Economics for Business: Impact of Demand and Supply on UK Economy

This report explores the impact of demand and supply on the UK economy, focusing on the effects of Brexit and COVID-19. It discusses the importance of effective economic policies and analyzes the issues faced by the UK government in the food sector.

Economics for business

EXECUTIVE SUMMARY
Economics is explained as understanding about economy and different aspects of economy
which contributes in nation development and help in development of their people. There are
many factors which affects nation economy such as consumption of goods, demand and supply
and flow of money in economy. This report provides information about impact of demand and
supply on economy and what different factors affect demand and supply of nation. This report
includes information about effect of COVID-19 on UK economy and what other different
economic factors are affected by pandemic. At last this report concludes about importance of
effective economic policies in order to boost and develop economy.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................4
TASK 1............................................................................................................................................4
Supply economic theory .............................................................................................................4
Demand economic theory............................................................................................................6
Market equilibrium......................................................................................................................7
Shortage and supply.....................................................................................................................9
TASK 2..........................................................................................................................................10
Issue and problems faced by UK government in food sector of country...................................10
CONCLUSION..............................................................................................................................12
REFERENCES................................................................................................................................1

INTRODUCTION
Economics is study of procurement and efficient allocation of scarce resources in the
concerned nation and under micro-environmental study demand and supply helps in interact in
industry to determine the equilibrium quantities. In this report the study of economics helps in
identify the internal and external factors that are managed by market forces developed by the
government by intervention. This report aims to explore the market interaction in the food
industry of the UK and they it impact the factors has undertaken such as Brexit, Covid-19. These
factors used to impact the economy and will lead to certain imbalances in the market and what
are the steps that were taken by respective government is being discuss in this report. Managing
the different factors has also impact the economy ans it should be properly control and identify
by the government to manage the social situation.
TASK 1
Supply economic theory
According to the Krugman and Wells, supply in market forces is used to relates with the
producer who used to produce goods and services and ready to supply those commodities on the
specific prices in the market. In the normal market conditions, sellers are willing to supply more
goods at high price and that indicate the positive relationship between the price and quantities
that are supplied. This kind of behaviour is shown in supply curve that is graphical representation
of the relationship between the price and supply is shown in upward slope.
Movement along supply curve

In the changes in price, the change in quantity will also changes and this kind of
movement indicate the single supply curve with the movement along the supply curve. If there is
increase in price then quantity supply moves upwards and that decrease in price, quantity
supplied moves downward on the similar curve. For example in the foods if there is change in
price of foods then the supply quantity moves upwards and with the decrease in price the
quantity demand moves downward.
Shifts in supply curve
 Left shift- When determinants other than price decreases , supply curve changes its
position and that shift towards left and which create another supply curve. For example in
the context of food supply, if there is decrease in food supply then then the price of food
will lead to increase as due to lesser quantity in the market.
 Right shift- When the determinants other than the price increases then the impact on
supply curve changes its position and shift towards right that creating another supply

curve. For example, in order to uplift or increase the producers and government is
providing subsidy to them, Then this will lead to produce more supply on the similar
curve.
Demand economic theory
As per Krugman and Wells. Demand refers to the market that is absolutely dependent on
the consumer as the demand is decided by the them and it is arises when they are willing to
purchase the commodity. In the theory there is always negative relationship between the price
and demand as when there is rise in price of particular commodity then there will will decrease
in the demand of that commodity. As, consumer will tend to buy the goods that are less in price
and will going to loose the interest when there is high price in the commodity. This kind of
behaviour is shown in demand curve which is graphical representation of the relationship and has
downward slope.
Movement along the demand curve
As, with the changes in price, quantity demand changes and usually indicate in the graph.
This movement is reflected in particular single demand curve with the movement along the
demand curve. In the increase in price, the quantity demand curve moves downward and in the
fall in the price, quantity demanded moves upward on the same curve. For example, in the rise of
one individual food the demand of another food is going to decrease and people will prefer to
buy cheap price of food on the another one. This is kind of changes appeared on the shift in
demand on the curve.

