Contemporary Business Economics: Demand, Supply and Economic Theories

This report delves into contemporary business economics, examining the laws of demand and supply within the retail sector, using Boots UK Limited as a case study. It analyzes factors that influence demand, such as price, consumer income, related goods, expectations, and tastes, and how these elements impact the demand curve. The report also explores the law of supply, considering factors like input costs, technology, taxes, and the number of suppliers that affect supply curve shifts. Furthermore, it evaluates the evolution of economic theories from the 20th to the 21st century, highlighting changes in business practices and economic measurements. The analysis provides a comprehensive understanding of market dynamics and strategic considerations for businesses in the modern economic landscape.

Contemporary Business Economics

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Determination of Demand Law with factors that implies movement and shift in demand
curve in retailing business...........................................................................................................1
1.2 Demonstration of Supply Law including the factors that create movement and shift in
supply curve of retail sector.........................................................................................................5
TASK 2............................................................................................................................................9
Evaluation of way models and concept of economic theories has been changed in 21st century
from 20th ones..............................................................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
With declination of persistent economic theory like Keynesian, give rise to new influential
theory. It includes concept of contemporary economics, that focuses on internationalisation of
business, in terms of finance, trade and investment (Sergi and et. al., 2019). A study is made to
evaluate demand and supply laws for evaluating factors, that fluctuate market of retail sector. For
this purpose, Boots UK Limited is chosen, that deals in retailing of health and beauty products at
global level. Furthermore, a demonstration is also given on way concepts and models of
economic theories change from 20th to 21st century.
TASK 1
1.1 Determination of Demand Law with factors that implies movement and shift in demand
curve in retailing business
To sustain position of a brand in a certain market, it becomes highly essential for firm to
prevent its business from declination of sales. For this purpose, a number of economic concepts
can be applied such as demand and supply law, to respond quickly towards current trend of
marketplace, as well as offer products according to demand (Aiginger and Rodrik, 2020). In
context with retailing sector, as mostly firms produce homogenous type of goods and services at
marketplace. Therefore, to gain attention and loyalty of customers, retailers must concern on
different factors of market, that affect demand of their products, such as income distribution,
presence of substitute or alternative goods, future expectations etc. According to law of demand,
price and volume of goods have inverse relations with each other (Popkova, Ragulina and
Bogoviz, 2019). If a product is offered on affordable or low price, then demand of same is highly
increased and vice versa. Apart from price, other factors like change in fashion, trends and more,
also creates movement and shift in demand curve, as demonstrated by below figure –
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As per this figure, movement shows decrease or increase in quantity of products with
change in price along the curve. While shift in curve shows shift of curve either in right or left
side (Kahn, 2019). So, concerning on key difference and importance of both concepts, firms that
deal in retail sector make strategies, to enhance sales effectively, with higher satisfaction of
customers. Boots Limited is one of the largest retailer of UK, which has expanded its business at
global level more quickly than others. It has currently more than 2500 stores that are range from
health & beauty shops to local pharmacies, where most of them located within shopping centres
and high streets. So, this would help easily in getting high attention of targeted audience (both
young and adults, especially women) to generate high revenue (Hofmann and Rutschmann,
2018). Along with this, to attract and gain satisfaction of customers, Boots also offers loyalty
card as a market strategy, which includes points, rewards, club card and more. In this regard,
consumers having its card, receive a number of benefits on every shopping, with discounted
offers. But as it deals in retail sector, therefore, to protect business from decline of sales,
maintain inventories and earn loyalty of customers, it is essential to concern on each and every
factor, that impacts on demand of its products as given below –
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 Price of goods or services: This factor as per demand law highly impacts on demanded
retail products. As Boots Limited offers high quality of health and beauty products,
therefore, customers are always awaited for getting same on attractive discounts (Coe,
Kelly and Yeung, 2019). In this regard, before making changes in price, its management
evaluate impact on same on demanded quantity. This would reflect by given figure about
way increase or decrease in price factor, shift demand curve either on left or right side –
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 Consumers Income– It is another crucial factor which instead of shift in demand curve,
moves volume of quantity either upper or lower side. Since present firm offers wide
range of cosmetic and health products, so, people with high income seeks to purchase
same, for maintaining well-being (Gan, Pujawan and Widodo, 2017). Along with this,
mostly its shops are located in high streets where people belongs to upper level of
income. So, this would also aid Boots Limited to enhance its sales, by offering high
quality of its commodities. Presence of shops in such a market, instead of shift demand,
make movements in demand curve, as shown below –
 Price of related goods and services: This factor also affect demand of a particular
product, where offering related goods or service on discounted price helps in increasing
demand of others (Badgaiyan and Verma, 2015). For example – offering beauty products
like facial serum, hair products on heavy discounts, then it will increase footprint of
customers easily on stores. So, while purchasing such items, demand of other products
also fluctuates. This would mostly shift demand curve in right hand side as shown below
–
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 Consumers expectations – As per this factor, it has been analysed that in beauty and
health products, consumers mostly expect to purchase high quality ones, instead of
compromising with price (Arunraj, Ahrens and Fernandes, 2016). Therefore, to meet
their expectations, management of Boots Limited concern on maintaining quality, as well
as meeting their satisfaction level.
