Economics for Business: Demand and Supply in the Banking Industry

This report discusses the application of economics in the context of the banking industry. It explores the market structure, demand and supply of banking services, demand elasticity, and the impact of recent events on the industry.

Economics for
Business

Executive Summary
This report has discussed about economics and economics in business. This
discussion has been made in context of banking and financial industry. This report
discussed about demand and supply these are most important elements of the
economics and all the important decisions are based on these elements of economics.

Table of Contents
INTRODUCTION...............................................................................................................5
MAIN BODY.......................................................................................................................5
Description of the company and industry in which it is operating.............................5
Market structure of the industry.................................................................................5
Discussion on demand and supply for the company’s product and their services. .6
Demand Elasticity for banking and financial services...............................................7
Analysis of recent event having substantial impact on the industry.........................7
CONCLUSION...................................................................................................................8
REFERENCES..................................................................................................................9

INTRODUCTION
Economics for business can be defined as application of economics and its
theories in business practices. This involves applying the rules of distribution of means
of production and distribution in business organization. This report will discuss about
various elements of economics and its theories in context of business organization. This
report will discuss about market structure the industry contextualized in this is banking
industry and firm which has been selected is Barclays. This report will discuss about
market structure of the industry. Demand and supply of the product and services of the
company and demand elasticity of the product and service of Barclays Australia has
been discussed. This has been followed by impact of recent event and events which are
likely to appear in near future on the banking industry.
MAIN BODY
Description of the company and industry in which it is operating
Barclays was founded in 1690 other than investment banking, Barclays’ services
are organised into four businesses which are personal banking, corporate banking
wealth management and investment banking. The industry under which Barclays
operate is Financial services-banking sector industry. Barclays Bank Australia was
opened in 1986 after banking license was granted to Barclays by Australian government
in 1985 (Zhu and et.al., 2018). Barclays bank provides services which are
comprehensive financial advisory, capital raising, financial and risk management
services to corporations, governments and financial institute. The industry in which
Barclays operate is completely dedicated to financial and banking services. The major
activity which is carried out in this is collection offinances from customers in form of
deposits and later giving this to customers in form of loan and financial assistance.
Interest is an integrated element as on deposits firm pay interest to customers and on
loan firm charges interest from customers. This way their services are operated in form
of collecting finance and later giving it to other customers. Investment services in this
industry refer to giving advisory service to customers regarding investment and
facilitating their investment through providing them mediating platform.
Market structure of the industry
In the Australia market banking sector has huge impact on the country’s
economy and it helps to control the flow of the money and the economy. Banks provide
the loan to the people, and they charge interest on their loan. People use the loan for
the production or their business and give their contribution in the Economy of the
Australia. In the list of the Banking in the Austrian market is dominated by four major
banks: Commonwealth Bank of Australia, Westpac Banking Corporation, Australia and
New Zealand Banking Group, and National Australia Bank. There are several smaller
banks with a presence throughout the country, and numerous other financial institutions,
such as Credit unions , building Societies and mutual banks, which provide limited
banking-type services and are described as Authorized deposit taking institution (ADIs).
Many large foreign banks have a presence, but few have a retail banks presence. The
central bank is the Reserve Bank of Australia (RBA). Which is the top bank and
maintain the flow of cash in the Austrian economy and provide the loans to the other

banks. They are having the control over the every bank in this country, and they
provide the guidelines which is followed by the other banks. The Australian
government's financial claims scream (FCS) guarantees deposits up to $250,000 per
account-holder per ADI in the event of the ADI failing.
In the Australia banks rewired the licensees to run their business which
because of the banking Act and the banks who are from the foreign counties are also
required the license which are operated by the branches in the Australia. As per the
countries Incorporated foreign bank subsidiary. The four major banks are among the
world's largest banks by market capitalization and all rank in the top 25 globally for
safest banks. They are also some of the most profitable in the world. This countries
financial system has also their contribution in the national economy which is around
140 billion to countries GDP growth which shoes the importance of the banking
industry in the Australia.
Discussion on demand and supply for the company’s product and their services
In banking industry services are same and people open their account in the
banks where they get good services. Barclays is also a bank, but they are providing
different kind of services to their customers, and they are taking advantage from the
technology. They are providing internet banking to their customers which make easy for
the customers to handle their bank account from the home. They can see each
transaction from their mobile and take many other services like shopping and credit card
online services and also available on the mobile or internet baking application. This
helps to attract the customers to open their account in their bank. To attract the
customers they provide exiting offers to them one of them is easy account open in less
time. Customers get their bank account in the less time as compare to the other bank
open their customers account. This helps to attract customers, and they also run their
offer in which people can open their bank account in minimum balance which is also
useful; for the company, and they can able to gain the customer's loyalty . To compete
the demand and supply for the customers.
Their customer support team is always there to help customers or the account
holders. It doesn't matter if they are from the another country, they have option to talk
with the companies customers executive from the any corner in the world. This
makes easy for the customers to access their account and Barclays can provide their
cust6emrs demand and control the supply of their services. Almost every people have
their account in the banks and Barclays is also providing their services to the
customer (Quintal and Phau., 2017). Their employees are having high skills, and they
get the best possible training from this company, so they can provide better and
satisfying services to their customers and achieve their goals and their objectives to
make the company successful in this sector. Employees and staff for the Barclays
know how they can provide satisfaction to their customers, so they can be happy with
the services of the Barclays bank. They spread their banks in every corner of the
Australia so it is easy for them to reach to their customers and account holder can
use the banking facilities from their nearby brand of the Barclays bank and satisfy
their needs.

