Business Management Report on Elasticity, Consumer Behavior, Aggregate Supply and Demand

The report discusses the importance of elasticity, consumer behavior, and aggregate supply and demand in business management. It also highlights the impact of macroeconomic factors on businesses.

Running Head: MANAGEMENT
BUSINESS MANAGEMENT REPORT
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SUMMARY
The management of a business is very vital in our today’s competitive business platform.
Every business therefore needs to have a comprehensive business management that will oversee
a smooth running of the business. The paper below will discuss various sensitive issues that the
management of any business is supposed to do to make sure the business that they run is
successful.
Elasticity
In business, elasticity is the degree to which persons, particularly consumers or producers
alter their demand or the quantity which is supplied when responding to the changes in price or
income. The latter is basically used to assess the change in the consumer demand as a result of
change in the prices of goods and services. Price elasticity is important for XYZ Company since
it influences the firm’s choice in its ability to lower or increase the prices of the products. There
are company’s products that are more responsive to the increase in prices while the rests of the
goods are inelastic and hence less responsive. Elasticity of price is important for XYZ Company
in making decisions concerning the prices. Price elasticity affects the decision of firms to
increase prices. When we assume that XYZ Company incurs no cost in the production of goods,
the business would then increase the prices till the demand goes down (Williams, Uzo, &
Peregrine, 2012). After the introduction of costs, things start becoming more complicated.
Consumer Behavior
For XYZ firm to sell their products and service, the firm has to be aware of how the
consumers behave towards the goods that the firm produces. The firm needs to study the kind of
products that a given portion of customers are interested in and the process involved for the
consumers to choose in between competing products or even among many products. The

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knowledge of the products and services will help the XYZ firm grow rapidly while responding to
the needs of their clients (Peterson, 2014). The organization should study consumer behavior so
that they could determine how and where they should sell their products and services. Given that
the firm knows what its customers tend to choose in most cases by use of the familiar brands,
then the firm will make a brand for the office supply, create commercials on the media pages and
promote their products. If XYZ firm sells books to schools, it will focus less on the social media
advertisement and hang posters in the graduate schools since most of their clients are
concentrated there (Peterson, 2014). The firm will also befriend the graduate programs on
Facebook pages.
Through studying the behavior of consumers, XYZ business will be able to decide the
kind of products and services to produce. In a situation whereby the firm is aware of what
products and services are needed by the consumers. If they know what the consumers are fond of
purchasing and how they go about make the purchase, the firm will then be able to identify the
need that has not been identified and satisfied in the past (Shapiro, 2016). When XYZ
understands what the consumer in relation to the products and services that the firm provides, it
will be possible for the firm to provide the goods and services in time and there are high chances
that the firm will win the loyalty of the clients. For instance, if the firm has been dealing with the
customers coming to the XYZ restaurant since the firm serves healthy food without the customer
having to wait for a long time, the firm then needs to keep training the wait staff on the need to
be as efficient as possible (Reifschneider, Wascher, & Wilcox, 2015). The XYZ top management
should also gather data on the consumer behavior by the sales information that the firm already
has. The firm should analyze if for example, most consumers make their purchases by use of

