BM533 Contemporary Business Economics: Demand, Supply & Theories

This report provides a comprehensive analysis of key concepts in contemporary business economics, focusing on demand and supply dynamics and comparing emerging economic theories of the 21st century with those of the 20th century. Task 1 explains the law of demand, including moveme...Read More

CONTEMPORARY
BUSINESS
ECONOMICS

Contents
CONTEMPORARY BUSINESS ECONOMICS............................................................................1
INTRODUCTION:..........................................................................................................................3
TASK 1:...........................................................................................................................................3
1.1 Explain the law of demand, movement along with the demand curve and change in
the demand curve with the help of appropriate diagram......................................................3
1.2 Explain the law of supply, movement along with the supply curve and also explain
change in supply curve with suitable diagram.......................................................................6
TASK 2............................................................................................................................................9
Compare & contrast emerging theories & models in 21st century contemporary
economics with those of the 20th century and connect then with certain business
practices.....................................................................................................................................9
CONCLUSION:.............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION:
Economics refers the analysis of all the resources which are available and also analyse their
values in the operating activities which includes the manufacture, circulation, and the ingesting
of all the commodities which are being formed. The subject basically focuses on the interactions
and the behaviour of many different economists with addition of their working values.
Economics can further be divided into two categories of microeconomics which basically deals
with the smaller concepts of the economy with the mind-set of an individual and a household and
the second is macroeconomics which is a broader concept which is the study of an economy as a
whole. Demand and supply however, considered as the two main aspects of the subject which
help any business to run in the large segment. For this report however, McDonald has been taken
into consideration which is an American fast food company which was founded in the year of
1940 and was founded by Richard and Maurice. It’s headquarter is in United Kingdom
(AGAPITO, 2022). Later in this report, the theories which are developing in 21st century
economics have also been discussed.
TASK 1:
1.1 Explain the law of demand and the movement along with the demand curve and also
the change in the demand curve with the help of appropriate figure.
In the subject of economics, demand plays a very important role and refers to the want of any
individual for buying a particular good or service but at the same time he should have the
capacity and willingness to pay in return of that good or service.
LAW OF DEMAND:
This law basically says that there is a negative connection between the prices of the goods and
the demand it at that particular price keeping all other influences constant. So when the pricing
of the goods goes high from say p0 to p1, the demand for that price of that good will decrease
because of this law. The goods in the market are however negatively related to the goods and
services which show better reflection in the marketplace. In context with McDonald, when the
prices of their food increases, the demand for their food decreases as people will shift to any
other cheap alternatives like that of burger king (Bertazzini, 2022).

From the respective figure, the curve is inclined in the downward direction because of the
negative connection among the pricing of the goods and the amount needed for it.
Increase in the prices from p3 to p2 will tend to decrease the quantity demanded form q2
to q1 because of the high prices of the commodities in the market place.
FACTORS THAT AFFECTS DEMAND:
 PRICE OF THE COMMODITY: A high amount in the price of the
commodities in the marketplace inclines to decrease the demand for certain
commodities. On the other hand, when the pricing of these goods are reduced then
the demand for burger of McDonald’s is going to increase as now people hold the
purchasing power for that burger.
 PRICE OF SUBSTITUTE GOODS: all goods have their substitutes in the
market place which also gives the same amount of satisfaction as the primary
goods available in the market. Hence, when the prices of any other food
corporation say burger kind decreased, people will tend to buy more of burger
king as it is comparatively very cheap and gives the same amount of satisfaction.
 PRICE OF COMPLIMENTARY GOODS: these are the goods which are
involved in the main production of the primary goods. So when the prices of these
raw material increases, the overall cost of production also increases and hence the
price of the goods increases. It shows a negative relationship with the pricing and
the demand of the goods (Gebbels, 2022). Hence if the prices of sauce or

mayonnaises increase, the prices of McDonald burger will also increase as both
things compliments each other.
 TASTE AND PREFERENCES OF CONSUMERS: when the consumer likes
any product and is able and willing to pay for that, which is termed as the
preference of consumers for that product above any other product. In context to
McDonalds, if the consumer is picking its burger instead of any other corporation,
then the demand for it will tend to increase.
 INCOME OF THE CUSTOMER: the demand and the income of the consumer
is straight related to each other. As the income of the consumer increasing, the
purchasing power of the consumer for that burger of McDonalds also increases.
Hence, the demand for McDonald also increases in the market place.
 CHANGE IN FUTURE OUTLOOKS: This factor is connected to the supply of
commodities available in near future. If the prices are tending to increase in the
future, people will tend to buy more now and hence the demand for product
(Gilbert, 2022).
CHANGE IN DEMAND CURVE:
Change is basically refers as the modification in the demand curve due to the change in the
influences which affects the demand in many ways and which has been discussed above. Due to
all the factors discussed above the change in the demand curve will be a shift, whether to the
right direction or to the left direction.

