Supply and Demand Analysis for Consumer Retail Demand

This report summarizes the supply and demand analysis for consumer retail demand, including the main factors that determine positive and negative shifts. It also discusses the UK governmental and economic policies that influence consumer retail spending.

Economics for Business

EXECUTIVE SUMMARY
This report summarised the supply and demand analysis which includes the main factors that
determined the positive as well as negative shift. It is linked with consumer demand for retail
goods & services. With the help of it, organizations are able to make their production or strategic
decisions related to consumer demand. In addition, this report also contains information about
economics or government policies which is used to influence the consumer spending in UK.
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EXECUTIVE SUMMARY 1
INTRODUCTION 3
MAIN BODY 3
TASK 1 3
Using supply and demand analysis, identify the main factors in determining the positive and
negative shifts linked to changes in consumer demand for retail goods and services 3
TASK 2 8
Identify and explain the main UK governmental and economic policies that could be used to
influence consumer retail spending in the United Kingdom 8
CONCLUSION 10
REFERENCES 11
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INTRODUCTION
Business economics is indeed an area of knowledge economics that studies the economical,
operational, economy-related, and environmental problems faced by companies (Brennan, 2018).
Company economics covers topics including the idea of scarcity, commodity variables,
distribution and consumption. Companies deals with much of the issues faced by a leader or an
organization. The reach of the economy is therefore broad. Although an organization can deal
with internal or operational as well as external or environmental concerns, there are various
economic theories that relate to it such as demand and supply analysis. This assessment covers
several topics such as supply and demand analysis which include some factors that determined
the positive and negative shift regarding retail goods & services. In addition, discusses the
government policy which is used to influence the UK’s consumers in retail sector.
MAIN BODY
TASK 1
Using supply and demand analysis, identify the main factors in determining the positive and
negative shifts linked to changes in consumer demand for retail goods and services
The principle of supply and demand is a concept that describes the relationship
among sellers and buyers (Brenner, 2018). The theory describes the influence of the relation
between the price of the commodity and people's desire to spend or sell the product. Usually,
when prices rise, people are able to supply even more demand less and vice versa when prices
decrease.
Law of Demand: It is among the most basic principles of economics. t functions with law
of supply to clarify how economic systems distribute capital and decide the prices of commodity
that they experience in day-to-day transactions. According to the law of demand, the quantities
bought vary inversely according to change in price. In other words, the higher the product price
forces consumers to purchase low quantity. This is due to a declining marginal utility.
The below mentioned chart shows the law of demand which indicates that as the price of cars
fluctuates demand also varies at different price segment.
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Above demand curve shows that higher the product price of retail goods & services can
discourage the consumers to buy and automatically demanded quality reduces (Maes and et.al.,
2020). In case demand principle, price and demanded quality has inverse relationship and which
become the reason of change in demand curve to positive or negative shift.
Shift in Demand Curve: A change in demand curve happens when the entire demand
curve shifts to the right as well as the left side. For example, a rise in wages could mean that
people could afford to purchase more products at the very same price. For this reasons, the
demand curve will take positive shift that is right side.
For better understanding we can take an example of change in demand of essential products of
people due to COVID 19 pandemic. The Corona virus forced companies to raise their prices by
looking towards higher amount of demand by customers. Below a chart is presented which
shows the shift in demand curve:
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As per above mentioned graph, it has been analysed that there are several factors which affect
the consumer demand regarding retail goods & services. Demand curve take positive shift when
taste shift to greater popularity, increase in household incomes, population increases, price of
substitute goods & services also rises, price of goods will expected to increase in future etc.
These factors will increases consumer demand regarding retail products & services force demand
curve to shift positively from D0 to D1 as mentioned in the graph. On the other side, above
mentioned factor decreases demand due to decrease in taste of customer, price of substitute,
population reduces etc.
The above mentioned graph shows that as the price of coffee reduces demand of coffee has been
increased in an effective manner. Similar to this, in the COVID 19 pandemic, demand of coffee
increased due to limited stock and it lead to increase in prices.
Law of supply: It is a microeconomic law which provides that, if all factors are equal, as
the price of a product or services rises, the quantity of goods provided by the suppliers will
increases and vice - versa (Maresova and et.al., 2018). The law of supply states that, as the prices
of an item increases, manufacturers will try to increase their profits by raising the quantity
available for sale. Below mentioned graph provide better understanding that how product price
and quality affect the supply curve:
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Above suuply graph shows psotive relation between product price and suppliers qualitity. When
price of retail gppds & services incraeses from P1 to P2 then supplied quality also incareses from
Q1 to Q2. There are several factor which force to maximise the price and supplied quality.
