Business Economics Analysis and Strategies for Ella Bridal Report

This report analyzes the business economics of Ella Bridal, examining topics such as normal and inferior goods, opportunity cost, and the impact of taxes and discounts. It explores price elasticity of demand, supply and demand dynamics, and the advantages and disadvantages of increasing production scale. The report further investigates the implications of opening an outlet in China, methods of raising funds, and the relationship between risk and interest rates. It also delves into the characteristics of Ella Bridal's market structure, the impact of UK trends on macroeconomic indicators, demand-side policies, and the reasons for imposing trade barriers. The report uses diagrams to illustrate concepts and provides references to support its analysis.

BUSINESS ECONOMICS

TABLE OF CONTENTS
QUESTION 1...................................................................................................................................1
A. The difference between a normal goods and inferior goods, and the kind of goods Ella
dresses are...............................................................................................................................1
B. The opportunity cost to Ella Bridals of investing all profit in business............................1
C. What will be the impact of different taxes and their changes on Ella bridal.....................1
D. Impact of discount on the profit and revenue of business.................................................1
QUESTION 2...................................................................................................................................2
A. The advantage and disadvantage of increase in scale of production.................................2
B. What is price elasticity of demand with the help of diagram............................................2
C. The effect of supply and demand on Ella Bridals's business with the help of diagram.....3
QUESTION 3...................................................................................................................................4
A. The advantage and disadvantage of opening an outlet in China.......................................4
B. The methods of raising funds for Ella Bridal....................................................................4
C. The relationship between risk and interest rate.................................................................4
D. The three reasons for shift in demand...............................................................................5
E. The characteristics of Ella Bridal's market structure.........................................................5
QUESTION 4...................................................................................................................................5
A. the impact of UK trends on Macroeconomic indicator.....................................................5
B. The demand side policies used by UK government and Bank of England foe economic
downturn.................................................................................................................................5
C. The three different ways to increase money supply..........................................................6
D. The reason for imposing trade barriers by UK government.............................................6
REFERENCES................................................................................................................................7

QUESTION 1
A. The difference between a normal goods and inferior goods, and the kind of goods Ella dresses
are.
Income of a person is a basic determinant of market demands which depends on
purchasingon purchasing power of customer. If demand of a goods is increasing with increase in
incomein income of a customer, that goods is called normal goods. If demand of aof a good in
decreasing with increasing level of income, such goods are comes under the category of inferior
goods (Liebhafsky, 2014).
Dresses producedDresses produced by Ella bridal comes under the category of normal
goods. Dresses produced by Ella Bridal are exclusive and costly. So, with the increase in income
level, customer would choose to buy their bridal dress from an exclusive showroom.
B. The opportunity cost to Ella Bridals of investing all profit in business.
cost is the profit or value of an option or an opportunity which a company has to give up
in order to choose another option is called opportunity cost. It helps in decision making by
choosing one option over various other alternatives (alternatives (Myers, 2013.).
By investing all profit in a business, Ella Bridals is giving up an opportunity of expanding
the business, opening new branches in London or starting the ranges of Groom's suits which can
increase profitabilityincrease profitability of company.
C. What will be the impact of different taxes and their changes on Ella bridal.
The tax levied on the income or revenue on income of a person or business entity is
income tax. The decrease in income tax will increase the revenue of Ella Bridals as income of
customer will rise. The tax levied on profit generated by UK company or company operates in
UK are corporation tax, if the corporation tax would decrease,capitaldecrease, capital income of
a business will increase which it can be use in business operation or expansion in business. the
tax imposed on the import and export of goods and services are called custom duty tax.
Ella Bridals imports the dress material from India and Pakistan, so increase in custom
duty will increase the expenses of business which results in increasing rates of the dresses
(Piggott and Whalley, 2017).
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D. Impact of discount on the profit and revenue of business.
The UK is facing the economic crises which leads to the downturn in the economic
condition/ To keep the position in fashion market, management has decided to give 15%
discount to increase sales of the dresses. The discounting will affect revenue of business and will
affect its profitability. But discounting will attract more customers. Being an exclusive brand, the
customer who can notcannot afford the Ella Bridal dresses will be able to buy it after discount.
