Economics for Business (MOD003327): Demand, Supply, and Policies

This report delves into the core principles of business economics, emphasizing the significance of demand and supply analysis within the retail industry. It explores the various factors influencing demand and supply, such as technological advancements, substitute goods, and complementary produc...Read More

Economics for Business

EXECUTIVE SUMMARY
This report is all about Economic business which is important to handle the internal and
external factor in the market. In the market there are two concepts are important demand and
supply. Demand refers to the buyers wants to purchase the goods and services and supply refers
to availability of goods and services in the market. There are various factors that affect the
demand and supply of the product such as technological changes, substitute goods and
complimentary goods. UK government provide some stimulus package and retail subsidies in
order to influence customer retail spending.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
Table of Contents.............................................................................................................................3
INTRODUCTION...........................................................................................................................1
TASK1.............................................................................................................................................1
Supply and demand analysis and their factor..............................................................................1
TASK 2............................................................................................................................................7
UK governmental and economic policies to aid economic recovery from loss of consumer
retail spending:.............................................................................................................................7
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business economics is a process that studies the market related and issue of
environmental in the organization, and also show the relationship of entity with labour, capital
and market. it is the main concept for the business because it linked with real business. They
focus on issues and problems related to business entity. In the UK various companies is
connected with economics. In association of applied economics policy makers in the mission of
organization to provide leadership (Supply and demand, 2018). This report is based on retail
industry that shows the affect of economic factor on the consumer spending. In this report there
is important factor of market demand and supply is used to find the shifting of their curve
whether it is positive or negative. There is also analysis of economic policies which is used to
influence the consumer retail spending in the UK.
TASK1
Supply and demand analysis and their factor
In the retail industry, both Market factor demand and supply play an important role in the
need and requirement of consumer.
Demand analysis- It is an economic principle refer to a customer desire for purchasing
goods and services and willingness to pay a price for a particular goods and services at a given
place. In the analysis of this retailer understand the demand of specific product for the customer
in the target market (Krugman, P. and Wells, R., 2017). For the new business enter into market
they have to analysis the market for their product that they can expand their market or not and
increase their profit maximization. In this there is negative relation between quantity demand and
price because if price increase demand is decrease and if price decrease then demand will
increase. Marketer can do the analysis by taking various steps-
 Market identification- In the first step they target the market for company product. They
can satisfy the customer by taking feedback and also improving their planning which help
in fulfils their satisfaction level.
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 Business cycle- after identifying the target market then they assess the business cycle in
the market which show the customer demand and supply of product and services.
 Product niche- once the business cycle develops then they develop the product
according to specific market. They use the differentiate product which create the demand
of product high in the market.
 Evaluate competition- In this factor marketer determine the competitor and their market
share so by this analysis they increase their profit margin and also innovate the product
and services different from competitor.
Change in demand. 2020.
(Source: Change in demand. 2020.)
Increase in demand, this diagram shows demand was D1 when the price was P1
but due to changes in price P2 demand increases by D2. The change in demand leads to
change in price of substitute and complementary goods, technology changes. It happen in
case of substitute goods such as if tea price is more than coffee but coffee price are
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increasing than before although demand of coffee is increasing because the coffee price is
less than tea.
Demand and Supply analysis.2020
( Source: Demand and Supply analysis.2020)
Decrease in demand, this diagram shows that when demand was Q1 price was P1 but
after the change in demand Q2 in decreasing manner it shows price is also decrease that is
possible in seasonal things such as sweaters, vegetables etc. This shows positive relation
between demand and price that depends on consumers and market. for example, consumers
purchase sweaters in winter season but in summer season demand of sweaters goes down that
leads to decrease in price because no one purchase sweaters in summers although on high price.
Supply analysis- In this first understand supply curve which means supplier sell the
product or services at a given price at a particular time. In this analysis there is positive relation
between quantity supply and price. If the supply increases the price of the product is also
increase and if the price decreases then supply decrease. It refers to availability of goods and
services for consumers according to their wants and needs. For example – if the price of x
product is increasing that leads to increase in supply of that product rather than other.
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Change in supply. 2019
(Source :Change in supply. 2019)
Increase in supply, this diagram shows increase in supply that when the supply was S in
that situation price shows as p*.After the changing in supply by S2 price remains constant it can
be possible in case of change in technology, innovation and creativity in products because in
today’s period consumer wants easy to use things on reasonable price with trending technology.
