BM533: Contemporary Business Economics Report on Economic Concepts

This report provides a comprehensive analysis of contemporary business economics, focusing on microeconomic concepts such as the law of demand and supply, including movements along and shifts in their respective curves, with examples from the retail business Morrison's. The report explores the factors influencing demand and supply, such as income, prices of related goods, taste, preference, price of inputs, number of sellers, and technology. Furthermore, the report compares and contrasts economic theories and models from the 20th and 21st centuries, examining their relevance and application in modern business practices. The report uses diagrams to illustrate key concepts and provides references to support the analysis.

CONTEMPORARY
BUSINESS ECONOMICS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Law of demand, its movement and change aspect related to demand curve.................3
Law of supply, its movement and change aspect associated with supply curve............7
TASK 2..........................................................................................................................................10
Comparison between contemporary economic theories and models of 21st century
and 20th century.......................................................................................................................10
CONCLUSION.............................................................................................................................13
REFERENCES............................................................................................................................14

INTRODUCTION
Business economic plays very great role for all businesses or companies,
because by considering business economic within business environment a business
easily improves economic condition within market. Currently top-level management
within different businesses has focused on hiring those employees within their business
environment who has proper knowledge of economics. This report mainly discusses
some major terms of business economics, like; law of demand, demand curve, change
in demand curve, law of supply, change in supply curve etc. Without involving these
demand and supply terms a company can’t increase its sales ratio within market. On the
other side, this report discusses various emerging theories and models of economics as
well. There is impact of business economics on Morrisons company also has been
mentioned in this report. It is a popular British retail company, headquartered in
Bradford, United Kingdom.
TASK 1
Law of demand, its movement and change aspect related to demand curve
The term demand signifies one of the two major market forces that tend to
regulate complete market. Law of demand basically signifies the relationship between
the price of the product and the demand of that similar product in the market at any
given point of time. The law of demand always depicts an inverse relationship between
the price and the demand of that particular commodity i.e. when the price of a
commodity increases; the demand for that commodity automatically decreases and vice
versa in case the price increases (Dong and Hu, 2017). In Morrison’s as well, the
applicability of demand of law can be clearly seen where the consumers tend to buy
lesser goods when the prices of such goods increases and more when prices decrease.
The major cause behind such inverse relation can be attributed to the concept of
diminishing marginal utility. According to this, consumers tend to satisfy fervent desires
in priority and every consequent i.e. successive unit, leads to satisfaction of less fervent
needs.

Figure 1: Law of Demand
Source: Demand Curve, 2019
As it can be seen from the diagram above, the slope of the demand curve is
always downward sloping because of the inverse relationship that it shows between the
price and the commodity. As the price is increasing of the commodity from P1 to P2, the
demand can be seen as declining from Q1 to Q2 thus proving the inverse relationship.
Movement along demand curve: In the scenario where only the impact of price is
taken into consideration while observing the change in the quantity demanded of that
particular product and this up or down that is observed is termed as movement along
the demand curve (). Additionally, it is assumed that impact of all the other possible
factors such as technology, fashion, government etc. remains constant referring to this
assumption as Ceteris Paribus. The price of product increases as the demand
decreases and opposite when it increases. The Morrison’s company is also affected by
the movement where demand increases with price decrease and opposite thus proving
that the theory of Ceteris Paribus holds true.

Figure 2: Movement along demand curve
Source: Demand Curve, 2019
Figure above shows that decrease in price from P to P1 at Morrison’s leads to
increase in Quantity demanded from Q to Q1 i.e. downward movement and upward
movement when the price is increasing to P2 and demand is moving upwards to Q2,
thus proving the concept of movement along demand curve.
Shift in Demand Curve: When all the other factors except price are taken into
consideration, then the change in the quantity demanded is thus depicted by the shift in
demand curve (Ho, Pan and Chang, 2017).

