Contemporary Business Economics Report: Demand, Supply, and Theories

This report delves into the core principles of contemporary business economics, focusing on the laws of demand and supply. It begins by explaining the law of demand, its relationship with price, and the factors influencing it, including substitution effects, consumer preferences, and income. The repor...Read More

Contemporary Business Economics

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK1.............................................................................................................................................3
Law of Demand and its types of curve........................................................................................3
Law of Supply and its type of curves..........................................................................................6
TASK2.............................................................................................................................................8
Comparing and contrasting emerging theories and models in 21st century with 20th century
and their relation with modern business practices......................................................................8
CONCLUSION..............................................................................................................................10
REEFRENCES..............................................................................................................................11

INTRODUCTION
Demand and supply analysis is one of the fundamental model in economics which
determine price relationship between producer and consumer. It is used as an essential theory for
every business to prosper and grow in an industry. This analysis helps in understanding
consumer behaviour with interaction of demand and supply curve. This interaction is known as
equilibrium situation where consumer and producer are in balance situation. Demand and supply
of a commodity is determine due to scarcity of resources in a country and allocation of these
resources on best alternative available(Arrowsmith, S., 2018). In micro economics, it studies the
nature of an individual behaviour and its impact on quantity demanded and quantity produced. It
helps in producing graphs which represent the movement and shifts on a demand curve. Thus, in
economics it involves various models and theories which helps in understanding fluctuations and
movements in a business. It has chosen bakery business which included production and services.
This report includes law of demand and supply with its shifts and movements and its impact on a
business. Also, it compares and contrast various theories of 20th and 21st century relating both to
modern business practices.
TASK1
Law of Demand and its types of curve
This law states that quantity demanded has indirect relationship with the price of goods
keeping all the factors remain constant. It reflects if all other factors than price remain equal, the
higher price of a good leads to less people demanding that good. In a business like bakery or
other businesses it represent changes and movements on its demand curve. Due to scarcity of
resources in a business it leads to various fluctuations in demand and supply of commodity. This
can be easily reflected with the shifts and movements of demand curve in a business. For bakery
business it involves various factors of production such as land, labour, capital and
entrepreneurship. These factors are important for the functioning of a business in a best possible
manner(Barn, R. and Powers, R.A., 2018). These are the means of production which helps in
transforming resources into finished outputs. It helps in satisfying varied wants and needs of

consumers by providing value or utility of money. Business requires various resources for the
production and supply which are scarce in nature. It is important to understand law of demand
which has direct impact on the operations of a business. There are various factors which affect
the demand of a product such as substitution effect, complimentary effect, income effect and
other personal factors. These factors affect the smooth functioning of a business. In bakery
business, the producer has to indulge in various factors of production which help in determining
quantity produced and overall productivity of a business. Business has to face impact of various
other factors than price which affect the demand of its product leading to poor performance
financially. Following are the external factors which affect the operations of a business. These
are
 Price- Price is one of the important factor which eventually determine quantity demanded
and produced in a country. Due to the effect of price elasticity consumers are sensitive
with the change in prices of a product. There are three types of elasticity which occurs
based on the nature of business(Bryson, J.M., 2016). This involves perfect, imperfect and
neutral elasticity which is depended on the type of product. In bakery business, it has
perfect elasticity for price of the product. It gets affected due to slight changes in the
price leads to more changes in the quantity demanded for products. It occurs due to
nature of products for which consumers are more sensitive. Therefore, in regard to bakery
products consumers get affected due to perfect price elasticity of commodities. Thus,
price plays an important factor for the change in demand of a product. When price
increases for a product it leads to decrease in the quantity demanded. This can be shown
in the demand curve which is downward sloping. Also, these changes can be
demonstrated as the movement on demand curve due to changes in the price of product.
 Price of related goods- In this due to presence of substitute goods in the market leads to
impact on the quantity demanded of a product. Substitution effect refers to the change in
consumption of goods due to relative change in the price and income of consumer. Also,
it states that due to changes in the price of one product leads to change in its consumption
or quantity consumed. Related goods include substitute and complimentary goods which
affects the demand of a product. Substitute goods are those which can be consumed in
exchange of other. These are the goods which affect demand due to availability of