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credit cards or cash. The firm should also keep a track of record on the time when the clients
flock in the firm.
The production cost and profits influence the business through the cash flow and the
overall wellbeing of the business’ model. The more revenue that a business generates, the lesser
its expenditure is, the greater the amount of revenue that the business will have in financing the
day to day operations and for paying the workers (Campanella, Serino, & Nelli, 2018).
Production cost will include materials like labor that the company will incur during the
production of the goods to be sold. Low cost of production will mean that the profits are high.
The XYZ Company should provide enough cash to cover its operations. The lower operating
costs will make the firm has a less bite out of the cash flow. It is also important for XYZ firm to
have a business model so as to create a framework that will be used to finance the day to day
operations of the business and also earn money that the firm can help the managers cover their
expenses (Türkay, Saraçoğlu, & Arslan, 2016). Given that the production cost is reasonable, the
firm will then run smoothly without necessarily having to incur additional costs and debts.
Aggregate Supply And Demand
Supply and demand are two factors that determine the pricing in the general picture of
any competitive market. These two factors are like two forces. Both the absolute level of supply-
demand and the comparison of these two forces are very vital in XYZ firm. The principle of
supply and demand is that if one of these two forces change, there will be an imbalance in the
quantity that XYZ is producing and also the quantity that the consumers are going to buy. The
XYZ management is then supposed to keep an eye on the two different forces that they will be
able to command. On the demand side, any increase in demand will make the prices shoot and
vice versa (Mathew & Stephen, 2017). On the other hand, an increase in supply (since the firm

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has a free entry, other firms might enter the market) will make the prices go down. The firm
needs to also compare the seasons. Some goods are sold more in given seasons while others in
other seasons. The supply for the firm for certain goods can hence be made seasonal by the XYZ
firm (Nakamura & Steinsson, 2018). For instance, there are some types of fish that can be harder
to catch during winter and this will make the XYZ firm to raise the price of fish for their
customers during that time. The latter will create an effect of demand for the fish in winter and
the firm then is left with the decision of taking the lower profits and offering the dishes at
particular times of the year (Caballero, Farhi, & Gourinchas, 2016).
Macroeconomic factors affect business in the way the overall economy functions. The
XYZ should consider the key economic factors so as to reduce the impacts on the cash flow and
profitability (Marthinsen, 2017). The macroeconomic variables such as unemployment and
corporation tax rate have effects on businesses and hence XYZ should predict the effects on the
variables for a better performance of the firm in the future.
Conclusion
As discussed above, the prosperity of any business is so much depended on a number of
factors. The elasticity of prices in business should always be approached keenly since prices are
very sensitive as far as retention of customers and the future of businesses is concerned. Through
studying consumer behavior, the firms are able to know the kind of products that each group of
customer is interested in and strive to satisfy them. On the other hand aggregate supply and
demand are also other factors that the firm needs to consider since the latter has much impact on
the prices of products. If XYZ managers want their firm to succeed in this competitive market,
then they are supposed to pay much attention to the above-discussed factors.

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References
Caballero , R. J., Farhi, E., & Gourinchas, P. O. (2016). Safe asset scarcity and aggregate
demand. American Economic Review, 1, 516-567.
Campanella, F., Serino, L., & Nelli, T. (2018). Macroeconomics Effects on Project Finance
Performances and Sustainability. International Business Research, 11(6), 11-32.
Marthinsen, J. E. (2017). International Macroeconomics for Business and Political Leaders.
United Kingdom: Routledge.
Mathew, J., & Stephen , D. R. (2017). Estimating and Questioning Economic Values for
endangered species. USDA Reports, 16(7), 3-17.
Nakamura, E., & Steinsson, J. (2018). Identification in macroeconomics. Journal of Economic
Perspectives, 32(3), 56-96.
Peterson, P. (2014). Peregrine Financial Group: Two Years and Counting. Farmdoc Daily,
University of Illinois at Urbana-Champaign. Department of Agricultural and Consumer
Economics, 4(124), 45-89.
Reifschneider, D., Wascher, W., & Wilcox, D. (2015). Aggregate supply in the United States:
recent developments and implications for the conduct of monetary policy. IMF Economic
Review, 1(63), 70-110.
Shapiro, M. D. (2016). Supply shocks in macroeconomics. United Kingdom: Palgrave
Macmillan.

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Türkay, M., Saraçoğlu, O., & Arslan, M. C. (2016). Sustainability in supply chain management:
aggregate planning from sustainability perspective. PloS one, 11(2), 23-45.
Williams, C. N., Uzo, J. O., & Peregrine, W. T. (2012). Vegetable production in the tropics. New
York: Longman.