Shift in demand curve
 Left side- When the determinants other than price decrease, the demand surve changes its
position and shifts towards left and that create in another demand curve. For example, in
the loss of economy the loss of job will help in demand curve shift towards and will lead
to changes in the demand curve in the graph.
 Right shift- When the determinants other than the price increasing, demand curve
changes its position and shift towards the right and that leads to another demand curve.
For example in the Covid-19, people will lead to consume high intake of foods and that
increases the demand curve to the right and that leads to consume in higher demands.
Market equilibrium
In the view of Krugman and wells, certain point of price, demand and supply forces
interact with each other and when they come to the single point then it called as the Market
equilibrium. Price at market-equilibrium is also called as equilibrium price and quantity at the
market-equilibrium is known as Equilibrium quantity.
Shifts in equilibrium

 Changes in supply- Market equilibrium is basically based on the interaction of two
forces and one of them is force of supply and other determinants. In the free market
conditions, supply of commodity changes has the many determinants such as food market
in UK was facing distortion due to effect of combines force of Brexit and another reason.
To enhance the situations, governmental provided relaxation and positively impact the
supply curve. Prices are then adjusted accordingly to strike new equilibrium point.
 Change in demand curve- There are another two determinants that force market-
equilibrium and its determinants. Inn the free market, demand of commodity changes due
to the changes in many determinants. For example the people will lead to adopt the
healthy lifestyle and now they were tend to develop the effectiveness of the price level

and creating the situation of disequilibrium of situations will going to stroke the new
equilibrium point.
Shortage and supply
Demand and supply used to interact to achieve the equilibrium and movement of either of
the two disproportion or the other and is capable of creating the situation of disequilibrium. In
order to achieve the price are influenced either demand or supply both.
Shortage
When the demand of commodity exceeds the supply in the market then it will called as
the shortage and this situations has occurred when the covid-19 has arises and many restriction
were faced by the customer. This will lead to increasing in the price and reduce the demand and
that create new market-equilibrium point.
Surplus
When there is exceed in the commodities then demand will also increasing is known as
the surplus. In the other words to support the food industry, government has introduces many
schemes and offer the subsidies and that help the producers to raise the supply level. With the
decline in prices, demand will increases and therefore, creating new point of interaction to be
called as the market equilibrium. This is happen to cope up with the reduces demand and to
attract the customer in the condition of slow market conditions.

TASK 2
Issue and problems faced by UK government in food sector of country
COVID-19 have affected every economy all across the globe and it also affected individuals of
every nation. This pandemic affected economies in terms of demand and supply also COVID-19
have affected revenues of nation which made big impact on development of several economies.
This pandemic have affected UK also and it made its big impact on the food sector of country.
Different sector businesses are affected by this pandemic such as hospitality sector, retail sector
etc. There are some sectors which are affected by this pandemic are mentioned below:
UK government have faced issue related with availability of labour due to Brexit agreement in
which UK have removed themselves from European Union and it made major impact on
economy of UK and their businesses. COVID-19 have affected different sectors majorly as
Brexit already contributed in rate of labour turnover but due to COVID-19 this issue become
more serious as now there is shortage of workers and labours. Due to this several organisations
are facing difficulty in production of goods and services as it also affected several food products
organisation. Shortage of labour have resulted in less availability of food products and it also
affects economy of UK as supply is not matched according to demand.
It also results in increase of production cost as less availability of resources have resulted in high
rates of resources and for production of it resources which are needed are very costly and this put
major impact on production cost of organisation. Many organisation which operates in food
sector have closed their production due to unavailability of resources and labours. Several hotels
and restaurant are also affected by this pandemic as demand of consumers are not met due to less
supply of resources. This affected organisation productivity and profitability which deals in food
sector and it also made huge impact on their revenues. As marketing plan and strategies of
organisation are changed due to pandemic and managers of organisation are focusing on
developing new strategies to resolve these issues. The whole economy of UK is affected by this
pandemic and it includes all the major sector businesses which runs economy. Different
measures and strategies are implemented by food organisation to maintain supply and demand
chain and organisation are focusing on completing the need of consumers food products.
Although, the impact of COVID-19 associated with food sector in UK are crucial, the
concerned government have constructed the following policies in order to mitigate the threats
inflicted by pandemic on food sector in UK.