Shift in Supply Curve: Variables excluding price have a different effect on the supply
curve. These factors are causing supply curve to change (Chang, McAleer and Wong, 2018). For
instance, this change is often divided into two shifts, left and right side. Realize that this change
takes place since the price is stable while analysing the influence of other variables on supply. A
right hand shift implies a positive influence on curve, while a left-hand shift indicates a negative
effect on the supply curve. The variables can be either directly or inversely related to the quantity
of the products supplied. The COVID 19 has affected supply of products also because of wider
lock down. As a consequences, supply of different products ruined and prices also fluctuated.
Below a chart is presented in such manner:
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The above mentioned charts show the shift in supply curve in both right and left. This shift
occurs due to change in price of products as well as because of market factors like availability of
products, any pandemic and many more.
Shift in supply curve happens when several factors affect and can cause positive as well as
negative shoft. Incrase in natural condition for production, decraese in input prices, improve
technology, low taxes etc. helps in positive shift (Paoloni and Lombardi, 2018). On the other
side, poor natural condition, high taxes, reduces in technology etc. affect the supply curve and
force negatiev shift. Incraese in supply curve shift from S0 to S1that is calles right side shift and
decareses in supply curve shift also called lefside movemnet.
Factors impacting consumer retail demand:
There are several factors which affect the consumer’s retail demand regarding products &
services. Some of them discussed below:
 UK population: This is one of the important factors which affect the consumer demand
regarding retail products & services (Deming, 2018). Higher the population is the reason
behind high demand and low population caused low demand. In case of consumer
demand for retail goods & services, when population of young people increases than
demand for relative goods also increases such as cloths, gadgets, fast food items etc. On
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the other side, if UK population has elder people more than demand for fast food items
decreases and other retail products which are focused of young people.
 Income effect and shift in employment: A rise in disposable income or shift
in employment that allows customers to buy more products. Higher incomes could arise
for a variety of factors, such as increased salaries and lower tax rates. When income of
individual increases then demanded quality also increases and the other side when
disposable income decreases then demand for retail goods & services also reduces.
 Subsidies: A rise in price of substitutes, such as a rise in price of retail products &
services, it would increase the market for another product market. If government reduces
the price of subsidies than demand for the product also reduces because it has positive
relationship. On the other side, when government increase the subsidies than demand of
particular product also increases.
 Substitute goods: This factor also affect the consumer demand for retail goods &
services (Silva, 2019). If price of substitute goods increases then demand for existing
products increases and other side, if substitute’s product price reduces then demand for
existing goods also reduces. This case shows the positive relation which affect the
demand of consumers for retail commodity.
 UK regional or local demand: Demand of local people and UK regional also affect the
demand of consumer market and retail goods & service. Increase in local demand of
products also raises the demand of retail goods & services. If in case, local demand of
people regarding retail goods decreases then it also reduces the price due to lack of
demand in market.
TASK 2
Identify and explain the main UK governmental and economic policies that could be used to
influence consumer retail spending in the United Kingdom
The UK's government uses fiscal and monetary policy such as taxation, interest rate and
public spending to stimulate the economy throughout the right direction by raising or lowering
demand and supply of goods and services (Đuričin and Herceg, 2018). Fiscal policy will increase
investment, build employment and open the way for long-term economic development. For
retailers, the fiscal policy affects customer demand, the business costs, financial investments and
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the desire to function. There are some major UK government policies which help in economy
recovery from the loss of consumer retail spending. Some of them discussed below:
Subsidies & taxes: Subsidies and taxes influence competitiveness by adjusting the value of
some of them businesses, and thus affect their decision-making on output. This may
have favourable results such as subsidies could be used to raise financial assistance for high-
growth smaller firms, and taxation could be used to minimise environmental damage. However,
subsidies and taxes could also build barriers to entry into the market, firms enable to develop and
tap into market dominance. When creating subsidies, government leaders should remember both
the degree of competition in the marketplace and the manner in which various methods may have
an impact on this competition to mitigate possible negative effects on rivalry.
Government as suppliers: In some sectors, the state still plays a significant role as a
supplier. Government could choose to serve as a provider of products and services on ethical and
moral grounds (Simon, 2019). In the United Kingdom, for example, the NHS guarantees that all
people have health insurance coverage. In certain cases, properties held by the Government for
social, environmental or security purposes have a financial value that could be used to offer
products and services to customers. For example, the Land Registry gathers services such as
home sales and offers most of these details to customers and middlemen. In recent years, the
government also took more control of some firms as a result of the financial downturn, in
particular the UK banks.
Retail subsidies: In order to recover their economy from crises or losses, government of UK
provide several types of subsidies to the retail business. Due to COVID-19, every sector affected
and economy facing huge loss, so UK’s government provide subsidies to the small entities to
recover themselves and make sure to gain previous position as soon as possible. In order to
improve economic performance, government maximise their spending portion, minimise the
taxes and interest rate on retail goods & services. These economic policies help the people and
encourage them financially to recover from their losses and again run their business to gain profit
and provide sustainable development.