Figure 3: Shift in demand curve
Source: Demand Curve, 2019
It can be observed that price is constant at the level of 4000, and the quantity has
shifted towards left from D to D1 thus showing decrease in demand and even increase
in demand can be ascertained from the right shift from D to D2. This shift is influenced
by variety of factors some of which can be evaluated in following context:
Income: Income is usually ascertained from the two different types of goods which are
inferior and normal goods. For inferior goods, when income raises, the demand for such
goods declines but for the normal goods, the increase in income causes increase in
goods demanded. For Morrison’s, income level of consumers has increased after Brexit
thus causing increase in demand and for normal goods and in case of inferior goods, it
has declined.
Price of Related Goods: Complimentary and substitute goods and their prices affect
the change in demand. In case of decrease in price of substitute good the demand of
existing good rises. In Morrison’s if price of coffee falls, demand for tea rises (Adamczak

and et.al., 2016). Similarly, increase in price of complimentary goods causes fall in the
demand for other goods i.e. if prices of butter increases in Morrison’s, then the demand
of bread reduces.
Taste and Preference: The taste and preference are also the additional factors that
can affect the demand for goods. The reason is that in accordance with the changing
trends and fashion preferences of the consumers, the demand also changes
accordingly causing increase or decrease in the types of clothes that are being brought.
Similarly, in Morrison’s, the decrease in the plastic consumption of goods has
consequently led to decrease in the consumption of such goods that are being sold by
them.
Law of supply, its movement and change aspect associated with supply curve
Supply is the second force out of the two major market forces amongst the
demand and supply. Law of supply states that when the price of any particular
commodity increases, the supply of that good in the market also increases at that given
point of time. The relationship between price and supply of quantity is positive because
every seller works with the objective of maximizing their profits (Münster and et.al.,
2020). In Morrison’s as well, when price of any product increases the stores tires to
maintain full stocks of such goods and this is done especially during festive scenarios.
Figure 4: Law of Supply
Source: Supply Curve, 2019
As the figure above clearly shows, the slope of supply curve is increasing due to
positive relation between price and quantity supplied. When the price rises from 1 to 2

to 3, then the quantity supplied is also increasing from 10 to 30 to 42 and so on. The law
is extremely practical as the managers at Morrison’s also tend to increase the stock of
goods as their prices increase.
Movement along supply curve: While analysing the concept of supply curve also, in
relation to movement along the supply curve also the change in quantity supplied is
ascertained with relation to the price of that particular goods supplied. In this context,
the movement can be termed as expansion or contraction in the supply curve.
Figure 5: Movement along Supply curve
Source: Supply Curve, 2019
Above figure depicts the movement of the supply curve where the increase in
price from 3000 to 4000, the quantity supplied also increases from 5 to 6 thus causing
extension in the supply curve. Contrastingly, the decrease in price from 3000 to 2000
causes the decrease in quantity as well from 5 to 3 causing contraction.
This can be understood in context of Morrison’s as well where it can be observed
that post Brexit, the prices of beef has significantly risen and accordingly the supply of
the beef has also increased in Morrison’s (Juntao and et.al., 2019). Thus the expansion

aspect of the supply curve can be estimated. Similarly if the price of technological
products declines, then their supply also declines automatically causing contraction.
Shift in Supply curve: The shift in supply curve can be observed from the impact of all
the factors that causes an increase or decrease in the supply of that quantity and the
price factor is kept as constant in this case. All the different factors can cause an
upward or downward movement in the supply curve. This can be observed as follows:
Figure 6: Shift in Supply Curve
Source: Supply Curve, 2019
It can be observed from the diagram above, the price is constant at 3000 and the
shift in supply curve is due to other factors. The shift of supply curve from S to S1
signifies an outward shift towards left thus showing increase. On the opposite, when the
supply curve declines from S to S2 the decrease in supply is indicated by the shift of
supply curve towards right (Newton, C., 2020). In Morrison’s as well the similar shift is
observed in supply curve due to some of the following factors:

