Economics for Business

Economics for Business

TABLE OF CONTENTS
INTRODUCTION......................................................................................................................3
MAIN BODY.............................................................................................................................3
Equilibrium............................................................................................................................3
Changes in demand................................................................................................................6
Factors influencing changes in demand for commercial property.........................................6
Changes in supply..................................................................................................................9
Factors influencing changes in supply for commercial property...........................................9
Elasticity of demand and supply..........................................................................................10
CONCLUSION........................................................................................................................13
REFERENCES.........................................................................................................................14

INTRODUCTION
Business economics is the field that studies the financial and organizational and
environmental issues which are being faced by the corporations. It studies about the various
factors having an impact over the business strategy and expansion plans. It is used for
determining the future course of actions that can be taken for achieving the success. This
report provides a detailed analysis of the factors affecting demand and supply of the
commercial property in UK over the past 10 years. It also describes about the various
important concepts of economics such as equilibrium, impact of change in price over the
movement of demand curve and supply curve and the price elasticity of demand and supply
with respect to the commercial property.
MAIN BODY
Equilibrium
Equilibrium is the price that equates the demand and supply in a particular market. It
is a state of no change. Under this, the quantity demanded of the goods is equivalent to the
quantity supplied and bot demand and supply works in a harmony (Equilibrium. 2020). The
market equilibrium demonstrates three types of characteristics which are behaviour of agents
in consistent, thee is not incentive in respect to change in the behaviour and the dynamic
process governs the market or equilibrium outcome. The free market trend towards the point
of equilibrium.
Impact of increase in demand on the market equilibrium

In case of increase in income, there will be shift in the demand of the product which
will consequently lead to shift in the demand curve towards the right (Movements and shifts
in demand and supply curves. 2020). This will raise the equilibrium price and quantity
demanded while the supply curve will remain the same.
The graph above shows, initially demand and supply of the product is at DoDo and
SS. With the increase in the income level, the demand curve shifts to the right to the new
position of D1D1 with the excess demand of the product to E0A. this excess demand exerts
pressure on the price. This leads to rise in price to OP1 where again demand equals to supply
and a new equilibrium point is attained.
Impact of Decrease in Demand on Market Equilibrium
The decrease in the demand curve leads to entire shift in the demand curve to the left.
As presented below, the initially demand was at D0D0 which intersects with SS at point E0. For
example, the decrease in income level of the consumers will lead to decrease in the demand
of the product or services which shifts the demand curve towards left at D2D2, the new
equilibrium point is attained at price P and quantity Q with the surplus E0B of the quantity
supplied which exerts downward pressure in price.