alternative goods which can be consumed in response to other. These goods can satisfy
utility or provides equal satisfaction to consumers(Abingdon, UK: Routledge, 2015).
 Taste and preferences- These are the factors which affect demand of a product due to
changes in taste and preferences of consumers. It is one of the major factor which is
related to personal characteristics of consumers such as beliefs, cultural norms and
attitudes etc. These personal factors affect the taste and preferences of a consumer with
changes in demand of a product.
 Population- In this due to presence of large number of people and changes in the
demographic factors impacts the demand of a product. Population is one of the major
factor which affects demand of a product. Due to changes in number of target customers
in a country leads to changes in the demand of product. With the increase in number of
youngster in population it leads to increase in number of consumers for bakery products.
Population of a country has a major impact on the demand of a product which leads to
increase in quantity demanded for a commodity(Burrell, K. ed., 2016.).
 Income of a consumer- This is one of the important factor which affects demand of a
product majorly. Due to fluctuation in the income of a consumer it leads to changes in
overall demand of product. Income of a consumer has direct affect on the expenditure of
a family. This leads to increase and decrease of demand for a product. This can be
reflected on the demand curve of a business leading to upward and downward shift in the
curve.
 Expectation of future prices- This is one of the assumption which leads to hoarding of
commodities. It affects demand of a product due to expectation of increase in the price of
commodity. These expectation leads to changes in the demand curve of a firm due to
increase in the future prices. Consumers starts hoarding goods which leads to changes in
the quantity demanded.
Changes in demand curve with movement :
Here, q1 and q2 are the new quantities which has emerged due to changes in price of the
product . This has led demand curve to move in right and left direction on the curve.

Changes in demand curve with upward and downward shifts:
Here, due to changes in other factor than price has led to shifts on the demand curve. This
results in making of new demand curve that is D`.

Law of Supply and its type of curves
Law of supply states that keeping all the factors constant than price, increase in price
leads to increase in supply of commodities. It has an upward slope which reflects changes in
price with quantity supplied by the producer or seller. It has a positive relationship with price of
the product which leads to increase in supply of goods with increase in prices. It demonstrate this
relationship on a graph with changes and shifts reflected on supply curve. Other than price it has
various other factors which hampers the supply of commodities. Thus, law of supply is one of
the important economic theory which is based on suppliers or producers in micro economics. In
bakery business it helps in understanding flow of supply in an industry and anticipating demand
and supply of a particular commodity. Law of supply helps suppliers in determining quantity
produced and quantity demanded by consumers. This helps in balancing and reaching
equilibrium state by the producer(Daniel, E., Henley, A. and Anwar, M.N., 2019). It is govern by
the law of diminishing returns which states that as the quantity produced increase it reaches a
point where it start producing negative returns. This law is affected due to various factors present
which leads to changes in the supply curve of a firm. These factors are as following-
1. Price- Price is one of major factor which affects quantity suppB36173lied in an industry.
This leads to changes in the supply curve with contraction and expansion in the
movement of supply curve. It is one of the major factor which has direct relationship with
the quantity supplied in a firm. Due to low prices producer decrease the supply of
commodities which creates demand in the market for the product. This leads to increase
in the price of goods which will increase supply by the producer. This benefits supplier to
gain more income when prices of goods are at peak.
2. Cost of production- This affects the supply curve leading to upward and downward shift
in the quantity supplied. This can have major effect when there are lower production cost
leading to downward shift in the supply curve.
3. Number of sellers- With the increase in number of suppliers in the market it leads to
increase in the market supply of goods. Due to presence of large number of sellers in the
market this will shift aggregate supply curve towards upward direction(Grima, S., Özen,
E. and Boz, H. eds., 2020).
4. Taxes and Subsidies- With the increase in government subsidies or decrease in taxes of
a product, it leads to increase in the supply of goods. Taxes and subsidies are

governments major factors which affect the supply of goods in the market. This leads to
upward shift in the supply curve of a firm.
5. Technology improvements- Due to improvement in technology it leads to increase in
the supply of a product. This has a major impact on the productivity and output of goods
in a firm. It helps in reducing cost with the usage of effective production techniques such
as automation and artificial intelligence. This leads to upward shift in the supply curve of
a firm.
6. Complimentary goods- With the increase in supply of complimentary goods it leads to
overall increase in the product. For example with the increase in production of wheat in a
country it leads to increase in the production of bakery products. Thus, due to increase in
the supply of related goods leads to increase in the supply of goods with upward shift in
the supply curve(Hall, S.M. and Jayne, M., 2016).
Changes in supply curve :
Here, due to changes in price of the product has led to contraction and extension along
the demand curve. This has resulted in change in the quantity supplied by the producer.
Changes in supply curve with shifts:
Here, due to changes occurring in other factors than price has resulted in formation of
new supply curve S and S1. This has resulted in increase and decrease in the supply of goods.

