Analyzing Supply, Costs, and Perfect Competition in UK Markets

This report examines the factors influencing the supply of goods and services, focusing on the impact of input costs and production decisions within the context of the UK economy. It elucidates the relationship between price and supply, as described by the law of supply, and discusses how costs associated with raw materials, labor, and capital affect production. The report further analyzes perfect competition markets, detailing how the dynamics of numerous buyers and sellers of homogeneous products influence supply. It explores both short-run and long-run production decisions within a perfectly competitive market, using the UK manufacturing industry as an example to illustrate these concepts and their impact on the overall economy. This document is available on Desklib, a platform offering a range of study tools and resources for students.

Economics for
Business

Table of Content
INTRODUCTION...........................................................................................................................4
TASK...............................................................................................................................................4
Why inputs and costs impact the supply of goods and services in terms of production
decisions......................................................................................................................................4
Explain the perfect competition market and how it impact the supply of goods and services by
applying in any UK based industry.............................................................................................7
CONCLUSION..............................................................................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Economics is a field of social science that studies scarcity of resources and helps in
allocation of these scarce resources to optimal use. These resources are used to produce an item
or service for accomplishment of the predetermined goals. Supply is the amount of a resource
that the firms/ producers are willing to provide in the market at a determined price(Mayer, 2018).
This report talks about how the factors that affect the supply of the raw materials have an impact
on production and the price of a commodity. This will be done taking in account the UK
economy. The effect of the production decision on the supply of the service and goods also
outlined by taking an instance of the economic condition of UK. The concept of perfect
competition and highly competitive markets will also be discussed in this report in regards to
their power on the supply of the raw materials.
TASK
Why inputs and costs impact the supply of goods and services in terms of production decisions.
Supply: It is the willingness of the producers to produce goods and services and provide
them in the market. It is the quantity of commodities that are available to the consumers. The
supply will depend on the demand of the commodity in the marketplace and are then sold in a
competitive market place. The concepts of demand and supply forms the fundamentals of the
economics. The price and supply of a commodity has a positive relation between them. This says
that if the price of a commodity increases, the supply of the same would also increase, and if the
price decreases, the supply will also decrease in response. This forms the basis of law of supply
which will be discussed further. The cost of the goods and the price of the inputs such as raw
materials, labour etc., contributes to the change in the price of the goods sold. The supply means
how much the of the items a businessman can supply to its buyer and at what cost.
Law of supply states that the price and quantity of good are directly related to each other,
while all other factor of production are kept constant. It shows that the behaviour of the producer
changes with the change in the price of items or services with the change in time. The
diagrammatic representation of this is:

The above diagram shows the direct relationship between quantity supplied and the price
as explained above. The graph is upward sloping due to the positive relation between price and
supply of a commodity.
Inputs: Inputs are the factor of production or raw materials. These are the factors required to
produce a commodity. They are known as factors of production. These are divided into:
 Land: It is a natural resource used to produce goods and services. This factor not just
include land but all the natural resources that makes up the raw materials for a business.
 Labour: It includes the human efforts like mental and physical activity which are done to
produce a commodity.
 Capital: It is the amount of money or resources used to produce the commodity. It can
include, the factory cost, machinery, equipment and commercial buildings, etc..
 Entrepreneur: This is the person who organises and brings the other three factors of
production at a same place to derive the benefits and produce a commodity. It refers to
the ability to bear the uncertain risk which can occur while supplying the items or
services.
Cost: The overall expenditure incurred on manufacturing particular goods and services
which includes raw material, labour charge, manufacturing expenses and other overheads.
Additionally Production cost is the decision that is taken by the owner of an organisation in

order to contribute in some sort of benefits for the profit and growth by meeting customer
demand.
Factor which are impacting the production decisions:
 Capital: The amount of money which is being used by the company in order to produce
the goods and services and it includes machinery, equipments, factory cost and
commercial buildings etc. With the passage of time, supply of capital inclines so all the
related decision of supply must take appropriately. Infrastructure required for the business
is being controlled by the government so delay in the decisions or the mismanagement
from the superiorities can negatively impact the economy of UK.
 Raw material: these aspects must be done on time as no delay in the certain resources
can be handled. All the material to be allotted when required. It will suffer the whole
economy and decrease the national income of the nation. For instance, UK has suffered a
lot during 2020 and effected the overall supply of raw material which bring down the
exports of the country due to to they have faced huge looses. It is the aspects which
hurdle the overall consideration of the economy.
 Labour charges: All the decision related to the input which is going to use in the supply
of the resources must be taken on time which increase the overall efficiency of the
employees that is ultimately contribute in the Gross domestic product of the UK
economy. As it shows the total production cost of the economy. It also helps in enhancing
the overall living standard of the individual by increasing the wages and minimising the
overall cost of the commodity or services. For instance, Increasing prices of products in
the manufacturing sector will impact the overall GDP of the UK and this has shown that
UK economy has been impacted in 2010 during the recession due to shortage of the
goods.
 Quantity of production: Employees must have the appropriate decisions for fulfilling
the exact quantity to the supplied and this have the direct impact on the production
decisions. When the produced unit of the commodity is not fulfilling the supply then it
results in taking the decisions regarding the supply of respective goods and services in
inappropriate. For instance, when there is the higher demand of goods and services but
the supply is not meeting the demand of the respective product then the overall demand
tends to rise but the production is still same. This affects the market conditions and