Price of Input: The input involves a variety of raw materials and other goods that are
required necessarily for the manufacturing of products and similar in Morrison’s as well
the requirement for different kind of input of goods is required. In case of increase in the
prices of such inputs, the cost of ultimate product also increases and this leads to shift
in the supply curve towards left i.e. it decreases.
Number of Sales: Number of sellers also affect the supply of the goods where the
increased number of or abundant sellers in a market automatically impacts the supply of
that particular product in the entire market signifying that hen the sellers are more, the
supply will be more and reverse when the sellers are less thus causing the shift in right
direction in case of more suppliers and towards left when the number of suppliers are
less (Mohsenzadeh, Sobhanallahi and Khamseh, 2017).
Technology: The technological development is another major factor that has direct
effect on the supply of the products. In Morrison’s they have kept their systems updated
using latest technology and hence are using all the latest innovations. The supply has
resultantly increased thus causing a right shift in the supply curve due to improved
consumer experience.
Therefore, it can be concluded that the shift can be due to various factors affecting
supply curve other than price.
TASK 2
Comparison between contemporary economic theories and models of 21st century and
20th century
Currently there are various economics theories and models of 21st century and
20th century available in the market which can contribute in all over economic growth of
a business. Most businesses use economics theories of both centuries according to
their comfortability. Generally, economist of both centuries has introduced very
innovative and useful theories of economics, in which top-level management within
every business should use economics theories of both centuries (Hau and Lai, 2017).

There is comparison between contemporary economic theories and models of 21st
century and 20th century has been included below;
Contemporary economic theories and models of 20th century
In 20th century, there are various economic theories and models was introduced
by different economists. Currently models and theories which they invented in 20 th
century are playing great role for different businesses or companies. Nowadays,
existing management within many businesses taking huge advantages from economic
their theories and models which was invented in that century. In this situation, top-level
management at Morrison also highly need to consider those all economic theories and
models which can positively impact its business operations in the retail industry of the
United Kingdom. There are some major economic theories of 20the century has been
discussed below;
Keynesian theory of economics
Keynesian theory of economics is one of the most popular theories of 20th
century which was developed by John Maynard Keynes in 1930. He was a great British
economist who developed this theory for undressing the great worldwide economic
depression. When he was invented this theory, then he changed the whole definition of
international economics. The world never forgets the contribution of John Maynard
Keynes to the economics. Currently most businesses are running their operations just
because of Mr. Keynes. Basically in this theory, he showed some appropriate ways of
fundamental economics ion his theory which can support the Morrisons for properly
marinating its demand and supply in the market (Černe and et.al., 2017). Currently
government within many countries are avoiding inflation issue within their existing
economic environment. That’s why Keynesian theory plays great role for different
businesses or companies.
Friedman’s theory of consumption
Friedman’s theory of consumption is another major theory of economics which
was also developed in 20th century by Milton Friedman. Basically, he was an American

statistician and economist etc. Currenntly this theory also plays great role in the
business environment of the United Kingdom. Reason is, this theory give opportunity to
a business or company for increasing its consumption ratios products and services in
the market. With support of Friedman’s consumption theory, the management of
Morrison scan easily influence to its customers in the mark let for consuming its
products and services. Mainly most businesses are suing this theory of economics for
increasing their profit ratio within their respective sector or industry.
The fisher effect
The fisher effective is one another innovative theory of economics which was
developed by economist Irving Fisher. Generally, he discussed about inflation and
interest rate within his theory. In this situation, different existing businesses or
companies within market are able to properly deal with inflation and interest rate
aspects by implementing this theory within their business environment. Many times
countries face inflation issue within their respective economic environment. In this
situation, such countries can use the fisher effect theory within their existing economic
environment for properly dealing issue like inflation. On the other side, this theory
contributes in making policies for interest rate as well (Conroy and Weiler, 2016). There
are interest rate factors play very effective role for the Morrison, in which exiting
management of company can use this theory for properly completing its all transactions
which has based on interest rate. These all factors are enough to show the importance
fisher effect in within business environment of the United Kingdom.
Contemporary economic theories and models of 21st century
Keynesian growth theory
Keynesian growth theory is basically updated version of 20th century’s Keynesian
theory. Some major economist of 21st century has added more measures of economics
within this theory. That why 20th century’s Keynesian theory becomes Keynesian growth
theory within 21st century. According to market requirement or demand, international
economics school always make changes within this theory. Currently Keynesian growth
theory of economics play great role for different companies or business. Of course

