Unit 55: Business Economics Assignment
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ICON College of Technology and Management
Added on 2020-05-11
Unit 55: Business Economics Assignment
ICON College of Technology and Management
Added on 2020-05-11
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Running head: BUSINESS ECONOMICSBUSINESS ECONOMICSName of the StudentName of the UniversityAuthors Note
1BUSINESS ECONOMICSTable of ContentIntroduction......................................................................................................................................2Task 1...............................................................................................................................................2Task 2...............................................................................................................................................5Task 3...............................................................................................................................................7Task 4.............................................................................................................................................13Conclusion.....................................................................................................................................17References......................................................................................................................................18
2BUSINESS ECONOMICS IntroductionThe study focuses on the nature and characteristics of the UK economy. It also highlightson how the economic system of this nation affects on the business organization of this nation.The UK economy is highly developed economy and is the fifth biggest in the globe as accountedby GDP (Gross Domestic Product). This nation has been ranked ninth biggest in terms ofPPP( purchasing power parity). The service industry mainly dominates this nation andcontributes to 80% of its GDP. This country has the mixed economy that relies on capitalistsystem (Taussig 2013). This system is characterized by absence of UK government interventionand free markets.Task 11.1The economic systems plays significant role in performing resource allocation. Scarcity hasbeen one of the vital issue in which the people wants are unlimited and hence it creates hugedifficulties in fulfilling the peoples need owing to limitation of resources (Laursen 2015).Due to unlimited needs of economic society, the perishable resources become scarce becausethey are not recyclable. Therefore, it is necessary for every economic society to utilize theirresources in efficient way. The resources are basically limited in two ways that includes-a)Limited in terms of physical quantity such as land that has finite amountb)Limited in utilization such as labor as well as machinery The demand for the specific good affects its price. Production cost as well as labor costaffects the price of scarce commodities. In UK retail market, the market forces mainlyconsider resources allocation. This means that the condition of market helps in determining
3BUSINESS ECONOMICSresource allocation to higher level (Cuñat and Melitz 2012). For example, Tesco Plc investstheir money in distributing the scarce resources that includes labor, capital etc. Producersand consumers have various takes in setting the product price. A particular price establishesdemand and supply balance, which is also referred to as equilibrium price. The sellers set theproduct price after dealing with their customers and focusing on their rivalries strategy(Rassenfosse and Potterie 2012). If the buyers does not accept the price and stops purchasingit, then this forces the retailers to decrease the price.1.2 Both supply as well as demand are two vital economic activities and have influence oneach other. These affect the prices of buyer’s products and services within the economy. Demandrefers to the measurement of consumer expenditure as well as consumer desire on specificproduct or service at particular price. Prices might decline if supply continues to increase. Supplyand demand helps in determining the prices of product. Consumers purchasing products exhaustsupply that results in rise in demand for goods. The theories of market economy claims that therelationship balances the equilibrium price, demand as well as supply reaches approximation ofperfect resource allocation. However, at this equilibrium point, prices are set to consumer’sinterest and hence producers produce fewer products. Market economies apply this asmechanism in order to determine product development as well as production. In case of weakeconomy, both the demand as well as supply becomes weak. Hence this adversely affects boththe production and consumption. 1.3 Market System refers to the network of retailers, purchasers and other players that workstogether for trading specific product. Various kinds of market systems that includes perfectcompetition, monopoly, monopolistic competition etc is vital for business as it helps the firms inmaking product pricing as well as production decision (De Luca and Atuahene-Gima 2012). The
4BUSINESS ECONOMICSmost vital step that the company takes in achieving success in business is educating the peopleregarding brands, product advantages and enhancing the stakeholder’s relationship. This methodof market assessment is mainly done before the organizations fiscal year that refers to theextension of budget formation and planning procedure. Opportunity cost refers to the cost of theforegone alternatives. It also facilitates the company in maximizing profit that could be achievedfrom capital and technology. As economic decision making is based on the accountinginformation, it is vital that information is useful to the organizations economic decision making.Tesco produces their product and offer services in such a way, so that it fulfills the requirementof buyers and stakeholders. This organization considers carrying cost including storage cost,opportunity cost and storage cost in order to make economic decision. Opportunity cost is vital for business as it helps this organization in deciding in whichbusiness activities they should invest the money in order to attain higher profitability. Inaddition, Tesco also assess opportunity based on benefits as well as cost associated in order tomake informed economic decision.1.4 Price elasticity of demand refers to the relationship between changes in quantity ofcommodity demanded with respect to its price change. Price and total revenue is inverselyrelated to each other. This means if price of the product rises and total revenue declines, then it isknown as elastic demand. On the contrary, if both the product price and revenue increases, thenthe demand is known as inelastic (Rassenfosse. and Potterie 2012). In case of luxurious products,the demand is inelastic and hence small rise in price does not affect the buyers. On the otherhand, demand is said to be elastic in case of substitute product. This means that if the price ofone good increase then the consumers switches to other product. Price elasticity plays asignificant role in Tesco. Tesco producers gather knowledge about price elasticity of product in
5BUSINESS ECONOMICSorder to decide upon the pricing policies that rely on the information about behavior of consumerand demand. However, if the product of Tesco has higher demand, then its price rises owing toexcess demand. Still, if the revenue falls then this is known as sheer elasticity.Task 22.1) Tesco’s “game changing” pricing policy increases their sales by 0.6% in last year. Pricevalue satisfaction refers to the method of assessing price on company’s operation. The managersof the company limit maximization of profits while the stakeholders are not involved in businessactivities. The pricing as well as corporate objectives have huge implications in business. Thecorporate objectives of Tesco includes-To gather knowledge about the customers preferences and meet their requirementsTo be more competitive on fundamentalsTo provide proper business environment To upgrade already existing stores of TescoTo focus on the product quality and the promotional activities of productTo adapt new technologies for manufacturing productsTo focus on the elasticity’s of products for setting their priceTo achieve more profit in order to return to shareholdersTesco’s focuses on the competitors pricing and the market demand for the product beforesetting their product price. As Tesco operates in perfect competition, it focuses on productdemand besides its price for producing that commodity. They even concentrate on thecompetitor’s business strategy and target market in order to gain competitive advantage. Thus,this helps them in attaining higher profit and expanding their business globally.
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