Demand and Supply analysis . 2020
( Source: Demand and Supply analysis 2020)
Decrease in supply, this diagram show decrease in supplies that when the supply was S1
in that situation price show as P1. After the decrease in supply by S2 price get increase and
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quantity supply get decrease. In this there is leftward shift in the supply curve due to many
factors.
Factors affecting change in demand
 Changing price of substitute good- Substitute means replacement product by change in
this there is demand increase or decrease according to market condition. For example –
cheaper flight ticket between London to Glasgow cause decrease in demand of the train
ticket between this two cities.
 Changing price of compliment goods- compliment goods also cause effect on demand,
because by increase the price of compliment product to z also decrease the demand of
product .by increase the flight ticket between London to England also cause decrease in
demand of resorts and hotel rooms in England and also there is fall in taxi services in that
city.
 Changes in the income of consumer- It means when the income goes up, the ability for
purchase products rise, this give impact rightward shift in the demand curve and by
decrease in income there is fall in demand. By heavily increase of advertising and
marketing also bring change in consumer preferences. There is increase in demand by
spending more amounts on online advertisement.
 Change in interest rate- individual buy more product on credit or through borrowing
money, by increase and decrease in rate of interest also make demand shift rightward and
leftward. By change in interest rate of loan on appliances demand for the product also
change.
 Change in the season- By change in the seasonal factor the demand is increase or
decrease according to seasonal factor, because in rainy season there is high demand of the
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umbrella in the country. In other season there is decrease in the demand of umbrella at
that time.
Factors affecting change in supply
 Change in the cost of production- It means at the low cost of production supply of the
product is increasing at every price which mean profit also increasing and if there is high
cost of production supply of the product is decreasing at each price which mean it give
less profit.
 Change in the tax policies- In the UK, tax affect directly the supply of goods and
services which mean if direct tax is increasing it leads to decrease in supply and Indirect
cost lead to increase in supply because it lead to increase in price.
 Change in technology- In retail industry it play important role, it affect supply in
positive or negative manner. In the market if seller bring new product with innovate
technology then it will increase the supply because there is increase in the price and it
also replace existing product which reduce the supply of old product.
 Change in the price of substitute product- If the price of petrol is less than diesel than
the supplier supply more vehicles of petrol rather than diesel. It leads to decrease in the
price of vehicle car. In complementary goods supply increase if the value of the raw
material is decease.
 Number of supplier in market- In the market by increase in the number of sellers
affects the market supply. Because when new business enter into niche market supply
increase by decrease in price. For example, if there is more supplier in the market then
buyers have more option to switch, in this situation supplier has to decrease in price for
attracting customers and competing competitors.
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 Climate changes – By change in the weather in retail product and services such as
umbrella, sweaters etc. All factors affect the production of goods and services in Retail
sector.
Example for supply and demand -
As per above data, it shows price and quantity demanded and quantity supply has
negative and positive relation. As when the price was Rs. 16, it shows that quantity demand and
supply is 50 and 80. When the price is decrease by Rs. 15, the demand is increase by 55 which
show there is negative relation between them and quantity supply is decrease by 70 which show
there is positive relations between them which mean it give less profit to the supplier and high
benefit to purchaser.
TASK 2
UK governmental and economic policies to aid economic recovery from loss of consumer retail
spending:
 Poverty programs- Every citizen residing in any country of the world have a right of the
good living standard along with the decent income and security of life and job so does the
people of UK have this right. The covid pandemic affected the people of each and every
country and UK is nothing different. The residents of the country have lost the jobs they
are becoming financially weak and the standard of living is going down. Here comes the
role of the government who should introduce some policies to overcome this situation
that the people are facing(Poverty programme, 2020).
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Tax concession: The government of UK must give some concessions in the tax rates so that the
load of tax reduces from the shoulders of the tax payers
Lower interest rates: The government can order banks to lower down the interest rates on the
existing loan so that will help in repayment of loan.
No tax on essential goods: In order to fight with the poverty government should remove all the
taxes from essential goods like food and medicine.
Generate employment: The main reason behind the poverty is unemployment so government
should generate more jobs in country.
 Government transfers: The redistribution of wealth is the most important part in the
economy of the country because the uneven distribution leads to financial inequality
among the people of the country. The government has to focus on the distribution of
wealth post covid scenario it has to bring some policies for the even distribution of
wealth like (Government transfer, 2019).
