BM533: Contemporary Business Economics - Demand, Supply, and Models

This report provides an analysis of demand and supply, using McDonald's as a case study to illustrate the concepts. It explains the laws of demand and supply, including movements along the curves and shifts in the curves due to various factors. The report further compares and contrasts emerging economic theories and models of the 21st century, such as Neoclassical Growth Theory, Marx's Social Economic system and Keynesian Economics theory, with those of the 20th century, examining their relationship to modern business practices. The report concludes by highlighting the significance of these theories in understanding the flow of money and economic growth.

BM533 Contemporary
Business Economics

INTRODUCTION
Economics is the branch of study which emphasis on production, distribution and the
consumption of products and services. It majorly concern with the interaction of the human
behaviour in their working. This is based on the different aspects of the market which includes
the supply, demand, change in demand and change in supply(Chen and et.al., 2019). McDonald's
is the chosen organisation for this respective report, It is the American company and established
in 1940 and operating in restaurant by Richard and Maurice in California. Concept of demand
and supply will be covered in this report and it also analyse the change in demand and supply on
larger level. Lastly it will examine the certain theories and models that are emerging in 21st
century an their comparison.
TASK 1
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.
Demand is defines as the desire of the consumer for purchasing the particular goods and
commodity backed with sufficient purchasing power to pay the prices for goods and services in
the large marketplace.
Law of Demand:
It is the fundamental principle of economics which states that higher prices of the goods
leads to have lower demand from the consumer of a particular goods and services. As all the
other factors remain constant, change in the prices of the commodity leads to change in the
demand of the goods and vice-versa. There is inverse relationship in the demand and the prices
of the commodity in the large market(Büyükdağ, Kaya and Kitapci, 2019). When the given
prices of the goods rises from P0 to P1 then the demand for the goods tends to decreases from
Q0 to Q1 and vice-versa. It shows the inverse relationship in the demand and the prices of any
product which is being offered by the firms in order to generate higher profits in it. In respect to
McDonald's, increasing prices of burgers impact the decreases in the demand of the goods as
more consumer will buy affordable food items which is meeting their satisfaction level.

The given graph shows the downward slopping of demand curve which is impacted due
to increase in the prices of goods and services from P3 to P2 then it reflects the downfall in the
demand of the commodity due to higher prices of the goods in the market and vice-versa.
Factors affecting demand of the specific good are as follows:
 Price of the commodity: Due to increase in the given prices of the goods leads to
decrease the overall demand of the product and reduction in the prices of the goods tends
to increase the quantity demanded in the market as buyer will love to purchase the
affordable commodities(Altavilla and et.al., 2018).
 Price of compliments goods: These are the items which are used as the conjunction of
any given products as it is directly related to the demand of the other product. As in
increase in the prices of the complementary goods tends to decrease the demand of the
given goods and vice-versa. For instance, when the prices of the breads or burger bun
rises then the demand for the burger tends to fall-down.
 Price of substitutes goods: It is defines as the goods which can replace the product and
give same level of satisfaction to the consumer. When the price of substitute goods
increases then the demand for current goods also increase as consumer will love to buy
the affordable commodities instead of expensive commodities. when the prices of the

burger king's food item rises then the demand for McDonald's food tends to rise as buyer
will more to affordable products.
 Taste and preferences of the consumer: Change in the taste and preferences of the
consumer directly impact the demand of the given good. It says that when the consumer
is liking the product it will leads to increase the overall demand in the large market as
product is meeting the taste and preferences of a large customer base. When buyer is
liking the burger then the demand for the burger tends to rise in the target market and
vice-versa.
 Change in future expectations: It is majorly related to the supply of the product in the
near future as if the consumer is expecting high demand of goods in near future so they
will buy the product right away in order to meet their requirements.
 Income of the consumer: It is related to the disposable income of the consumer as
increase in the demand of the goods reflect the high income level of the consumer so they
will move to luxury or normal goods but when the income of the consumer is low then
they will move to inferior goods as other factors remain constant(Ahmad, Abdullah
2021).
Change in demand curve:
It is phenomena which shows the change in the entire curve due to change in the certain
factors that includes change in income, change in prices of substitution and complementary
goods. In this, the demand curve will shift to right or left.