results in in the shortage of goods in the large market. Thus, the impact of market is the
demand n the country which impact the economy of UK.
 Entrepreneurship: It is based on the two aspects that are opportunities and the
willingness that how the company execute their functions and run the overall
functionality of the business. In this context, UK has led down the change in the various
aspects such as change in government. There was a sort of distortion in the nation and
there is no alliances with the government which leads to decrease the overall economic
economic conditions of the UK. Because due to decision related to the production were
taken but people do not having the satisfaction and the trade union were formed which
impact the overall supply of the commodity and services.
Explain the perfect competition market and how it impact the supply of goods and services by
applying in any UK based industry.
Perfect competition is the type of market in which homogeneous product are sell and
there are large number of buyer and seller which is also defined as the formative structure at the
marketplace that shows the cost-efficient arrangement of certain economical sources. It shows
the serving partners and the natural standardization in the comparison of various market
structure. It is the formal assessment which sows the higher competitor in the market at its peak.
All the evaluation based upon the homogeneous effects of the consumer. Basically, It can be
known as hypothetical conditioning in which seller is selling their product on the basis of market
rate.
According to Prof. Marshall that the extreme perfection in the external place is only
stronger when they are inclining of having the similar product that are being sold for the specific
period of time.
Supply curve in the Perfect Competition:
A perfect competition supply curve's curve is the portioning of marginal cost graph which
is lying over the minimum of the changeable pricing of mean. It have the inclusion of the
marginal revenue, total revenue and the cost that is being used to analysing the increment in the
incomes. Basic attributes for the business in order to have profit-maximise for any business that
are total and marginal revenue. These aspects shows the various beneficial areas that are given
below:
Manufacturing decision-making in Short-run

It is the time duration in which at least one factor of producing is fixed while the other is
variability. Additionally, there are three major aspects which affects the short-run decisions such
as revenue, costing and the variable cost and shutdown of the any activity. There is huge
competitive marketplace in short-run supply curve is he marginal costing curve-line in or above
the shutdown point. It is the enlisting the economic level of manufacturing sector.
This curve is showing the short term supply curve showing the perfect competitors ans it
is seen from the above curve that the line which is staying at or above the shutting dot. So it is
giving the profitable scenario. When the company is having the graph line below the particular
point so it is not related as they are not supposed to aligned in that range.
Production decision related to long run
It is related to the period of time in which all the manufacturing & costing department
that are variable in nature. This category shows the calculation of supply in context to the series
of the existing market's short run. This is related to the connection of the various points of
invariants that return in the market. It is having three periods of productivity that are given
below:
 Increasing return to scale.
 Constant scaling-return.
 Decreasing returns to scaling.

The above diagram shows the manufacturing company which are having affected due to
the change in the firm which are having supernormal benefits. It is the condition of having the
least proficiency in the long run.
Manufacturing industry of UK
The commercial organisation which are engaging in producing the products and services
in the market of United Kingdom. It is very diverse which comprises of various product range in
the different type of industries like wise fast moving consumer goods (FMCG) and the furniture,
technological goods etc. It shows the factors of production and value which can generate the
higher income for the UK(Bolton and et. al., 2018).Manufacturing industry of UK is the third
largest economy after the retail and service industry.
Impact of the perfect competition market in supply:
 Number of sellers: There are different type of process that are being sold in the target
market that means same item is being manufactures. It also shows that there are large
number of manufacturer in the perfect competition market an there is no barrier in the
entry or the exit of the firm that also make difficult for the supplier to analyse the idea of
the quantity that they have to made and also implied in the economy of the UK.

 Prices: It is the type of market in which is the main factor of the business and also have
the major consideration to the business as price affects the overall supply of the
commodity. Manufacturing industry has the basic expenses that needs to be meet on
daily basis by also helps them to meet the huge competition in the market. For example,
IKEA is the manufacturing company which is dealing in assembling furniture and selling
them in the large market. In this, buyer also keep on purchasing the goods and services as
long it is meeting the satisfaction of the consumer. Till then, supplier has come to the
point of market clearing prices that means when the price of the product is equal to the
supply of the commodity.
 Maximize profit: The main goal of the competitive market is to increase their overall
profits by increasing the overall supply of the company and the higher marketplace by
valuing their resources in lower prices and this also consider the overall supply curve of
the manufacturing sector.
 Competition: There are large number of manufacturers in the market and the competitors
in the nation increases day by day and this is being influenced by the number of seller
and the buyers. The overall price of the goods which is being offered by the supplier to
their retailers is low and goods is being of superior quality. This will affect the overall
supply of the company in the target market. In this context, competitors tend to lower
down their prices with the good customer experience. This also influence the overall
economic condition of the country due to the large number of seller and seller in the long-
run market.
CONCLUSION
This is concluded from the above report that supply of goods and services plays an
significant role in ensuring the flow of goods in the market. It is also necessary to make the best
use of resources in best appropriate manner, In UK economy, there are factors such as labour,
capital and land which influence the overall flow in the economy. These inputs are the important
aspects of any economy because without these factors, put a direct effect on the production of the
items. If these commodities are not manufactured & supplied at the right time, this also make
change in the domestic income and the economy of United Kingdom. Lastly, perfect competition
market comprises of large number of buyer and seller giving huge competition to the other firms
and they are meeting their rivals by having uniqueness and the right pricing policy in the market.

REFERENCES
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