Economics for Business: An Analysis of AMP Limited

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Economics for Business

Table of Contents
Introduction............................................................................................................................... 3
Overview of AMP limited........................................................................................................... 4
Overview of the financial services industry...............................................................................5
Market structure of the financial services industry.....................................................................6
Determination of demand..........................................................................................................7
Determination of supply.............................................................................................................8
The price elasticity of demand...................................................................................................9
Effect of the event on the financial services industry...............................................................10
Conclusion.............................................................................................................................. 11
References.............................................................................................................................. 12

Introduction
The economics is a study of production, consumption, and distribution of resources, this study
will be briefly explaining the different units of economics with the help from AMP limited
company. This study will be briefly elaborated the history and the market of AMP limited
company so that the economics of scale will be explained. The AMP limited company is
working in the financial services sector so the financial sector will be briefly explained in this
study and the market structure of financial services will be briefly explained in this study to
take an idea about how financial services market work in an economy. The demand and
supply are an important part of any company because the entire operations of a business are
dependent on demand and supply. The elasticity of demand also briefly explained in this
study to take an idea about how a small change in the price creates a huge impact on the
demand for a product. The events that create a huge impact on the industry, as well as the
company, also discussed in this study to take an idea about factors that create an effect on
the entire industry.

Overview of AMP limited
AMP Limited is an Australian based financial services company that provides different types
of financial services such as insurance, financial consult, and banking services such as an
account of saving and home loans. The headquarter of AMP limited is located in the Sydney
Australia and the AMP limited company is a top company of ASX (Australian stock exchange)
according to market capitalization. The AMP limited company was formed after the
demutualization of AMPU (Australian mutual provident society) which was formed in 1849 as
a nonprofit company that was deal in life insurance policies.
The AMP limited company consists the largest number of shareholders in Australia and New
Zealand because of the demutualization of society that leads to massive changes in the
policies of the company and shares of a company divided among the policyholders of society
so this creates a huge profit for the policyholders. The AMP limited company provides a
different kind of financial services such as financial planning, life insurance services, banking
services, and superannuation fund across Australia. The AMP limited company is the largest
retail company of Australia and the AMP limited company is also the largest company that
provides risk business across Australia and New Zealand, but these are four main areas of
operations through which AMP limited the company gets most of their revenues.
 The AMP limited company is to provide financial planning services to their clients, the
AMP limited company also provides superannuation services to the different
businesses of Australia and New Zealand. The AMP limited company is using its own
networking channel to distribute services with help from financial planner experts.
 The AMP limited company also provides different types of superannuation and
insurance services such as personal insurance, design, the fund managed by self and
general superannuation. These services also distributed through a self-made network
of financial planners.
 The AMP limited company is also providing customer solution services to financial
problems that customers face in their personal finance.
So these are some common services that are provided by the AMP limited to the citizens of
Australia and New Zealand.

Overview of the financial services industry
The financial services market of Australia is very vast and the financial services market of
Australia is considered as a central hub for the entire Pacific specifically region of Asia
Pacific. The financial services market in Australia is quite strong due to the infrastructure and
financing facilities of Australia (Martin et. al., 2017). The Australian workforce is also
contributing a significant part in the growth of financial services specifically the schemes
related to retirement saving is quite strong than any other country in the region. Australia is
considered as the best financial market because of a better workforce and growth, the
investment growth in the Australian market is quite high as compare to other countries in the
region.
Australia is considered as the largest country in the contestable funds which is valued around
A$1.3 trillion. The regulation of financial sectors is better than any other country in the region
and the financial fraud and misconduct are not hot happen occasionally. The investors always
keep faith in the Australian financial market that is the main reason for the growth in this
sector. The financial market includes some basic features such as buying of financial assets,
selling and creating assets that are must relate to financial activities. These are some basic
financial services that are included in the financial sector such as finance and leasing which is
based on the assets, fund management, superannuation management, hedge funding,
insurance services, private banking, retail banking, venture capital, payments system,
clearing, settlement, and investment banking. The above services are considered in the
financial services industry.
The Australian financial sectors are continuously immerging and provide employment to
around 450,000 peoples and also make a significant portion in the growth of the economy.
The financial services contribute around $140 billion in the overall GDP of Australia which is a
really significant amount (Cashin et. al., 2014).
The trade and business of a country are dependent on the financial strength of a company
because every business needs capital and if the financial sector of the country is strong than
they provide loan to industries which is improve the growth of industries so this entire cycle is
dependent on the financial strength of a country. Strong regulation on the financial services
industry must require keeping make proper control of the financial activities of a country
because financial fraud can create a massive burden on the entire economy of a country so
it's important that the financial sector must be properly regulated. The strength of the
Australian financial market is stable, the Australian financial market remains stable most of
the time in a year due to this the growth of sectors is also increases and if the financial market
continuously fluctuates than that creates a problem for the entire economy of a country.

