Contemporary Business Economics

Contemporary Business Economics

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK1.............................................................................................................................................3
Law of Demand and its types of curve........................................................................................3
Law of Supply and its type of curves..........................................................................................6
TASK2.............................................................................................................................................8
Comparing and contrasting emerging theories and models in 21st century with 20th century
and their relation with modern business practices......................................................................8
CONCLUSION..............................................................................................................................10
REEFRENCES..............................................................................................................................11

INTRODUCTION
Demand and supply analysis is one of the fundamental model in economics which
determine price relationship between producer and consumer. It is used as an essential theory for
every business to prosper and grow in an industry. This analysis helps in understanding
consumer behaviour with interaction of demand and supply curve. This interaction is known as
equilibrium situation where consumer and producer are in balance situation. Demand and supply
of a commodity is determine due to scarcity of resources in a country and allocation of these
resources on best alternative available(Arrowsmith, S., 2018). In micro economics, it studies the
nature of an individual behaviour and its impact on quantity demanded and quantity produced. It
helps in producing graphs which represent the movement and shifts on a demand curve. Thus, in
economics it involves various models and theories which helps in understanding fluctuations and
movements in a business. It has chosen bakery business which included production and services.
This report includes law of demand and supply with its shifts and movements and its impact on a
business. Also, it compares and contrast various theories of 20th and 21st century relating both to
modern business practices.
TASK1
Law of Demand and its types of curve
This law states that quantity demanded has indirect relationship with the price of goods
keeping all the factors remain constant. It reflects if all other factors than price remain equal, the
higher price of a good leads to less people demanding that good. In a business like bakery or
other businesses it represent changes and movements on its demand curve. Due to scarcity of
resources in a business it leads to various fluctuations in demand and supply of commodity. This
can be easily reflected with the shifts and movements of demand curve in a business. For bakery
business it involves various factors of production such as land, labour, capital and
entrepreneurship. These factors are important for the functioning of a business in a best possible
manner(Barn, R. and Powers, R.A., 2018). These are the means of production which helps in
transforming resources into finished outputs. It helps in satisfying varied wants and needs of

consumers by providing value or utility of money. Business requires various resources for the
production and supply which are scarce in nature. It is important to understand law of demand
which has direct impact on the operations of a business. There are various factors which affect
the demand of a product such as substitution effect, complimentary effect, income effect and
other personal factors. These factors affect the smooth functioning of a business. In bakery
business, the producer has to indulge in various factors of production which help in determining
quantity produced and overall productivity of a business. Business has to face impact of various
other factors than price which affect the demand of its product leading to poor performance
financially. Following are the external factors which affect the operations of a business. These
are
 Price- Price is one of the important factor which eventually determine quantity demanded
and produced in a country. Due to the effect of price elasticity consumers are sensitive
with the change in prices of a product. There are three types of elasticity which occurs
based on the nature of business(Bryson, J.M., 2016). This involves perfect, imperfect and
neutral elasticity which is depended on the type of product. In bakery business, it has
perfect elasticity for price of the product. It gets affected due to slight changes in the
price leads to more changes in the quantity demanded for products. It occurs due to
nature of products for which consumers are more sensitive. Therefore, in regard to bakery
products consumers get affected due to perfect price elasticity of commodities. Thus,
price plays an important factor for the change in demand of a product. When price
increases for a product it leads to decrease in the quantity demanded. This can be shown
in the demand curve which is downward sloping. Also, these changes can be
demonstrated as the movement on demand curve due to changes in the price of product.
 Price of related goods- In this due to presence of substitute goods in the market leads to
impact on the quantity demanded of a product. Substitution effect refers to the change in
consumption of goods due to relative change in the price and income of consumer. Also,
it states that due to changes in the price of one product leads to change in its consumption
or quantity consumed. Related goods include substitute and complimentary goods which
affects the demand of a product. Substitute goods are those which can be consumed in
exchange of other. These are the goods which affect demand due to availability of