Taxation Policy: It is considered to be an element is used in order to manage the cash outflow
associated with an economy. Post Brexit, government introduced high tax rates for imports and
exports associated with food retail sector in UK. Although, after pandemic situation the taxes
were reduced significantly for the purpose of enhancing engagement in the sector, the food items
which generated major income for the economy and still had potential in global markets were
remained untouched in order to maintain an equilibrium in revenue generated from tax. Due to
the impact of this problem in order to enhance and establishes new start up, British government
focus on control and provides tax relief to newly start up organizations, especially those entities
which open their business in food sector, in order to enhance growth rate of this sector. In
addition to that, these new policies also provided subsidiary for such tax payers who were unable
to pay taxes due to pandemic situation. This helped them in maintaining a contingency in their
operations. There was one more major change in taxation policies. In order to give financial
assistance to those who are dealing with providing services, specific changes in taxation structure
was made. Taxes on luxurious items were reduced such as beverage item, beer, cold drinks as
these are beneficial for the purpose of increasing inflow of cash and fulfil lack of ability of
money in economy.
Fiscal policy: These policies are constructed in order to have control over government
expenditures and nation’s cash outflow by introducing strict barriers such as taxation policy.
Government of UK in their 2020's fiscal policy implement new strategies and proved relief
regarding with strict rules related with the business. In order to maintain position of food market
of UK they formulate policies to spread their food market for this purpose they avoid to change
start or customer duties as well and change imposed on delivering of their food products.
Price control: In this reform the UK government prohibited manufacturers in increasing prices
of certain products. This policy was considerably one of the most relief for the food sector of
UK. These certain products were an accumulation of necessary products, such as salt, oils, fruits,
mineral food items as these are essential ingredients of almost every food and therefore, if the
prices associated with these products would have taken a rise it would have affected normal
household adversely. This reform was introduced mainly in order to control inflation within UK
economy. They also set price of transportation of import of export of these products as well as
control their price of times grains. They control price of bread, milk as all these are essential
food item people not able to manage pay high amount of these items due to shortage of supply as

well as non-ability of cash capital. In addition to that, prices of basic healthcare services,
medicines and food items that are consumed during sickness were also taken into consideration
under this reform.
Poverty program: In UK more than of 14 million people live their lifer below the line of
standard living. Which impacts that more than of one third of total population of UK becomes
under this category. Due to COVID-19 many of people lost their jobs thus the number of people
sped their life n below the standard number of living has been increase. Government of UK
already run their education poverty ads well as child safety and development program in which
they provide facility to poor children for education. However, they contribute towards the
poverty fund specially to overcome the issue related with COVID-19.
CONCLUSION
This report concludes about the importance of effective economic policies in an economy and
help in understanding about effects of supply chain on economy. This report concludes about
different curves which help in analysing demand and supply of country. This report concludes
about economy of UK and focuses on issues about demand and supply shift in their economy due
to Brexit and COVID-19. This report concludes about different sector businesses in UK which
are affected by this pandemic and what other issues are faced by UK government due to this
pandemic and what measures are taken to resolve these issues.

REFERENCES
Books and Journals:
Krugman & Wells 2017 EFB MOD3327 textbook
Online
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mpactonoutputintheukeconomy/december2020>
Disequilibrium. 2021. [Online]. Available
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Eat out to help out: Coronavirus scheme offering UK diners 50% off begins, 2020. [Online].
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Effects of COVID-19 on the food supply system, 2020. [Online]. Available
through:<https://post.parliament.uk/effects-of-covid-19-on-the-food-supply-system/>
How Coronavirus is changing grocery shopping, 2020. [Online]. Available
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Market Equilibrium. 2021. [Online]. Available
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Movement along demand curve. 2021. [Online]. Available
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Movement along supply curve. 2021. [Online]. Available
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Price of high-demand food bought online in UK rises sharply. 2020. [Online]. Available
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in-uk-rises-sharply>
Rishi Sunak: VAT cut to be extended for hospitality sector, 2020. [Online]. Available
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Shift in demand curve. 2021. [Online]. Available
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Shift in market supply. 2021. [Online]. Available
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