Demand and Supply of Ferrari and Emerging Economic Theories

This report analyzes the law of demand and supply for Ferrari and compares emerging and traditional economic theories related to contemporary business activity. It discusses the impact of factors on demand and supply, and the shift in demand and supply curves. It also explains modern economic theories like behavioral economics and traditional theories like Keynesian and neoclassical theories.

Contemporary Business
Economics

Table of Contents
INTRODUCTION ..........................................................................................................................3
Task one: Demand and Supply of Ferrari........................................................................................3
Law of Demand...........................................................................................................................3
Law of supply..............................................................................................................................6
Task Two: Emerging Economic Theories.......................................................................................8
Modern Theories.........................................................................................................................8
Traditional Theories....................................................................................................................9
Comparison.................................................................................................................................9
CONCLUSION .............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business economics refers to the field that usually deals in the demand analysis,
allocation of resources,management of inventory, cost analysis and price system and so on. This
also helps in knowing the global financial conditions which is having impact on the individual
business and how they are impacting the overall financial choices of the people. Traditional
method includes the overall working of the company and they are effectively acting at the
functional areas. It is vital to have the economic practices related to the inter-functional
coordination and these type of interactions will be take in context to Ferrari, It is the lavish sport
car company that is established in 1939 by Enzo Ferrari. This respective report will analyse the
law of demand and supply foe the specific product. Second part will determine the comparison
of the emerging and the modern economic theories related to the contemporary business activity
that is commonly observed in the society.
Task one: Demand and Supply of Ferrari
Law of Demand
The law of demand stated that rise in the prices of commodity tends to decreases the
overall demand of the specific products. On other hand, decrease in the given price of the
products tends to rise the overall demand of the commodity in the large market, all other factor
remain constant. This is identified as the common principle of the macroeconomics that depict
that how the taste and preferences of the customer changes over the period of of time. It is shows
that inverse relationship between the prices and the demand of the given goods at a point of time.
This given diagram shows the graphical presentation of law of demand. AS per this, it is seen
that when the prices of the commodity increases or they are at high point then the demand of
such goods at its lowest as it shows as the quantity demanded Q1. When the prices of the given
goods starts to reduce and then increase is expected that is commonly seen to expected to
increase the overall demand to the q2 and q3 following a reduction in the prices to p2 and p3.
This is commonly shows that such changes are known as the movement with the demand curve
and they are keep on rising which also leads to increase in the overall demand. When the price of
the given goods tends to increase then it leads to lower down the demand in the target market.

Illustration 1: Law of Demand
Using this law in consideration to Ferrari, a new model is being launched every year and
old model get outdated and obsolete with the passage of time and increase in the prices means
enhancement in the technology. These are the luxury gods which can be only purchased by the
individual who are having sufficient purchasing power in the market when the prices of the sport
car increases with the certain prices then the demand for such goods tends to fall down and more
people will buy such products to the certain quantity. Additional, when the Ferrari decided to
reduce its prices then it would come under the buying power of the people by which they can
have the demand of sports can be increase over particular period of time.
This shows the certain factors which mentions in which other factors remains constant
and the demand for gods is basically influenced by the pricing of the given products. Somehow,
in the real world conditions for Apple do not work in the same way. This is basically influenced
by the certain aspects of external factors that does not results in movement along in the demand
curve but other than this it leads to shift in the demand curve. Various scenarios is being
discussed that leads to have shift in the demand curve for Ferrari along with the representing the
shift in graph.
Ferrari is the luxury product that can only be afforded by the people who is having high
buying capacity. For instance, economic recession is leading to fall down the buying power if the
individual foe which some people are able to buy Ferrari. In such cases, the prices of the goods
do not tends to change rather than the buying power of the individual can be changed. This given