TASK2
Comparing and contrasting emerging theories and models in 21st century with 20th century and
their relation with modern business practices
In modern economics it is based on the fact that consumer are rational in behaviour
which selects best alternative for satisfying varied needs of consumers. It leads to self
maximisation and growth of individual standard of living. Contemporary economics is one of the
modified and efficient manner which relates with the modern economics of 21st century. In this
economics is linked with businesses which help producers to focus on increasing overall
productivity of labours and number of output. In this producers are more focused on satisfying
consumer needs and wants with the help of analysing consumer behaviour. This help in
determining actual needs and serving them optimally with allocating resources. In macro
economics this has lead to introduction to the concept of full employment and innovation. For
the growth of an economy it is require to tap all the opportunities for increasing employment
leading to full employment theory of economist(Kotlarsky, J., Oshri, I. and Willcocks, L.P.,
2016).
Also, it has given equal opportunities to both men and women in a country. In
comparison to 20th century it is considering men and women both as equally compatible for
employment. This has helped in increasing the overall performance of a country with increase in
GDP of a country. It has been focusing on equal distribution of resources by allocating them
optimally for the overall welfare of a country. In micro economics it has lead to focusing on
business environment with efficient functioning of competition in a country. Businesses has been
able to increase their market share and in building competitive edge with efficient usage of
resources and factor of production. It has focused on usage of efficient technology to increase the

productivity and output. Also, it promotes behavioural leadership for improving work culture and
to increase the efficiency of labours. Thus, modern economics is more rational and application
based for retrieving benefits. This leads to overall welfare of society with considering
environment as an important factor for sustainable development of businesses and economy.
Contemporary marketing refers to the marketing in which focused of customers is
maintained rather than companies profits(Kurtz, D.L. and Boone, L.E., 2015). That is needs of a
customer is the first priority of every company. In 2008, due to global economic recession and
economic growth turns down in Euro. That time some if the policymakers and sociologists and
economics have taken key explanations that is neo-liberals for the crisis. Likewise- in 1980s,
many of the companies have started many institutional procedures to reduce internal conflicts
between them. In addition, some of the economics, policymakers , sociologist promotes social;
agenda for the growth of companies and business.
Along with that business leader is the attention of 20th century. There are certain rules and
policies in the companies which needs to be followed by the managers and employees both. They
can't break trust of the customers. For this companies needs to satisfy customers desires and
needs. And they need less to focus on themselves(Maji, S.G. and De, U.K., 2015).
Changes that arise in 21st century to that of 20th century:
 First changes that has come is that various forms of rent which arises changes under the
jurisdiction if social societies. For example- ownership of home and technological
improvement is a new business started and rising in power of price.
 Another change that has come in 21st century is the various improvements has occurred.
There is a immense degree of exposers adjust in contemporary economics.
 Moreover, innovations occurred are from financial studies in the people life and their
identifies and subjects. Which are based on entrepreneurial convictions, actions of people
and opinions of people that are being focused.
Comparison of 20th century and 21st century in context with modern business:
Business in 20th century is are very socio economic and unknown. Creation of new rooms
and new industry was there. Various mistakes which are to be noted in 20th century and these are
improved at 21st century. And also these mistakes highlights the new path which needs to be
followed. In 21st century, business brings new ideas and technology to encourage the employees
and to give opportunity to the employees(McCann, P., 2016).

Also businesses in both the centuries have used different ways to earn competitive edge.
As in 20th century opportunity is given more to men as compared to women's. This is don
because at that time companies believed that men are more aggressive so they can handle the
situation suitably. Company ls gives them opportunity to earn competitive edge. But in today's
generation, women are given more chances of innovating and opportunities are given more. Also
pay out is given fairly to the employees as compared to 20th century. Also there are some issues
in 20th century that is rate of unemployment, individual record or competences and training and
development methods etc. Now these are considered as the most important and taken more into
consideration(Thatcher, J and et.al., 2015).
CONCLUSION
From the above report it has been summarized that supply and demand of the products
and services are based on the needs of customers. Company basically focuses on customer needs
rather than making profits. Some factors play important role in changing the product delivery
and requirements of the customers. These factors could be income of the customers, price of the
product and service etc. this is required for business analyst. Moreover this is also required to
attract the customers and target market.

REEFRENCES
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