 Consumers taste – It also affects adversely on demanded quantity of retail products,
which make changes in trends of marketplace. As per changes in taste and preferences,
demand of new or high quality of cosmetic goods increases, while existing ones or low
quality items shifts demand curve to left side (Stank and et. al., 2019).
Thus, it has been evaluated from all above discussion that to maintain sales and
revenue in business, it is essential to make changes in pricing, marketing and other
policies. This would not only help in growing business, but also keeping competitive
image of brand effectively.
1.2 Demonstration of Supply Law including the factors that create movement and shift in supply
curve of retail sector
Law of Supply also depicts relationship between price and quantity of a product at
marketplace. But on contrast with Demand law, it states that availability of good in market
depends on its price, i.e. products with high rates, are available in sufficient amount (Coe, Kelly
and Yeung, 2019). While suppliers to earn profitability, mostly seek to supply those products in
more quantity which are offered on high rates. In context with retail sectors, firms like Boots
Limited offers those products which are always in demand at marketplace. Therefore, it would
help in retaining interest of suppliers and distributors in business, to meet successfully demand of
consumers. But still there are number of factors present which impact on supplied quantity of
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goods, both in positive and negative manner (Sergi and et. al., 2019). But before, evaluating
factors that impact on supply of commodities at market, it needs to understand basic difference
between movement and shift in supply curve. As shown in below figure, changes in price of
basic necessities goods makes movement only. While change in price of health supplements and
related goods, shifts curve from right side.
Since present firm not only deals in retail business, but also associated with pharmaceutical,
beauty care and health industry (Aiginger and Rodrik, 2020). So, there are number of factors
present that shifts supply curve of its good in right or left side, as explained below –
 Cost of input – This is one of the most important factors, that highly affects price of
commodities, including supply rate of same at marketplace. As before purchasing beauty
and healthcare products, people mostly concerned on input use in preparing it, rather than
price. So, Boots Plc in this regard, highly focused on using best resources in production.
This would help in offering items on high price, as well as suppliers also like to supplied
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the same, in sufficient amount (Popkova, Ragulina and Bogoviz, 2019). But if keeping
the price of goods same, with increase in production cost, decreases supplied quantity and
shift supply curve in left as shown in below figure –
 Cost of technology: As producing and delivering high quality of goods to end users,
technology plays an important role. Therefore, this factor also creates fluctuation in
supply curve, either in left or right side (Kahn, 2019). But in this sense, if retail and other
companies are forced to keep price constant, when there is a high investment on
technology. So, it leads to reduce volume of supplied quantity at marketplace, which may
create shortage of same also, with increase in demand of consumers.
 Taxes – This factor also impact on volume of supplied goods at market, where high
taxation rates reduce availability of certain items in a particular area. Therefore,
management of Boots Limited always seek to increase availability of products in such
area, where tax rates are much less, for maintaining their profitability ratio (Hofmann and
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Rutschmann, 2018). While market where such rates are high, availability of its demanded
goods are much less, that shifts supply curve towards left.
 Number of suppliers – Presence of various suppliers helps in increasing supplied
quantity of goods more at marketplace, which shifts supply curve rights. In this sense,
present firms having various suppliers, helps in getting resources on cheap rates within
sufficient quantity and on time (Gan, Pujawan and Widodo, 2017). This would help in
meeting demand of consumers on time, by supplying goods on time.
Thus, it has been determined from above analysis that in meeting demand of consumers, it
becomes essential for retail firms like Boots Plc, require to analyse each and every factor that
impact on supply of its goods. It helps in making prior policies to overcome from same, so
that higher benefits can be earned.
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TASK 2
Evaluation of way models and concept of economic theories has been changed in 21st century
from 20th ones
With industrial evolution, process of operating business and way to develop practices has
been highly changed in today’s 21st century (Arunraj, Ahrens and Fernandes, 2016). Economists
now concern more on measuring financial situation of a country, in terms of investment made by
organisations, individuals, government and more, to enhance domestic market, by applying
contemporary economic theories. While as compared with present business practices, in 20th
century, companies mostly use traditional economic theories like Keynesian, for maintaining
profitability, instead of productivity (Badgaiyan and Verma, 2015). Concepts of such theories
can be defined as system which is mainly based on customs, time-honoured beliefs and more.
Applying traditional models and concepts not only shaping products or services, but also create
changes in product distribution process, so that demand of marketplace at both domestic and
global can be met. In order to measure the economic condition, it also stress upon rules and
business code of conduct use for running the organisation.
