Economics for Business: Impact of Input Cost on Demand and Supply of Goods and Services in Highly Competitive Markets

ECONOMICS FOR
BUSINESS

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
when and why input cost of production impact on demand and supply of goods and services. 3
highly competitive markets impact the supply of goods and services.........................................6
CONCLUSION................................................................................................................................9
REFERENCES................................................................................................................................1

INTRODUCTION
Business for economic is the field of applied economic in which studies the financial,
organization and the market related issue faced by the corporation (krugman & wells, 2020).
This report will cover when and why input decision gets impacted due to the supply of goods and
services along with the examples. Further, it will also analyse how perfect competition impact
decision making of supply.
MAIN BODY
when and why input cost of production impact on demand and supply of goods and services
The law of supply is the important concept in the economic theory. The supply of the
product or services is totally dependent on producer or manufacturer. As it stated that as prices
of the goods and services increase as the supply will automatically increase. In this case the
supply curve will go in the upward direction whereas if prices goes downward then the supply
will also fall dawn. It is because producer doesn’t want to sell the product at low price which
reduces the profit margin. Moreover, price and supply move in the same direction. Therefore, it
can be stated that both has positive correlation between quantity supplied and price.
But on the other side, there is negative corelation is exist between price and the quantity
demand of the product. As prices decreases than the quantity demand increases (krugman &
wells, 2020). It is because consumer want to buy more and more product at low cost which occur
quantity demand. Therefore, the demand curve will go right direction when increase whereas it
goes in left direction when the demand decreased.
Cost of production input can be defined as total cost which has been applied for making
goods and services. These costs are direct material, labour and factory overhead. Moreover, all
the other expenses are concerned with the general and administrative activity. In the economy
the production activity is connected with the physical output of the production process due to the
input factor has been invested. Moreover, it has been represented as the maximum number of
outputs which can be obtained from available number of alternatives. Due to this, producer can
achieve high profit margin with less cost.
The law of supply is conjunction with law of demand in the basic market condition which
resultant in the price and the quantity demand exist the relationship with the supplier and

demander. As supply curve the are to be determined by the price that will increases or decreases
the supply and along with the price curve. Under supply of the goods and services, the supplier is
to be provided product in the market. There are many factors which affect seller willingness and
the ability in order to produce the goods and services. These factors are prices of related goods,
conditions of production, expectation and the price of goods, price of input, number of suppliers
etc. Input and output analysis is the micro economic analyse which is based on the
independencies between different economic factors. Production of a good involved taking the
base of input further apply process to get output. In order to increase the production terminology,
it is required to increase the production process. Moreover, as the cost of the production get
increase than this will create an impact on the prices and the demand. As cost of input rises then
the producer doesn’t want to continue with the same level due to low profit margin (krugman &
wells, 2020). Further, the input cost of production includes the raw material, labour and the
overhead which are directly connected with the operation.
Price changes: when the cost of the input of production get increased this will affect the decision
of the organization and government in the economy. Moreover, these supply and demand get
affected due to increase or decrease in prices of input cost which include lack of labour force for
the production, unavailability of raw material, spend the high amount on direct overheads. This
will increase the price of the product which put impact on the consumer demand, producer
manufacturing willingness and the economy as whole. In addition to this, consumer demand gets
decreased as prices increases and on the other hand producer need to increase their budget for
meeting the consumer demand. The demand of the product also gets affected due to high cost
and economy get affected due to high inflation in the market. Bank need to provide the fund to
the producer. This will increase the flow of fund in the economy (Das and Avasthe, 2018).
Therefore, producer need to make decision or prepare the flexible budget for maintaining the
production process.
In the UK economy, organizations who are involved in the manufacturing sector, need to track
the prices of input cost of production. It is because this will put direct impact on the demand of
the population of UK and others (Yu and et.al., 2020). Due to increase in prices, the profit
margin of UK’s organization gets decrease that is why it is required to take decision about the
continue with the same product line or change with others.