From the overhead figure, it can be seen that the high increased demand, the curve will
eventually change to the right side of the curve which is from d0 to d2 and in
circumstance of the decrease in the request demand of the commodities or services, there
will be a change to the right side of the demand curve which is from d0 to d1.
1.2 Explain the law of supply and the movement along with the supply curve and also
explain change in supply curve with suitable figure.
It is the second important thought in the subject of economics. It can be defined as the
accessibility of the commodities and facilities in the market in return of the consumer’s demand
for it.
LAW OF SUPPLY:
This law basically demonstrations the positive connection of the pricing of the commodities and
facilities available and the amount supplied for that pricing level in the market places keeping in
mind that all the other factors that affect the supply remains constant. With the following
diagram and in context with McDonalds, when the prices of their food increase, the demand for
their food say the burger also increases automatically (Huang and et. Al., 2022). Same goes
when the pricing goes down, the quantity supplied is also less because people now think of it as
of poor quality.

From the following diagram, the supply curve shown is showing upward sloping because
of the positive relation between the quantity supplied and the price of goods and services.
When the pricing go low from p2 to p3, then simultaneously the supply for the
commodity also go low from q2 to q1.
FACTORS AFFECTING SUPPLY:
 COST OF PRODUCTION: this can be defined as the cost of the whole process
while making the goods at the time of production. It is straight connected to the
supply of the commodity. When the pricing of the raw commodities increase due
to many reasons, the overall pricing of the commodity increases which will result
in the less demand for that product because of the high price.
 GOVERNMENT SUBSIDIES: these subsidies play a very important role in
deciding the supply of the commodity. These give certain benefits to the supplier
or the company and also have some major impacts on the overall functioning of
the company (Li, 2022). A decrease in the pricing of subsidies will make the
overall demand increase in the market place.
 TECHNOLOGY: When any business uses the advanced and modern technology
for the process of production of goods and service, the cost of production however
decreases. Main purpose to choose advanced technology is to decrease the cost of
production and to have a better approach than its competitors. This will increase

the price of product which increases the demand of it in the market which
eventually increases the supply of the commodities.
 OBJECTIVE OF THE FIRMS: there is much kind of firms in the market and
they all have different motives for running their businesses. Some of them are
non-profits organisations and most of them have the goal of profit maximisations.
The supply for the firms of profit maximisation will be more as compared to any
others.
 WEATHER: it is also considered as the main factor of supply of goods. Like in
the agriculture sector, there is specific impact of the weather for the production of
McDonalds. It also has an impact on the overall functioning of the business
structure (Moeckli, 2022).
 MORE FIRMS: it brings out the competition in the market. Firms are basically
fighting to produce best quality of products and to consumers to choose them
upon any other firm. In context with McDonald’s however, they will tend to fall
in the supply of food due of the huge amount of competitive firms previously
existing in the place (Sin and et. Al., 2022).
CHANGE IN THE SUPPLY CURVE:
Any change in the curves only to either right or to the left side of the curves. The change is due
to all the factors which tend to affect the supply of goods and services in any way. Say when the
supply of burger goes high or decreases, the demand for that decreases in the market place. Rise
in the quantity which is supplied results in a right changes from s0 to s1, whereas the decrease in
the quantity which is supplied results in the left shift to the curve from s0 to s2.

The following figure shows the shift in the supply curve due to all the factors which have been
discussed above and which affect the supply curve in many ways.
TASK 2
Compare & contrast the emerging theories and models which are in the 21st century
contemporary economics with those of the 20th century and connect then with certain
business practices.
many different theories given by numerous different and great economists that are being
analysed and help to know the growth rates and at the same time to know the combination for
some certain factors which are being described as follows:
NEO CLASSICAL GROWTH THEORY:
In this theory, it has been describes as for analysing the growth rate for any economy with
respect to other factors which includes the capital, technology and the labour. Trevor and Robert
Solow have the capability of introducing such economic theories which helps in the long run
development of the economies and this is stated according to the national bureau of economic
research in 1956 (Naudé, 2022).
This theory basically explains the short term equilibrium which also helps in getting the effective
amount of impact when there is a change in the economic surroundings or environment and in
addition to this, there is no major development, if the organisation fails to introduce modern and
advanced technology which helps in the advancement in the production level. This economic
theory however is very different from that of long term equilibrium which basically does not
require such kind of factors. This also suggests that capital is also important in the economic
development of the company. And also in addition to this, the capital and the labour’s inter
relation helps to decide the amount of output that the firm will produce because of the
advancement in the technology and can also analyse the productivity and strategies to adopt to
increase the production.
MARX’S SOCIAL ECONOMIC SYSTEM THEORY:

Karl Marx had introduced many theories of his time and most of them were related to capitalism
and communism. He was the person who was very much inspired by many economists. One of
them was political economist David Ricardo and his theory of own brand economics (O’Connor,
2022). The thought of Marx was that to have a civilization with is a mixture of double key
mechanisms which includes the capitalism and communists & they both understand the social
and the economic system of the economy. This can also be valid in today’s time.
Capitalist can be defined as the people who are the owners of the business they run and who also
manages the process of production of all the goods and services they produce and also have the
responsibility of materials like raw materials, tolls and factories which give the end results of the
profit maximisations.
KEYNESIAN ECONOMIC THEORY:
In this theory, Keynesian focused on the two factors which affect the economy in many ways
which are the prices and the wages of labour workers. Theses also have some principles which
they have to follow which helps to see how the whole economy works and also helps to analyse
the aggregate demand which can change many economic decisions taken on the previous basis.
Sometimes all the decisions are taken by the private sector r maybe the public sector which also
have major impact on the macroeconomics factors. The consumer spending is however being
reduced at the time of high recession in the economy. The more the short sun, the more will be
an effect on the employment and the prices of them (Pan and et. Al., 2022). Prices and the wages
only react in response to when there is a modification in the supply of the certain commodities &
facilities in the market place. Lastly, there is the aggregate demand which also helps to see
whether the demand is predictable to not.
In relation with the modern theory, the aggregate demand is mainly get affected by the various
economic decisions in both public and the private sectors. However, in the neo classical theory,
the major focus are on the three factors which affect the economy which includes the wealth,
working labour and the equipment & the last step is to make the philosophy and all the additional
factors to get an progression and at the same time the economic development (Żemła, 2022).

CONCLUSION:
In this respective file, it has been determined that the demand can be defined as the desire of any
individual for buying a particular good or service but at the same time he should have the
capacity and willingness to pay in return of that good or service. Law of demand has also been
discussed along with the factors that affect the demand and also the movement and shift in the
demand curve has also been discussed. In addition to this supply which can be defined as the as
the availability of the goods and services in the market in return of the consumer’s demand for it.
Law of supply has also been discussed along with the factors that affect the supply of products
and also the movement and shift in the supply curve has also been discussed. Lastly the
developing philosophies and the models in 21st century modern economics with the 20th century
have likewise been discussed in this respective file.

REFERENCES
Books and Journals
AGAPITO, D., 2022. Senses. In Encyclopedia of Tourism Management and Marketing. Edward
Elgar Publishing.
Bertazzini, M.C., 2022. The long-term impact of Italian colonial roads in the Horn of Africa,
1935–2015. Journal of Economic Geography, 22(1), pp.181-214.
Gebbels, M., 2022. Personology. In Encyclopedia of Tourism Management and Marketing (pp.
1-3). Edward Elgar Publishing.
Gilbert, J., 2022. Nomads. In Elgar Encyclopedia of Human Rights. Edward Elgar Publishing
Limited.
Huang and et. Al., 2022. Solo Travellers. In Encyclopedia of Tourism Management and
Marketing (pp. 1-3). Edward Elgar Publishing.
Li, L., 2022. Realist Tourism Experience. In Encyclopedia of Tourism Management and
Marketing (pp. 1-3). Edward Elgar Publishing.
Moeckli, D., 2022. Racial and Ethnic Profiling. In Elgar Encyclopedia of Human Rights. Edward
Elgar Publishing Limited.
Naudé, P., 2022. Colonization: Who Is in the Center and Whose Knowledge Counts?.
In Contemporary Management Education (pp. 51-68). Springer, Cham.
O’Connor, P., 2022. Online Travel Agency (OTA). In Encyclopedia of Tourism Management
and Marketing (pp. 1-3). Edward Elgar Publishing.
Pan and et. Al., 2022. Digital economy: An innovation driver for total factor
productivity. Journal of Business Research, 139, pp.303-311.
Sin and et. Al., 2022. Recentering Tourism Geographies in the ‘Asian Century’. Routledge.
Vakulabharanam, V., 2022. South Asian Economies in Two Imperialist Regimes Between 1950
and 2020. The Oxford Handbook of Economic Imperialism, p.411.
Żemła, M., 2022. Inter-destination Cooperation. In Encyclopedia of Tourism Management and
Marketing (pp. 1-5). Edward Elgar Publishing.
(AGAPITO, 2022) (Bertazzini, 2022) (Gebbels, 2022) (Gilbert, 2022) (Huang and et. Al., 2022)
(Li, 2022) (Moeckli, 2022) (Naudé, 2022) (O’Connor, 2022) (Pan and et. Al., 2022) (Sin and et.
Al., 2022) (Żemła, 2022)