Subsidies: the government of the UK has to focus on the subsidies which can be given on the
basis income of the people like lower income group of the society should get the subsidies on the
electricity bills, gas bills etc.
Lower interest rates on loan: the government should lower the interest rates on the loan that
will encourage the people to take loan that will increase the flow of money into the market and
will help in creating the job.
Minimum price for weaker section: the government should fix the minimum price for selling
as well as purchasing for the weaker section the society so the people can buy the products that
are required for their survival of the people belonging to lower income group.
By applying the above measures, the government can make sure the even distribution of the
wealth among the people.
 Retail subsidies: Retail industry is one of the most important part of the country’s GDP
retail industry is the linkage between the producer and the final consumer this industry
plays an major role in the supply of goods and services to the public basically the FMCG,
Pharma and many other industries are heavily depended on the retail industry and as we
all they know the retail industry is heavily impacted by the covid scenario as all the retail
stores were closed and now also people are avoiding to go to the retail stores to buy
groceries here comes the role of the government to help the retail industry to overcome
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this situation of the Covid government can do by providing the subsidies to retailer as
well as the manufacturer so that will lead to the lower down the production cost of the
goods for the manufacturer so they will sell the products to wholesaler on lower rate and
so will wholesaler to retailer that will lead to the higher number of customers in the retail
store as the prices of the goods will be low that will motivate consumer to come to retail
store and purchase goods from retailers(Retail subsidy, 2019).
 Stimulus packages:Stimulus packages are the most important part of the government
measures when the country is in the financial crises the meaning of the stimulus packages
is the rebates given by the government in tax is known as stimulus packages government
give these packages in order to motivate people to invest their money in various
government, semi government and private schemes in order to maintain the flow of
money into the market. The government of UK can take example from Indian
government which has started many schemes where they ask people invest money in the
schemes introduced by the centre government of India and each and every person
investing in such schemes is getting benefits in the taxation. The other policy that
government can introduce is that it can lower down the tax rates on exports and
manufacturing of the products within the country that will lead people to start their own
business that will help in generating the employment other than that the UK government
can give some relief to the companies that are coming to UK to either manufacture or sell
their products this will also generate employment and will also help in increasing the
funds (Stimulus package, 2020.)
 Industry specified measure- There are different measure that UK takes for seeing
special industry analysis demand and supply. In the country government focus in
betterment of society. So that employees can purchase goods or services and fulfil their
family needs. In the coronavirus situation government passes various budgets for
different industries to support them in financial needs (Industry specific sector, 2020)
CONCLUSION
From the above report it has been concluded that Business economics play vital role in
facing the problems. It helps firm to know about their spending and production decision making.
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Firm use economic tools such as demand and supply. Demand of the product and price has
negative relation and supply and price has positive relation. There are various factor that can
affect demand and supply those are subsidiary and complementary goods, income level and
climate and technology. Government are the main factors which affect the spending in retail
goods and services that are poverty programme, government transfer, retail subsidies and
industry specified measures.
REFERENCES
Books and journals
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Change in demand. 2020. (Online). Available through
<https://www.investopedia.com/terms/c/changeindemand.asp>
Change in supply. 2019. (Online). Available through
<https://www.tutor2u.net/economics/reference/shifts-in-market-supply>
Demand and Supply analysis. 2018.(Online). Available through
<https://www.financialexpress.com/industry/banking-finance/investing-the-sum-of-all-
peers/122917/>
Government transfer. 2019. (Online). Available through
<https://www.investopedia.com/terms/t/transferpayment.asp#>
Industry specific sector. 2020. (Online). Available through
<https://www.investopedia.com/ask/answers/05/industrysector.asp>
Poverty programme. 2020. (Online). Available through
<https://www.investopedia.com/terms/p/poverty.asp>
Retail subsidy. 2019. (Online). Available through
<https://www.investopedia.com/terms/s/subsidy.asp>
Stimulus package. 2020. (Online). Available through
<https://www.investopedia.com/terms/s/stimulus-package.asp>
Supply and demand. 2018. (Online). Available through
<https://www.financialexpress.com/economy/why-govt-must-spend-to-drive-up-
demand/2069954/>
Krugman, P. and Wells, R., 2017. Volkswirtschaftslehre. Schäffer-Poeschel.
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