On contrast, in 21st century, economic development condition of a country is measured on
the basis of long-term growth in supply chain capacity; domestic goods for population;
proportion of companies used latest technologies and more (Gan, Pujawan and Widodo, 2017).
For this purpose, concept of contemporary theory of economics applies in terms of organisational
context. In this regard, according to modern economic theory that replaces applications of
traditional ones, increase in supply of domestic goods at both local and international market,
helps in enhancing and sustaining economic growth more effectively. Along with this,
contemporary theoretical concepts also make changes in business prospectus, by emphasis more
on sustainable business practices.
Traditional theories used in 20th century –
The Fisherian theory – This tradition theory views extent of business capabilities to
improve GDP and high economic growth of business at global level (Hofmann and Rutschmann,
2018). For this purpose, focus is given on factors that causes indebtedness of local firms,
decrease in growth rate, supply chain process and more.
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Keynesian theory – According to this theory, prospectus of economists is mainly based
on contraction or expansion of economic market, by measuring ability of domestic market to
meet demand of local customers. To determine such an extent, main focus is given on ability of
people to spend money on purchasing domestic goods, role of government in improving
monetary condition, fiscal policies and more.
Complementary Economic Theory used in 21st century –
Nudge theory – It is one of the mostly used complementary theory that focuses on
process by which reinforcement in business practices can be done, to improve economic
condition by increasing productivity of companies (Kahn, 2019). Through this process, effective
policies can be created to prevent firms from market failure, reduce spending rates of
government for improving society and infrastructure etc.
Behavioural Economics – According to prospectus of behavioural economists, in order to
increase GDP and economic conditions of a country, main focus is needed to evaluate factors,
that impact on demand and supply curves of local market (Popkova, Ragulina and Bogoviz,
2019). It helps in analysing ways to influence buying behaviour of local customers, to purchase
domestic goods instead of foreign ones, so that strong currency can be built.
Henceforth, through evaluating the key differences between theories of traditional and
complementary models, it has been identified that both are focused on way to improve national
income in terms of sustainable growth in GDP (Sergi and et. al., 2019). Hereby, traditional
theories like Fisherian emphasis on increasing capabilities of companies and individuals for
spending on local market. While complementary theories on contrast like behavioural, concern
on making collaboration among public and private authorities to meet demand of local
customers, with policies that restricts or minimises import of foreign goods at marketplace. This
would help in not only increase profitability of domestic companies, but also develop currency
for improving national income effectively (Aiginger and Rodrik, 2020).
CONCLUSION
From all over discussion, it has been summarised that theoretical aspects of economics
changes continuously, with industrial revolution. Now, to maintain sales and profitability of
business, companies are concerned more on evaluating each and every factor, that affects supply
and demand of their products at marketplace. In addition to this, instead of measuring
profitability only, firms like retail organisations emphasis on way to satisfy demand of both local
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and international customers. This would help in increasing trading at global level, with
advancement of enhancing GDP growth for economic development.
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REFERENCES
Books and Journals
Aiginger, K. and Rodrik, D., 2020. Rebirth of industrial policy and an agenda for the twenty-first
century. Journal of Industry, Competition and Trade, pp.1-19.
Arunraj, N.S., Ahrens, D. and Fernandes, M., 2016. Application of SARIMAX model to forecast
daily sales in food retail industry. International Journal of Operations Research and
Information Systems (IJORIS), 7(2), pp.1-21.
Badgaiyan, A.J. and Verma, A., 2015. Does urge to buy impulsively differ from impulsive
buying behaviour? Assessing the impact of situational factors. Journal of Retailing and
Consumer Services, 22, pp.145-157.
Coe, N. M., Kelly, P. F. and Yeung, H. W., 2019. Economic geography: a contemporary
introduction. John Wiley & Sons.
Gan, S.S., Pujawan, I.N. and Widodo, B., 2017. Pricing decision for new and remanufactured
product in a closed-loop supply chain with separate sales-channel. International
Journal of Production Economics, 190, pp.120-132.
Hofmann, E. and Rutschmann, E., 2018. Big data analytics and demand forecasting in supply
chains: a conceptual analysis. The international journal of logistics management.
Kahn, H., 2019. World economic development: 1979 and beyond. Routledge.
Popkova, E.G., Ragulina, Y.V. and Bogoviz, A.V. eds., 2019. Industry 4.0: Industrial revolution
of the 21st century (p. 253). Springer.
Sergi, B.S. and et. al., 2019. Entrepreneurship and economic growth: the experience of
developed and developing countries. Entrepreneurship and Development in the 21st
Century, pp.3-32.
Stank, T. and et. al., 2019. Toward a Digitally Dominant Paradigm for twenty-first century
supply chain scholarship. International Journal of Physical Distribution & Logistics
Management.
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