diagram depict a leftward shift in the overall demand curve in which the prices of the certain
goods can not change. This movement is defined as the leftward shift in the demand of the given
goods in the large market where all overall quantity demanded have decrease foe the same price.
Ferrari will now either have to lower the price to maintain demand or also have to deal with the
lower selling prices of their sport cars.
A close rival for Ferrari is Ford Motor which offering the hybrid and electric vehicle that
can be purchased by people of high range buyer. Change takes places in the prices as the
customer is having the different buying capacity and the certain choices by which they emphasis
on having valued products. For example, when the Ford company decided to minimise their
prices of their high end cars which directly competes with the cars of Ferrari so that they can
have the higher profitability and market opportunities. This also helps the customer to have the
affordable product for them. Decrease in the prices of Ford model cars make shift of the
customer from Ferrari to Ford as it is more affordable for the user to have the better products
casing shift of the customers from Ferrari to Ford as given in the below diagram for Ferrari.
Whereas, change seen in the consideration of Ford cars are also moving along with the demand
curve rather than the shift in the overall demand curve since the prices get reduced which leads
to rise the overall demand of their commodities.

When there is change in the various factors which is leading to rise the overall demand
foe the apple and it products and the curve will shift to the right as per shown in the demand
curve. This can be done when the prices of substitute goods tends to fall down and includes the
the best application of the Ferrari which helps in having the better services to their customers.
This also leads to increase the demand of the for Ferrari cars as the people is having more
preference to them even since the prices are being high. In this Schneier, the demand curve will
shift to the right in which the prices are constantly increasing and the demand for Ferrari cars
also increasing in which the attribute to change which takes place in the prices of the
complementary goods.
Law of supply
The law of supply show a positive relationship between the prices and the quantity supply
of the given goods whereas decrease in the prices of the goods leads to cut down the overall
supply of the goods in the large market. Or can say that quantity supplied is the respective
amount that is willing to buy and able to buy in the large market. This is the assumption of law
of demand that enhance in the prices creates a high margin for producer that means suppliers can
rise the prices in order to have more profits as well. It is seen that to have the exist relationship
among the prices of the goods and the certain amount on which the given goods is being sold as
per given in the below table. For example when the prices of the Ferrari cars tends to rise then
the supply of the given commodities also increases the overall supply of given goods in a large
market.

When there is change in the various factors in the market is also called as the shift in a
supply curve in which supply curve will move to right or left. For example, when prices of the
certain aspects tends to rise the overall consideration of the market at larger picture. When the
prices of their products tends to reduce then the supply curve will shift to the left as the quantity
supplied has reduced instead of standing on the same price level by which they are having the
major consideration. Shift is been observed in demand curve in the given supply curve in which
this will move from AS1 to AS2 which is also showing decrement in the entire supply. There are
other factors which is also given greater incentive foe the organisation by which they can
increase the overall supply. In today's world, when the sub parts of the car are available at the
minimum prices so this leads to increases the overall profit margin of the suppliers or the
manufacturer. This also leads to increase the supply of Ferrari cars and cause to this the supply
curve will shift to the right which shows the movement from AS1 to AS3as given in the chart.

Task Two: Emerging Economic Theories
Economic theory have been emerged in order to have better explanation to the economy
and the society. It is also seen that the modern theories of economic are rising from the classical
theorise that includes Marxian and Keynesian viewpoint. The main part is to have the
comparison for the modern theories which id being classified in the 21st century with traditional
economic that are present in the last century. This would be easier to understand the changes
which are taking place in the business environment in response to various economic theories and
are also being created and put forward. There are modern economic theory which also followed
by the traditional theories which would be easier to make understand the change which is taking
place over the years.
Modern Theories
Behavioural economic concept is the modern economic theory which tries to justify the
diversified choices of their customer and they are dealing in the scarce resources. This theory act
as the main head in which various theories are emerging relating to the human behaviour. It is
vital to have the branch since thy provide insights into how the psychological factors tends to
carry the impact on the various decisions making of the individual. They are the one who is
having the major emphasis on the insights of the people which need to be accessed as it