As per this graph, demand curve means that demand curve will change will shift to the
right or left in relation to increase or decrease in the quantity demand of the given goods. As
when the demand curve shift to the right as it shows the increase in the demand of goods and
services but shift to the left of the demand curve leads to downfall in the demand of the goods
and services.
1.2 Explain the law of supply, movement along with the supply curve and also explain change in
supply curve with suitable diagram.
Supply is refers to the total amount which is available for the particular goods for their
prospective customers. As it is the fundamental concept which is related to particular prises in
which the company is selling goods and services in order to increase or decrease their
supply(Taghizadeh-Yazdi, Farrokhi and Mohammadi-Balani, 2020).
Law of supply:
It is stated that there is positive relationship in the prices and the supply of the given
goods in the market as increase in the given prices of the products leads to rise the demand of the
good as well. On other hand, when the prices of the goods tends to reduce then the supply of the
commodity also decreases. In context to McDonald's, when the prices of the burgers increases
they it leads to rise the overall supply of such food items.

The given graph shows that supply curve is sloping upwards and having positive
relationship in the supply and the rices of the goods. When the prices of the goods tends to
increase from P3 to P2 then the supply of the given goods also rise from Q3 To Q2 as
manufacture will offer more goods.
Factors affecting supply of the specific good are as follows:
 Costs of production: when the firms is offering any level of the goods which can impact
the overall production capacity of the company due to insufficient raw material or lower
wages given to the workers. For instance, when the prices of raw material tends to rise
then the supply for the burger from McDonald's will downfall in the large
market(Shapiro, 2018).
 Technology: It is defines as the advancement or the innovation by which company can
majorly reduce their operating cost. It is the main concept which describe the
advancement of the firm in order to generate higher level of profits in the market which
can meet the high demand of the prospective customers. Innovation or advancement leads
to increase the supply of the goods.
 Government Subsidies: It refers to the change in the government subsidies change the
supply of the given goods. When there in rise in the subsidies will decrease the prices of
the commodities and on other hand, when the prices of the subsidies increase then the
overall f the goods tends to rise in the large market.

 Weather: It is the aspects that is having direct impact on the overall sale of the product
in the market. When the weather is favourable for the certain goods that is being offered
by the company and meeting the demand of the large market so it will impact positively
for the profitability of the company. MacDonald's is offering food item which comes
under agriculture sector and it affects the overall functionality of the business due to
change in the weather.
 More firms: As there is large number of suppliers who are offering differentiate products
which also impact the overall supply of the goods in the market and in context to
McDonald's, when the prices of the goods decreases then the supply for the brger also
reduces in the large market.
Change in Supply Curve:
Change in the supply is the phenomena which shows the shift in the supply curve due to
have certain change in the factors that includes factor of product, technology (Scheutz, 2017).
There is rise in the supply of the commodities will make shift right of the supply curve in the
large market and it move from S0 to S1. On other hand,when the supply of commodity decreases
then the curve will shift from S0 to S2.

As per the graph, it is shown that price of the commodity rises then the entire supply
curve will shift to the right from S0 to S1 and when the given prices of the commodity decreases
then the supply of the particular goods tends to fall down and the supply curve will shift from S0
to S2.
TASK 2
Compare & contrast emerging theories & models in 21st century economics with those of the 20th
century and explain the relationship between both modern business practices.
there are certain theories which are emerging in 21 century and having their own
significance in the growth of the UK as it defines the flow of money within the market as well
that are explained below:
Neoclassical Growth Theory
This is the economic concept which analyse the growth rate of economic that is divided in the
three aspect that is capital technology and the labour. National bureau of economic research have
launched this certain theory with the aim of having long term economic development in the year
of 1956.
It is the concept which set that short-term equilibrium helps in in meeting the various
amount of capital labour required in the production process. This specific concept has shown the
growth of capital with the economy and how the capital is important for the overall development
of the nation(Reisman, 2018). Over the relation of labour and capital can be analysed by
evaluating the overall output of the the organisation with the help of using innovative and
advanced technology in it.
Marx's Social Economic system
The economist and the author who have their own theories related to the capitalism and
communism. Marx was musically influenced and changed by the certain political economics
such as David Richardo and their own brand related to the economics. Marx also explain that the
overall society is integrated the two main classes that are are capitalist in which the
understanding is inactivated as there are economic and social system that are are important in the
modern and advance economy. Capitalist are the entrepreneur of the owners that manage the
overall production process and also concern for different means of production that includes the

