Economics for Business: Supply and Demand Principles in the UK Food Market during the Pandemic

Economics for
Business

Executive summary
This first task is about the application of economic theories from Krugman & Walls for
understanding supply and demand principles which can be used to UK food supply in this
pandemic situation. These principles have been explain with the use of graphs in relation to the
chosen food supply market. Also, related examples have been used to make the whole
explanations better. The graphs of basic supply and demand and there movement have been
described with the use of such graphs. Furthermore equilibrium price and quantity along with
how it is shifted with supply and demand curve and shortage and surplus have also been
included.
Second task explain the economic principle of market failure and interference of
government in the supply and demand of food related products in UK economy. Examples have
been included for making the government interventions. Also, sources like you can use and
government publications have been taken into account for providing real examples. Discussion
and analysis have been done for four strategies chosen by the UK Government for raise the UK
food supply market from the losses due to covid-19.

Introduction
An economy is the large set of production and consumption activities which are
interrelated for the purpose of allocation of scarce resources. Economics for business involves
study of number of aspects and functions of a particular market place such as demand and supply
which impact the business activities. Since the resources are very limited and its consumers are
in large number, therefore it becomes difficult to allocate it so that each section of the society
have the scarcity resources. An economy comprises of production factors, methods of
distribution and consumption. In this report, theories of demand and supply included for
understanding the downfall in the UK food market because of covid-19. In addition to this,
reasons for market failure and the intervention of government in the supply and demand of UK
economy have also been included.
Task 1
Krugman and Wells are well renowned authors who have given the demand and supply
theory which are the main detriments of any market. This theory explains that demand is that
principle of economy which refers to consumers' desire to buy goods and services. It reflects the
willingness and power of people living in a specific place to buy something. Krugman and
Wells, provides that economy is the place comprising number of buyers and sellers in a perfectly
competitive market. The demand function depicts DX = f(Px, P1, P2,..... I,T, Z,...).
Where, Dx= quantity of good X demanded
Px= price of good X (the “own price”)
P1= price of good 1 (other prices)
I= income
T= general environment
Z= expectations
According to the authors, there is a shift in the demand curve, when the demand changes,
supply and prices also change. In other words, when demand is increased supply is low and vice
versa, other factors being constant. The relationship between demand and supply is inverse. If

the price of goods or services is high, the demand for that particular item will be lower.
Furthermore, when the price is high, the quantity of goods will be limited. The slop is usually
downward.
Law of supply
Supply is the economic law which explains the quantities of a particular goods or services
being sold at a specific price. The relationship of supply depicts upward slop. In other words,
there will be more quantities supplied when the price goes up. There are some factors which
must be constant for determining the relationship between these two detriments of any economy.
Similarly, time is an important factor which should be considered for determining the current
conditions.
1. Shift in supply curve in relation to UK food market due to Covid -19
Supply curve right shift
An increase in the change in supply shifts the supply curve to the right. It depends on the
relationship that price and quantity share. The change is supply occurs because of the price.
Provided that demand curve is not changed. UK food market is facing crisis because of the
increasing cases in coronavirus. It has become difficult to determine the prices for coming
months. There is no export of food products in European as well as other countries in the world.