gradually impact the individual's decision making process. Maximization of utility and profit is
not enough which can be used to predict the human behaviour particularly with the fact that
human are unpredictable in the market. These are the certain type of emotional responses that is
shown by the individual living in the society which is also not followed by the traditional
economic models of demand and supply. Behavioural theories aim to fill in the gap by taking in
the certain account of psychological factors which impact the purpose in order to fill the gap by
taking in the account.
Budge theory is defined as the brand of behavioural economic theory that defines the
choice of the individual which is causes the behaviour of the people to change in the appropriate
manner without taking the major change in the economic incentives. This is the theory which
helps in understanding the application in public policies through subtle alteration in the business
environment.
Traditional Theories
In 20th century, economics is vied as the social science but with the mathematical
revolution in the next century helps in over growing the large market. Rational economic model
which provides stronger insights into behaviour that is commonly seen by the people living in
the society. Keynesian theory focuses on the prices, wages, employment rate and interest rate.
This theory says that spending made by the government rises the supply of the money and also
leads to have the better approach in the market as well through the proper regulation of economic
cycles.
Neoclassical theory claims that certain factors which are responsible for analysing the
prices of items and also cover the perception of the competitors and their customers in the target
market. This also focuses on demand and supply as the key driving factors which includes
production, consumption and pricing of certain goods and services. This is majorly seen that they
are emerging theories which are rational and having the aim of attaining maximum level of
satisfaction of the customer preferences.
Comparison
There are various difference are observed in traditional and the contemporary economic
theories in which it is seen that traditional theories believe that the society acts in an appropriate
whereas the modern theories take into account as the psychology of human. They are taking into
account in which people make a decisions in an appropriate manner. Economists need to have

the effective understanding as the behaviour shown by the people by which they can give better
advice to the people who is having certain decision in a certain manner. They can give advice to
the business relating to the enterprise operations. The traditional economics state that businesses
that fails in creating the affirmative surplus foe the certain number of the consecutive period and
this finally ends up having closing down but this is observed that the rational thinking may not
always prevail as per the behavioural economists, various additional features are being seen over
the period of time.
CONCLUSION
It is concluded from the above report that business economics is vital and having
significant role in accessing various business activities. By applying the law of demand and
supply, it is cleared in case of Ferrari that how various factors affecting the demand and supply
of the given goods. There is negative impact of such factors which is also leads to have adverse
business performance. Moreover, there various theories of the economic has been formulated
during case of 21st century that can effectively take into account with the psychological aspects
which is also impacting the behaviour of the individual in the economy. These are the aspects
which are proven to be more effective for effective understanding the behaviour in comparison to
the traditional economic theories.

REFERENCES
Books and Journals
Alsawafi, A., Lemke, F. and Yang, Y., 2021. The impacts of internal quality management
relations on the triple bottom line: A dynamic capability perspective. International
Journal of Production Economics, 232, p.107927.
Ghouri, A.M. And et. al., 2020. Enhancing business performance through green human resource
management practices: an empirical evidence from Malaysian manufacturing
industry. International Journal of productivity and Performance management.
Akbulut, B. and Adaman, F., 2020. The ecological economics of economic
democracy. Ecological Economics, 176, p.106750.
Juutinen, A., Tolvanen, A. and Koskela, T., 2020. Forest owners' future intentions for forest
management. Forest Policy and Economics, 118, p.102220.
Orlova, E.V., 2020. Labour productivity management using health factors: Technique and
models. Upravlenets, 11(6), pp.57-69.
Kalkuhl, M., Schwerhoff, G. and Waha, K., 2020. Land tenure, climate and risk
management. Ecological Economics, 171, p.106573.
Ulucak, R. and et. al., 2020. Mitigation pathways toward sustainable development: Is there any
trade‐off between environmental regulation and carbon emissions
reduction?. Sustainable Development, 28(4), pp.813-822.
Bondarenko, S. and et. al., 2021. Modeling of economic security of the enterprise at change of
investment maintenance. Studies of Applied Economics, 39(7).
Massa, N., 2021. FEMA executive MBA students taking entrepreneurship elective with Dr
Massa complete feasibility project and pitch ideas for start-up business concepts.