Poverty programmes: Government introduce such kind of programmes which helps the
economy to recover from loss of consumer retail spending (Government policy, 2020). UK
government made several poverty policies and programs such as HBAI (Households below
Average income), Child poverty etc. Helping children conquer poverty would make a big
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difference not just to their wellbeing, but also to lives of their households, neighbourhoods and
community as a whole. They are serious about ending child poverty in the United Kingdom by
2020. On 5 April 2011, they released the first national strategy on childhood poverty in the
United Kingdom that set out all the steps that they will take throughout 2011 and 2014 to achieve
our objectives. On 26 June 2014, after reflecting on the draught strategy and for period of 2014
and 2017, they released the 2nd national strategy for the elimination of child poverty in the
United Kingdom. The Government publishes a report on income disparity in the United
Kingdom called HBAI (Households below Average Income). This study establishes the poverty
line throughout the United Kingdom at 60% of the median family income. If income is even less
than 60% of this average, HBAI declares it to be living in abject poverty. This really is the
concept of relative poverty, because absolute poverty is just where family income is less than
60% of the median level as it was in 2011. One out of five (22%) households in the United
Kingdom have had a significant impact on the bottom line, taking into account their house
prices. 30 per cent of children live in families below the poverty line (the cost of housing). It's
about twice the poverty rate (16%) for people on benefits.
Government as an influencer: UK's government is constantly trying to control customer
behaviour and firm intervention indirectly (Government as influencer, 2020). Empowering self-
regulation might have been a successful way to escape proper operation, but it is necessary to be
mindful of the intention to enhance anti-competitive cooperation. Behavioural economics implies
that people's behaviour plays a vital role in assessing the level of competition in many markets.
Government and regulators could have a significant part to play in maintaining that customers
can actively participate in markets, for example by providing enough knowledge or being able to
change suppliers easily. Government may concentrate on demand by seeking to manipulate
consumer behaviour in a number of ways, such as by legislation or the tax system. Items are
taxed more heavily in the context of alcohol than other products and customers underneath the
age of 18 are excluded from consumption. UK government may also use promotional campaigns
and education programs to illustrate the costs of this behaviour. This indicates that the
Government will play a significant role in making markets work better by growing customer
interest and business involvement.
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Above discussed all the UK government policies help the economy to recover from
consumer losses of retail products & services. These economic policies make sure that,
organizations gain from their operations which automatically helps in recovering economy.
CONCLUSION
On the basis of above discussion it has been concluded that economics and its related
concepts are essential in order to evaluate the market trends and demand of products in the
market. With the help of demand and supply analysis, organizations and management are able to
review their decisions and modify their strategies accordingly. In addition, they should also
ensure that entity maximise their profit with the help of evaluating market structure and
implementing such concept into their organizations. There are several factors which affect the
organization and its operations that further cause the production as well as profitability. Change
in population, household income, subsidies, substitute products etc. In addition, there are several
economic policies which are made by the UK government to influence the consumer retail
spending.
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REFERENCES
Books & Journals
Brennan, T. J., 2018. The rise of behavioral economics in regulatory policy: Rational choice or
cognitive limitation?. International Journal of the Economics of Business, 25(1), pp.97-
108.
Brenner, B., 2018. Transformative sustainable business models in the light of the digital
imperative—A global business economics perspective. Sustainability, 10(12), p.4428.
Chang, C. L., McAleer, M. and Wong, W. K., 2018. Decision sciences, economics, finance,
business, computing, and big data: Connections.
Deming, W. E., 2018. The new economics for industry, government, education. MIT press.
Đuričin, D. and Herceg, I. V., 2018, June. Industry 4.0 and paradigm change in economics and
business management. In International Conference on the Industry 4.0 model for
Advanced Manufacturing (pp. 37-56). Springer, Cham.
Maes, I. and et.al., 2020. Business and Economics. Sociologia e ricerca sociale, 121(2020).
Maresova, P. and et.al., 2018. Consequences of industry 4.0 in business and
economics. Economies, 6(3), p.46.
Paoloni, P. and Lombardi, R., 2018. Gender issues in business and economics. In Selection from
the 2017 IPAZIA Workshop on Gender, Springer Proceedings in Business and
Economics.
Silva, E., 2019. The state and capital in Chile: Business elites, technocrats, and market
economics. Routledge.
Simon, J. L., 2019. The economics of population growth. Princeton university press.
Online
Law of Demand. 2020. [Online]. Available Through:
https://www.investopedia.com/terms/l/lawofdemand.asp
Law of Supply. 2020. [Online]. Available Through:
https://www.investopedia.com/terms/l/lawofsupply.asp
Government policy. 2020. [Online]. Available Through:
https://www.gov.uk/government/publications/2010-to-2015-government-policy-poverty-
and-social-justice/2010-to-2015-government-policy-poverty-and-social-justice
Government as influencer. 2020. [Online]. Available Through:
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/
attachment_data/file/284451/OFT1113.pdf
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