This will help in increasing the customer base for the company (De Mooij and Ederveen, 2014).
QUESTION 2
A. The advantage and disadvantage of increase in scale of production.
The advantage of increasing in scale of production is:
 Economies of scale will arise with increase in production of company, with
increaseCompany will face cost advantage with increasing level of output (Stuckler and
et.al., 2011).
 With increase in scale of production, purchasing of raw material will be increased, which
results in producing a variety of dresses which will attract more customers and increases
profitincreases profit of the company (Koshal, 2018).
The disadvantage of increasing scale of production:
 Increase in scale of production may results in over production. And if there is no demand
in market, having larger output will not be profitable.
 Ella bridal depends on the material imported from India and Pakistan, any changes in
prices or taxes will affect company’s profit specially when its increasing its production.
B. What is price elasticity of demand with the help of diagram.
Price elasticity shows relationship between demand and priceand price of product. It
shows the effect on changes in price on demand of a product. The inelastic price of elasticity of
demand shows that the demand of aof a product will be barely affected by the changes in
price(Explaining Price Elasticity of Demand.2018.). Ella bridal owner considers that the demand
of dresses will not be affected by a slight change in price (Loderer and et.al., 2015).
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figure 1: inelastic price elasticity of demand
C. The effect of supply and demand on Ella Bridals's business with the help of diagram.
Figure 2: demand and supply for dresses
()
(Source: Loderer, Cooney and Van Drunen, 2015)
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The fashion industry is in china is becoming global diversified and multicultural. The demand
for imported clothes are increasing, starting a new outlet in China would be profitable for Ella
Bridals. The above figure shows that demand and supply for clothes in Chinese market. In this
figure with price P1 the company is supplying quantity Q. If there is an increase in demand (D1
to D2) this encourages firms to produce more and so supply increases as well and helps the
company to make more profit (Muth, 2017).
QUESTION 3
A. The advantage and disadvantage of opening an outlet in China.
Advantage:
 It will promote the brand in Chinese's fashion market.
 There will be support and guidance from the parent outlet in London .London.
Disadvantage:
 Cost of loss will be high if product will not match with the preferences of customer.
 Establishing a new outlet can be very expensive for the parent company, as there are
different taxes and subsidiary charges.
B. The methods of raising funds for Ella Bridal
Three different ways in which Ellawhich Ella Bridal can raise funds are: Personal savings: it is a common method of raising funds by investing your reserve
capital. Bank Loans: Ella Bridals can borrow funds from the bank. It can take secured loan on a
long-term basis (Smith Jr, 2011.)
 Venture capital: The Ella bridal can opt for venture capital for raising funds by giving
equity profit to investorsto investors from the company's profit.
C. The relationship between risk and interest rate.
The risk and interest rates are directly related to each other, if risk is higher hgher, then
rate of return will also be high. When an investor purchases a bond he is actually purchasing the
company's debt. If financial condition of the company will not match the expectation of
investors, then there will be a threat of loosing the capital invested.Ifi the interest rate will
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increase there will be risk to Ella Bridal to use more money for payment of loans, which
decreases profits. Starting a new outlet will not be profitable with high rates (Zeuthen, 2018.).
D. The three reasons for shift in demand.
The three reason for the shift in demand of Ella Bridals dresses are:
 With change in income level of buyer, demand for the dresses will also change.
 Change in fashion leads to changeto change in demands of Ella Bridals dresses.
 If the price of rival dresses fluctuate the demand of product will also fluctuate (Rémuzat
and et.al., 2017).
E. The characteristics of Ella Bridal's market structure.
The Ella Bridals operates in Oligopoly market structure; its characteristics are:
 all the firm in this market makes profit.
 There can be homogeneous or differentiated products.
 There are barriers to entry and exit from this market.
QUESTION 4
A. The impact of UK trends on Macroeconomic indicator.
The macro indicators are as follow:
 Consumer Price Index: it measures the average price of consumer goods and services.
 Producer price index: it tracks the price changes in virtually all goods producing sectors.