Market structure of the financial services industry
The market structure is determined through the competition among companies in that
particular market or industry, the market structure makes a significant impact on the pricing
policing of companies who run their business in a particular market or industry. The market
structure is consisting of how many firms are working in the market and what kind of
competition among them. There are basically four types of markets that have different
features these are as follows.
 The first and basic market structure is a perfect competition where a firm can entry any
time and also exit any time, the perfect competition is determined through the capacity
of buying and selling of goods and services in a particular market. There are a lot of
competitors actively competing with each other in the perfect market competition where
each firm want to outrun other company and earn higher profits through sales of goods
and services.
 The second and most common market structure is a monopolistic market where the
companies are still competing with each other but the product in which they are dealing
in almost similar products so it's quite difficult to make differentiae in perfect
competition and monopolistic competition. The monopolistic structure of the market is
also consisting of a large number of buyer and sellers.
 The Third and least common market structure is a monopoly where single
organizations dominate the entire market of that industry. The monopoly market
structure is not a common structure of the market and it generally found occasionally in
the market but the monopoly market structure is always harmed consumers in the
economic sense. In the monopoly market structure consumers are always pay a high
amount to the services provided by the company because in monopoly a single firm
determines the price of products. In the monopoly structure of the market, it's quite
difficult for a company to enter in the monopoly market because of restrictions; there
are a lot of restrictions in the monopoly market structure (Baró et. al., 2015).
 The third and last structure of the market is oligopoly in which it's difficult for a
company to enter the market because of the already existing large firms which are
make hurdles for new entrant companies. In the oligopoly structure of the market, the
price of the product is determined by the company and if the prices are high than
normal prices than the customers are more interested to buy substitute goods as
compare to goods of the company.
So these are some basic types of market structure and features of these market structures
which determine the competition among companies.
These are some companies which are dominating the entire financial services industry in
Australia.
 The commonwealth bank of Australia with a market cap of 131,918,000,000
 Westpac banking corp of Australia with a market cap of 94,842,700,000
 ANZ banking group limited of Australia with a market cap of 77,062,400,000
 Insurance Australia with a market cap of 18,211,000,000

So these are some top companies of financial structure which are run the entire financial
services business in Australia. These companies are also making a significant effect on the
economy of Australia through the contribution in the GDP as well as in the trade of Australia.
Determination of demand
These are some important factors that determine the demand for a particular product in the
industry, as follows:
 Income: income of peoples always make a significant effect on the demand of a
product, if the income of peoples increases than its obvious that peoples will be
preferred more to buy and through this the demand of products also increases. If the
income of peoples decreases due to any reason than the demand of that product also
decreases because the purchasing power of peoples decreases (Beaudry et. al.,
2016). In the financial sector, the entire business of a company is dependent on the
income of peoples if the income of peoples increases than they either deposit that
money into bank o they invest that money into market so in both scenario the
companies of financial service industry get benefits. If the income of peoples
decreases than they withdraw their money from the banks and from the market which
makes an impact on the entire financial services market so the income of peoples is
really a big factor in the determination of demand.
 Preference of consumer: the preference of consumers is also a big determinant of
demand for the product in the market if the preference of consumers changes towards
the other product then the demand of the product is sharp decreases. In the financial
services industry, the preference of customers is really a big determinant of demand in
the market. If a customer wants to invest in the market but suddenly he changes his
preference keep that money into stock so this also creates a big problem for a
particular company so the preference of customers is really an important factor of
demand determination.
So these are two important factors that determine the demand for a product in the financial
services industry.

Determination of supply
These are some important factors that determine the supply of a product.
 Cost of production: the cost of production is a big factor behind the supply of a product
if the cost of production of an increase than a company can suffer from heavy loss
which is ultimate decreases the profit of the company. In the financial services industry,
the cost of production can be cost of operation such as cost related with employee or
software cost, if the employees want more salary from the company than the company
cut the cost in terms of employee's reduction to the supply of customer services
decrease in that case (Jones et. al., 2014.).
 Technology: technology is really a big factor behind the supply of demand if a company
is using old technology than the supply of product in the market decreases and if a
company is using advanced technology than the supply of a product increases. The
technology is creating a big impact on the products of financial services if a company is
using old technology that they cannot provide proper financial services to their
customers as compared to a company that is using advanced technology.
So these are some important factors that determine the supply of a product in the financial
services industry.

The price elasticity of demand
The price elasticity of demand means the change which occurs in the demand of a product
due to change in the price of a product if the price of a product increases than that makes a
significant effect on the elasticity of demand. The elasticity of demand for financial services is
more or less elastic because the price of products makes a significant effect on the demand
product of financial services (Rassenfosse and Potterie, 2012).

Effect of the event on the financial services industry
The major events that happen in the financial service industry are related to the degree and
efforts of financial advisors. The Australian regulator of corporate revel that the 90% of
financial planners cannot work in the favor of clients so it's a really big problem for the entire
financial sector because the number of clients sharply decreases due to this massive fraud
(Thimmapuram and Kim, 2013).

Conclusion
The demand and supply of a product are determined by the market forces such as both
response to the increase or decrease in the prices of the products. The extent and impact of
the response depend on the elasticity of the demand of the product, such that the lesser the
elasticity of demand, the less is the responsiveness of the product to the change in the price
and vice versa. The assignment involves understanding the impact of a real-life event on the
demand and supply of the products and services of AMP Limited and what necessary steps
the company could have taken to cope with the impact and normalize the business operations
over a period of time.

References
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