Economics for Business: Impact of Inputs, Costs, and Perfect Competition Market on Supply of Goods and Services in UK

Economics for
Business

Table of Content
INTRODUCTION...........................................................................................................................4
TASK...............................................................................................................................................4
Why inputs and costs impact the supply of goods and services in terms of production
decisions......................................................................................................................................4
Explain the perfect competition market and how it impact the supply of goods and services by
applying in any UK based industry.............................................................................................7
CONCLUSION..............................................................................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Economics is a field of social science that studies scarcity of resources and helps in
allocation of these scarce resources to optimal use. These resources are used to produce an item
or service for accomplishment of the predetermined goals. Supply is the amount of a resource
that the firms/ producers are willing to provide in the market at a determined price(Mayer, 2018).
This report talks about how the factors that affect the supply of the raw materials have an impact
on production and the price of a commodity. This will be done taking in account the UK
economy. The effect of the production decision on the supply of the service and goods also
outlined by taking an instance of the economic condition of UK. The concept of perfect
competition and highly competitive markets will also be discussed in this report in regards to
their power on the supply of the raw materials.
TASK
Why inputs and costs impact the supply of goods and services in terms of production decisions.
Supply: It is the willingness of the producers to produce goods and services and provide
them in the market. It is the quantity of commodities that are available to the consumers. The
supply will depend on the demand of the commodity in the marketplace and are then sold in a
competitive market place. The concepts of demand and supply forms the fundamentals of the
economics. The price and supply of a commodity has a positive relation between them. This says
that if the price of a commodity increases, the supply of the same would also increase, and if the
price decreases, the supply will also decrease in response. This forms the basis of law of supply
which will be discussed further. The cost of the goods and the price of the inputs such as raw
materials, labour etc., contributes to the change in the price of the goods sold. The supply means
how much the of the items a businessman can supply to its buyer and at what cost.
Law of supply states that the price and quantity of good are directly related to each other,
while all other factor of production are kept constant. It shows that the behaviour of the producer
changes with the change in the price of items or services with the change in time. The
diagrammatic representation of this is:

The above diagram shows the direct relationship between quantity supplied and the price
as explained above. The graph is upward sloping due to the positive relation between price and
supply of a commodity.
Inputs: Inputs are the factor of production or raw materials. These are the factors required to
produce a commodity. They are known as factors of production. These are divided into:
 Land: It is a natural resource used to produce goods and services. This factor not just
include land but all the natural resources that makes up the raw materials for a business.
 Labour: It includes the human efforts like mental and physical activity which are done to
produce a commodity.
 Capital: It is the amount of money or resources used to produce the commodity. It can
include, the factory cost, machinery, equipment and commercial buildings, etc..
 Entrepreneur: This is the person who organises and brings the other three factors of
production at a same place to derive the benefits and produce a commodity. It refers to
the ability to bear the uncertain risk which can occur while supplying the items or
services.
Cost: The overall expenditure incurred on manufacturing particular goods and services
which includes raw material, labour charge, manufacturing expenses and other overheads.
Additionally Production cost is the decision that is taken by the owner of an organisation in