B. The demand side policies used by UK government and Bank of England foe for economic
downturn. Fiscal Policy: By cutting tax rates and spending government can increase the demands in
market. Lower income rate will increase purchasing power of consumer. Higher
government spending will create job opportunity and provide stabilized economy.
(economy. (Demand-side policies.2018) Monetary Policy: It is most common tool for influencing economic activity. Bank of
England can cut interest rates on borrowing which leads to reduction in cost of
borrowings, encourages investments and consumer’s spending.
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 Devaluation: It helps in restoring competitiveness and increase the domestic demand. A
fall in exchange rate will make exports cheaper and import more expensive. Which leads
to increase in demand of domestic products.
C. The three different ways to increase money supply.
 Reducing Interest Rate: lower interest rate will reduce the cost of borrowing, money
supply will leadslead to increase in investment. The lower mortgage payment enables
consumerenables consumer to purchase more. Print more money: Central bank can print more money to pay the expenses and
increase money supply in market. Printing more money will leads to increase in the
inflation rate (Taguchi and Tian . 2017).
 Central bank buying government securities: If central bank will buy government
securities, people who were holding bonds have more money. Bank see liquid assets
become liquid.
D. The reason for imposing trade barriers by UK government.
The three reasons for which government should impose trade barriers are:
 Unemployment problem gets worst if imports are let into the extent that they are
destroying local industries,atindustries, at the time of recession or poor economic
condition.
 To boost up the domestic products in market itsit’s important to put barriers for export
and import market.
 Tariffs on trade provides revenues to the government.
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REFERENCES
Books and Journals
Amir, Y. and et.al., 2018. An opportunity cost approach for job assignment in a scalable
computing cluster. IEEE Transactions on parallel and distributed Systems, 11(7), pp.760-
768.
De Mooij, R. A. and Ederveen, S., 2014. Taxation and foreign direct investment: a synthesis of
empirical research. International tax and public finance. 10(6). pp.673-693.
Kahn, M. E. and Matsusaka, J. G., 2011. Demand for environmental goods: Evidence from
voting patterns on California initiatives. The Journal of Law and Economics, 40(1), pp.137-
174.
Koshal, R. K., 2018. Economies of scale. Journal of Transport Economics and Policy, pp.147-
153.
Kurzban, R. and et.al., 2013. An opportunity cost model of subjective effort and task
performance. Behavioral and Brain Sciences. 36(6). pp.661-679.
Liebhafsky, H. H., 2014 New thoughts about inferior goods. The American Economic
Review. 59(5), pp.931-934.
Loderer, C., Cooney, J. W. and Van Drunen, L .L.D., 2015. The price elasticity of demand for
common stock. The Journal of Finance. 46(2). pp.621-651.
Muth, R. F., 2014. The derived demand curve for a productive factor and the industry supply
curve. Oxford Economic Papers. 16(2). pp.221-234.
Piggott, J. and Whalley, J., 2017. UK tax policy and applied general equilibrium
analysis. Cambridge Books.
Rémuzat, C. and et.al., 2017. Supply-side and demand-side policies for biosimilars: an overview
in 10 European member states. Journal of market access & health policy. 5(1). p.1307315.
Smith Jr, C.W., 2011. Alternative methods for raising capital: Rights versus underwritten
offerings. Journal of financial economics. 5(3). pp.273-307.
Stuckler, D. and et.al., 2011. The public health effect of economic crises and alternative policy
responses in Europe: an empirical analysis. The Lancet. 374(9686). pp.315-323.
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Zeuthen, F., 2018. Problems of monopoly and economic warfare. Routledge.
Taguchi, H. and Tian, L., 2017. CAPITAL FLOWS, MONEY SUPPLY AND PROPERTY
PRICES IN CHINA. Theoretical and Practical Research in Economic Fields. 8(2 (16),
pp.91-104.
Online:
Demand-side policies. 2018. [Online] Available
through;<http://www.sanandres.esc.edu.ar/secondary/economics%20packs/
macroeconomics/page_52.htm>
Explaining Price Elasticity of Demand. 2018. [Online] Available
through;<https://www.tutor2u.net/economics/reference/price-elasticity-of-demand
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