many businesses are still using 20th century’s Keynesian theory, because it is also great
theory. But top-level management of various companies should move on from previous
Keynesian theory of economics for employing new Keynesian growth theory within their
business environment. There is Morrisons company also will be gain an effective return
from this economics theory of 21st century (Cravino and Levchenko, 2017). Currently
this company has large customer base in the retail industry of the United Kingdom, in
which company can easily make balance between its product supply and demand in the
market by using Keynesian growth theory. That’s why each business should follow the
concept of this theory of economics within its daily operations.
Modern equilibrium theory
Modern equilibrium theory of 21st century is another productive theory of
economics which can support to the Morrisons for maintaining an appropriate balance
between its demand and supply. This theory plays great role not only in marinating
balance between demand and supply, because this theory plays great role in the
development of all over business operations as well. For3 example; by using modern
equilibrium theory, Morrisons can easily make maintain a proper channel within its cash
inflow and out flow. In this situation, when any business maintains proper channel for its
cash inflow and cash outflow, then it will be able to increase its financial conditions in
the market. That’s why this theory of economics can indirectly improve financial
conditions of a business or company as well.
CONCLUSION
It can be concluded that a business or company can’t survive in the market
without involving different economics terms within its daily operation. That’s why
business economics is too important to a business or company. Currently many
businesses are able to talk huge advantages from various theories and models of
economics which has based on 20th and 21st centuries. Top-level management within
each business is able to make proper balance between its demand and supply. By
considering business economics aspect within daily operations, a company easily gain
huge competitive advantage in the market.

REFERENCES
Books and Journals
Adamczak, M., and et.al., 2016. The integration between production-logistics system
and its task environment-chosen aspects. IFAC-PapersOnLine. 49(12). pp.656-
661.
Černe, M., and et.al., 2017. The role of multilevel synergistic interplay among team
mastery climate, knowledge hiding, and job characteristics in stimulating
innovative work behavior. Human Resource Management Journal. 27(2). pp.281-
299.
Conroy, T. and Weiler, S., 2016. Does gender matter for job creation? Business
ownership and employment growth. Small Business Economics. 47(2). pp.397-
419.
Cravino, J. and Levchenko, A. A., 2017. Multinational firms and international business
cycle transmission. The Quarterly Journal of Economics. 132(2). pp.921-962.
Dong, D. and Hu, Y., 2017. Study of System Dynamics for Health Care Housing
Development in Panzhihua. In ICCREM 2017 (pp. 175-186).
Hau, H. and Lai, S., 2017. The role of equity funds in the financial crisis
propagation. Review of Finance. 21(1). pp.77-108.
Ho, C.C., Pan, C.C. and Chang, L.C., 2017. Determining an optimal action portfolio for
water resource management by using stochastic programming. Water
Resources Management. 31(9). pp.2675-2687.
Juntao, F., and et.al., 2019. Decentralized self-balancing control strategy for the optimal
operation of energy storage systems in network.
Mohsenzadeh, A., Sobhanallahi, M.A. and Khamseh, A.A., 2017. A new stochastic
demand model for dual-sourcing supply chain considering disruption
risk. International Journal of Services and Operations Management. 27(1). pp.70-
82.
Münster, M., and et.al., 2020. Sector Coupling: Concepts, State-of-the-art and
Perspectives.
Newton, C., 2020. Covid-19 Scarcity and Household Utility Stock-outs, Shortages,
Substitutions, Other Goods (II).
Online
Demand Curve. 2019. [ONLINE] Available through:
<https://www.britannica.com/topic/demand-curve >

Supply Curve. 2019. [ONLINE] Available through :<
https://www.britannica.com/topic/supply-curve >