of economy. On
the other hand, decrease in taxes gives a breath of relief to customers. With they are able to buy
their basic necessities. Government has made provisions for medicines that has maintain the
flow of medical items according to their requirements. For meeting the demand with supply UK
government has imported medicines from other countries. With the less or no income people
have some how manage to buy goods that has maintained the level of demand and supply.
Supply of masks, gloves and medicines has drastically increased COVID.
TASK 2
Brief explanation regarding issue and problems UK government face within food sector of the
country and strategies or policies they use to overcome theses problems.
COVID- 19 pandemic has lead a negative impact on economy of UK. It has completely
destroyed the food market chain of UK. This has impacted the supply of food items directly
along with the hospitality sector which is connected with the food sector. Listed below are the
failure of markets that UK has faced in this pandemic situations-
Shortage of labour because of Brixit agreement and due to pandemic becomes a major
problem and increase the rate of labour turnover (Yamamura and Tsutsui, 2020) Organisations
are not able to produce food related products and they lack in providing services due to shortage
of workers. This shortage has impacted the economy of country in a negative way, as essential
food items are not provided or supplied to customers. This pandemic has also shoot the
production cost high as they have to consider safety measures in production for this they have to
buy tool kits relating to health safety.
Preferences of customers have completely changed during the situation of Corona virus
which makes it difficult for big as well as small units to survive in market. Numerous of
restaurants, hotels and other other manufacturing units related to food have completely shutdown

as it become difficult for them to cover up their costs. In this regard Baxter Food group as well as
daisy giant Müller have close their business units in UK as they have suffered from heavy
looses.
Future plans and marking strategies of organisations has totally changed which forced
them to make changes in their existing polices. Due to the fear of infection of virus, citizens of
UK have completely change their food habits and they reduce the consumption of meat during
this time. The negative effect of this shift impacted many workers as they have lost their jobs
and this give rise to the problem of unemployment. This also increased the rate if labour turnover
due to shortage of resources and monetary capital.
The overall structure Of UK with the monetary cycle is totally decline. Customers shifted
or change their food habits as they are more towards the healthier food products in order to boost
their immunity. This change has transformed the demand of products in the food sector. Thus
organisations should pull up their socks and formulate new policies as well as strategies so that
they can survive in this difficult situation.
Bedsides the fact, that COVID 19 has adversely effected the food sector of UK, their
government is continuously making efforts to boost their economy. In this regard, they are
performing new- new policies and strategies to boost their economy.
Price control: Price control is the most important and useful strategy that government of
British has enforced in order to control rise in prices and this gives a relief to UK citizens. In this
policy, government of UK has restricted or cut down the prices of some particular products in
order to control the rate of inflation within their economy. However, they have faced many
problems in doing so. At present UK government is still taking many efforts in controlling the
price of vegetables, fruits, mineral items of food as well as they are also initiating their efforts
towards price control in health care sector.
UK government has also make endeavour to reduce the prices of transportation so that
import and export of goods can be done easily along with that price control of food grains. They
reduce the prices of food basic necessities like milk, bread which are used daily and people
cannot afford to pay higher for these goods. This rise in the prices mainly occur due to shortage
of supply and cash capital is not much available at that time. This price control also help people
who are left with no jobs or paid less for their jobs as this made easy for them to at least get their
basic requirements.

Taxation: Taxation act as an important element or tool which helps in managing the
outflow of cash in the economy. Earlier Government of UK charges high tax rates on export and
import of goods along with duties. This was because of the Brixit and after pandemic
government has rethink for their tax related policies.
Government has change their structure of tax and decease the tax rates of food items
which are necessary. Further, they have also reduce the tax rates that are earlier implemented on
hotels and restaurants as they provide food and accommodation facilities. On the other side, they
laid heavy taxes on food items which create revenue for the government which will decile their
money cycle in order to maintain flow so that hospitality sector can run their business. In order
to re4duce the impact of this pandemic government tries to control tax rates which will also help
new start ups and main preference was given to food sector so that they can enhance their
working. Government has also formed new policies which aims in providing relief to tax payers
so that they can pay their tax liability. This will also helps business of food sector to pay theirn
tax liability.
In order to provide financial assistance to those who work or business in the sector of
service providing, government has transformed their policies and strategies. But on the other
side, UK government has imposed high rates of tax on beer, luxury beverage items and cold
drinks as they are useful for the purpose of increase in flow of cash. They have also taken steps
against the lack of money ability in economy in order to generate more money.
Fiscal policies: Fiscal policies are considered to be the important part of government
policies as they are implemented in order to control expenditure and outflow of cash within the
market itself (Moschella, Tamagni and Yu, 2019). This control is done by using strict rules and
regulation of taxation. UK government in 2020 comes with new strategies which has proved to
be a big relief towards strict rules relating to business. Authorities has formulated their policies
in order to maintain the position of food market. For this enlargement of food market they have
changed their delivery methods of food items and import of food grains. Along with this
government has also made efforts in providing income to workers
Poverty program: During the COVID 19 pandemic situation 14 million people of UK
have lived their lives below the line of standard living (Fairlie, 2020). This has impacted the

major part of their population as one third of them have become the part of this category.
Loosing jobs is one of the major reason due to which people are forced to do so in COVID 19.
UK government is already running their ads relating to poverty and education along with
the child safety and development program. In these programs they provide education facility to
poor children. However, they have also contributed to poverty fund in order to solve issue that
arise during COVID situation along with this people can also come out from the problem related
to poverty.
CONCLUSION
From the above analysis it has been concluded that, COVID – 19 pandemic some how
has directly affected economy of entire economy. In reference to UK , its citizens as well as its
government has suffered from some major issues. Due to these issue demand and supply curve of
food sector has shown a shift with the change in the quantities demanded and quantities supplied.
Thus, UK government faced the problem insetting price of food products, their supply
and in their demand. These factors give birth to inflation and manufacturing cost of food items
has increased which results in shutdown of various small and big organisations in UK. However,
government has taken some preventive measures with the help of effective strategies in fiscal,
taxation, control of price and in poverty policy, in order to overcome the loss which was due to
COVID-19.
REFERENCES
Books and Journals
Ashraf, B. N., (2020). Economic impact of government interventions during the COVID-19
pandemic: International evidence from financial markets. Journal of behavioral and
experimental finance. 27. p.100371.
Cha, S. S. and Seo, B. K., (2019). The effect of brand trust of home meal replacement on
repurchasing in online shopping. The Journal of Business Economics and Environmental
Studies. 9(3). pp.21-26.

Colombelli, A. and Quatraro, F., (2019). Green start-ups and local knowledge spillovers from
clean and dirty technologies. Small Business Economics. 52(4). pp.773-792.
Fairlie, R. W., (2020). The impact of COVID-19 on small business owners: Continued losses and
the partial rebound in May 2020 (No. w27462). National Bureau of Economic Research.
Fairlie, R. W., 2020. The impact of COVID-19 on small business owners: The first three months
after social-distancing restrictions.
Moschella, D., Tamagni, F. and Yu, X., (2019). Persistent high-growth firms in China’s
manufacturing. Small Business Economics,. 52(3). pp.573-594.
Yamamura, E. and Tsutsui, Y., (2020). Impact of the state of emergency declaration for covid-19
on preventive behaviors and mental conditions in japan: Difference in difference analysis
using panel data (No. 2005.13008).