material labour cost overheads that are incorporated for generating the overall revenue and
profitability of an organisation.
Keynesian Economics theory
According to this theory there are certain assumptions that wages and the prices are fixed
and further having three principle which are are given and also explain that how the overall
economy will work in order to maintain the flow of money in the country. First aspect is related
to the aggregate demand which can affect the overall all decisions related to the economy and
sometimes these measured that decision can leads to reduced the influenced of private sector and
can be adverbs to the the output it get in macroeconomics such as due to higher recession
consumer leads to purchase less. Second aspect is price and bases that shows the slight change in
the demand and supply of product and services by due to change in the prices of certain
commodities. The last factor is aggregate demand that can be anticipated or
inanticipated(Opeskin, 2021). This is the aspect which affect the overall prices and the
employment in the economy in the short run.
As per the theory it is related to the aggregate demand which influence the overall
economic decisions in the public and private industry on other side new classical theory is
depend on the three aspect that is capital labour and technology so the final consideration of this
theory is to have the advancement bi making best use of land labour and capital. This helps in
maintaining the economic growth and development within the nation.
CONCLUSION
It is analysed from the above report that supply and demand are the two wheels of
economic which contribute in the economic development of the nation. There are various factors
which influence the demand and leads to change in demand of goods and services which are
change in price of substitute complementary goods taste and preferences of buyer change in
income and the future expectation. As per the law of demand there is a inverse relationship
between the prices and the quantity. There are various factors which affect the overall supply in
the market and that our technology weather number of firms and cost of production. As per the
law of supply says that there is positive relationship between the prices and the quantity supplied
in the market. Marx's Social Economic system, Keynesian Economics theory and neoclassical
theory are the certain concept which is given by the famous economist and also contribute for the
development and the welfare of the economy.

REFERENCES
Books and Journals
Opeskin, B., 2021. Rationing Justice: Tempering Demand for Courts in the Managerialist State.
University of New South Wales Law Journal, Forthcoming.
Reisman, D., 2018. Demand Management. In James Edward Meade (pp. 147-165). Palgrave
Macmillan, Cham.
Scheutz, M., 2017. Demand and charitable supply: Poverty and poor relief in Austria in the 18th
and 19th centuries. In Health Care and Poor Relief in 18th and 19th Century Southern
Europe (pp. 52-95). Routledge.
Shapiro, D.B., 2018. Payment to egg donors is the best way to ensure supply meets demand. Best
Practice & Research Clinical Obstetrics & Gynaecology, 53, pp.73-84.
Taghizadeh-Yazdi, M., Farrokhi, Z. and Mohammadi-Balani, A., 2020. An integrated inventory
model for multi-echelon supply chains with deteriorating items: a price-dependent
demand approach. Journal of Industrial and Production Engineering, 37(2-3), pp.87-96
Ahmad, A., Abdullah 2021. Aquaculture industry: Supply and demand, best practices, effluent
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Altavilla, C. and et.al., 2018. Credit supply and demand in unconventional times. Journal of
Money, Credit and Banking.
Büyükdağ, N., Kaya, A. and Kitapci, O., 2019. The Effect of Marketing Expenditures on
Business Performance: Time Series Analysis on Causality. Journal of Applied
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Chen, F. and et.al., 2019. Evaluating ecosystem services supply and demand dynamics and
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