Demand Elasticity for banking and financial services
Demand elasticity refers to changes in demand of service and goods on the
basis of changes in price of the product and service. Demand of goods can be
considered inelastic if because of small changes there are no changes in the demand of
the product and service. Other than this if demand of goods gets affected from changes
in price it is considered to be elastic (James and et.al., 2019). Demand elasticity gets
varied as price of the service falls its demand gets increased on the other changes in
price as it gets increased cause shortage in demand of the service. There are various
factors affecting service demand of the Barclays and here investment banking services
of Barclays are being considered. This is basic rule of demand elasticity that demand
gets higher when price of the service gets reduced and on the other hand demand of
the services gets reduced when price of the service gets increased. In relation of
investment banking service this rule applies. When price which is charged for service is
less its demand automatically gets increased and when prices which are charged by
Barclays are increased this reduces demand for its services.
Though there are several factors which affect the demand of the financial and
investment services and its demand. These are based on the capacity of the customers
to invest money and how much they are willing to invest. This investment capacity of the
customers is based on price index. Price index contains inflation and this affects
financial position of the people. In inflation savings of people reduce because of
increased expenses resulted from increased prices. This is an important factor because
investment is linked with saving and which is a result of less cost and living expense of
people. In case savings of people are less their capacity for investment will also reduce
and as a result their demand for investment services will also reduce.
Price Elasticity of demand also depends on the return which customers get in exchange
of their investment (Ahmar, Usman and Diyah, 2018). This is why it also an important
factor to consider regarding demand of investment services. The higher the returns of
investment are the higher for demand of investment services will be. On the other hand
in case returns on investment are not good people will look for different ways in which
they can employ their money. This is will higher return of investment will increase
demand for investment services and less return on investment will affect its demand
negatively.
Regarding investment services of Barclays and its demand and elasticity one important
factor is habits of people regarding investment and savings and Australia. People
having habits of saving and investment will make positive impact on demand for
investment services on the other hand people if do not have habits of saving and
investment will not demand for such services.
Income of people is another factor to affect demand of investment services because
centre of all these is income of the people (Larsen and Gilani, 2017). Australia is a
developed country and this is why income of the people in Australia is high and this is
also a positive factor for investment services of the Barclays.
Analysis of recent event having substantial impact on the industry
Services of the business organisations get affected because of several factors.
These factors are generally uncontrollable factors which cannot be controlled and many
times these events are unpredicted too. One such event which has occurred in the
world recently is Covid-19 pandemic, this tragedy has affected the whole world and

every industry in the world and there is no industry which remain unaffected from impact
of Covid-19 pandemic. Investment and banking industry has also affected from this and
the impact is negative on this industry.
The impact on investment and financial industry is negative and will reduce the demand
for the financial and investment services. This is because these services are
significantly based on the income and earnings of the individual and because of Covid-
19 pandemic earnings and income has been negatively affected (Alt, Beck and Smits,
2018). This impact is long term impact because the impact which Covid-19 has made
on the investment and finance will require significant time to become normal. This has
also affected investment and asset valuation and this has impacted the entire economy
of the world.
Covid-19 is driving market volatility and many instances, meaning changes in asset
valuation on daily basis. This will also affect how investment managers run their
investment operations (McKibbin and Fernando, 2020). Many of the managers and
investment managers and investment firms will n1eed to consider how they can
reposition investment portfolio and reassure investors that firm is managing through the
volatility professionally in tighter time cycles.
This discussion suggests that covid-19 has made significantly affected economy and
every aspects of the world has affected from this and this has most negative impact on
income and businesses and investment industry is completely dependent on
performance of business and income of people and their savings. In Covid-19 crisis all
these have negatively been affected and this has directly affected the investment and
financial industry.
Countries are making their efforts in order to improve economic condition in their
country and Australia will also employ its efforts in order to improve economic condition
of the country (Podikkalathil and Manalaya, 2019). These efforts possess possibility and
effectiveness of these efforts will determine how fast and effectively country and its
economy gets normal. This will make positive impact on this sector as well.
CONCLUSION
On the basis of above discussion it can be concluded that demand and supply
are two most important concepts of economics and all the activities of business and
economics are based on demand and supply. These are affected from various factors
among all the factors price is most important for determination of demand and supply.
This is why it is very important that price is balanced in order to maintain positive
demand and supply. Though the factor price remains same in every industry but other
factors depends on the type and nature of the industry. Industry which was discussed in
the report was banking and financial industry. Factors affecting banking and finance
industry are income of the people and their savings and investment tendency.

REFERENCES
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