Contemporary Business Economics

Contemporary Business Economics

TABLE OF CONTENTS
INTRODUCTION............................................................................................................................4
TASK 1............................................................................................................................................4
1.1 Explaining the law of demand and movement along demand curve and change in demand
curve............................................................................................................................................4
1.2 Presenting law of supply and movement along supply curve and change in supply curve. .6
TASK 2............................................................................................................................................9
Comparing and contrasting the emerging economics theories in 21st and 20th century..............9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Business economics is a field that studies the financial, organizational, market-related
issues faced by corporations. Along with this, it helps in establishing relationships between
various economic factors like income, profit and market structure (Leonard, Michaelides and
Michaelides, 2018). Though this, managers of a company make effective decision for future. The
present report will help to shed a light upon different economic theories and concepts that helps a
business to extent its growth and success. The study will explain law of demand and law of
supply along with diagram. Further, it compares and contrast emerging theories and models in
21st century with 20th century with regard to contemporary economics.
TASK 1
1.1 Explaining the law of demand and movement along demand curve and change in demand
curve
The law of demand is known as one of the most fundamental concept of economist. It
states to direction through which quantity demand changes with fluctuation in price. In other
words, the higher the price, quantity demand also lowers and the rationale behind the same is due
to marginal utility. (Marwala and Hurwitz, 2017) explains that when the price rise and demand
declines, whereas price decline and it increases the demand of goods. For example, a baker sells
the roll for £1 each and for a day 50 rolls are sold at the same price. As per the law of demand,
the baker decides to increase the price by £1.50 and then they have to sell only 40 rolls. This in
turn reflected that to increase the profit, consumers have to pay high price but meanwhile it
decreases the demand of that products. Thus, the concept helps the management in deciding
whether how much increase as well as decrease in the price of commodity is desirable.
There are two effects responsible for law of demand which includes income and
substitution effect. In income effect, higher the price and this in turn consumer spend less
amount in the goods due to low earning. In the case of substitution effect, price of a product
increases and this promote household substitute towards substitute goods. As a result, they start
left the products which are actually desired (Humberto, 2020). Hence, it can be stated that law of
demand affected the consumers because consumer demand for a good rise when prices fall and
consumers are willing to pay for goods decline even their utility decreases. Overall, it can be

stated that it is a market condition which changes the price and this in turn affect the overall
demand of a consumers.
Movement along the demand curve
It is the situation where quantity demanded of a commodity is change because of price
whereas other factors remain constant. There are various factors that are affect the demand curve
which is seen as the change in curve (Ji and et.al., 2020). In this above picture it is shown that
when the price of particular commodity is increases the quantity demanded of commodity will
decrease because there is inverse relationship between price and quantity demanded whereas,
when price increase From OP to OP'', the demand for a commodity will fall with M to L and
demand curve moves in upward direction that is also called contraction of demand.
Similarly, price of a particular commodity will decrease, the quantity demanded of a
commodity will increases. Whereas, the price is decreases from P to P', the quantity demanded
will rise as M to N and demand curve will moves downward that is called expansion of
demand.
Factors that cause movement of demand curve are income, taste & preference, price of related
goods etc.
Income- Income of a consumer affects the purchasing power, if the income of consumer
is increases the demand of particular product will automatically increase. On other hand,
decreases in income results decreases in quantity demanded with other factors remain constant.
For example, The income of a person is rises from 10,000 to 20,000 which results demand of a
commodity will increases.