BM533: Analyzing Demand, Supply, and Economic Theories

This report, prepared for a Contemporary Business Economics module, delves into fundamental microeconomic concepts. It begins by explaining the Law of Demand and the Law of Supply, illustrating movements along and shifts in demand and supply curves with diagrams. The analysis covers expansion, contraction, and factors causing curve shifts. The report then contrasts 20th-century economic theories, such as those of Adam Smith and Karl Marx, with emerging 21st-century models, relating both to current business practices. The comparison highlights the evolution of economic thought and its impact on modern business strategies, including discussions on free trade, capitalism, and the influence of labor dynamics. The report concludes by summarizing the key findings and emphasizing the importance of understanding these concepts for effective business management and achieving competitive advantages in a changing market environment.

CONTEMPORARY
BUSINESS MANAGEMENT

TABLE OF CONTENTS
INTRODUCTION.......................................................................................................................................4
MAIN BODY..............................................................................................................................................4
TASK 1.......................................................................................................................................................4
Explaining the Law Of Demand (LOD) with movement along the demand curve and changes in same 4
Explaining the law of supply with diagram of movement along and change in supply curve..................7
TASK 2.......................................................................................................................................................9
Comparing and contrasting the 21st and 20th century economics theories and model and relating it to
modern practices......................................................................................................................................9
CONCLUSION.........................................................................................................................................11
REFERENCES..........................................................................................................................................12

INTRODUCTION
Business management is process of making strategic decisions regarding various
functions such as production, supply to derive significant positive impact on company. In
currents scenario to is essential for organization to have efficient business management to
achieve competitive advantages in order to cope up with changing market environment. The
current report will give emphasis on law of demand & supply. Present case study will reflect
diagrams of movement along as well shift of curves of respective theories to derive deep
knowledge. It will compare & contrast emerging theories by relating with modern business
activities.
MAIN BODY
TASK 1
Explaining the Law Of Demand (LOD) with movement along the demand curve and changes in
same
It is a fundamental principle which reflects the inverse relationship between the quantity
and price. Law of demand is micro economics concept that helps to understand change in
demand due to variation in prices of products or services. According to this particular law other
factors being constant and price & quantity are inversely related that helps to take varied from
business decisions on the basis of consumer changing behavior (Mazurek, García and Rico,
2019). If the value of goods are increased it tend to result is low demanded quantity and vice
versa. Demand curve denotes variation in both value and amount demanded from one point to
another. Organization largely focus on it make strategic decision regarding charge fixation, level
of production, etc so that growth in industry with appropriate knowledge cab be derived. There
are various types of assumptions that LOD has considered for obtaining the desirable level of
results. This concept can be understood deeply by following diagrams
Movement along demand curve can be understood by emphasizing on two types of
directional change in quantity due to price. The directional movement can be either upward or
descending which aids in identifying that its expansion or contraction of amount demanded.

Expansion is basically rises in amount demanded because of fall in worth. This results in
downward movement along the same required curve (Franks and Bryant, 2017). In addition to
this, it is widely referred as extension in demand that ultimately provides opportunity to sale
more commodities. With help of below illustrated diagram it can be deeply understood.
Expansion in demand curve can be presented by downward directional movement which
from one point to another. it outcome due to there is reduction in price of particular commodity
or service and other factors remaining constant that is refers as ceteris paribus. Other factors are
here income of consumers, cost of substitute & complements, seasonal, change in taste &
preferences, advertising, etc. Law of demand expects these elements to remain constant which is
biggest assumption of this. It leads to allow movement on the same demand arc. For diagram one
it can be understood that movement from point A to B on demand curve d1.it happens as price
fall from P0 to P1 which resulted in Q0 to Q1. This implies due to variation occur in fall worth as
it can be interpreted that X & Y axis reflects quantity demanded and Price respectively.
Diagram two shows contraction in ordered goods that is due to fall in amount demanded
because of rise in price. It is reflection of changing in consumer behavior due to increase in value
of goods which tend them to buy in lesser amount to fulfill their particular need. With respect to

this, decrease in insist commodity by market is caused by change in determinants of specified
factor other than price. 2nd diagram as per the above graphical presentation it can be seen that
there is upward movement from E to F on same bend d2 that is result of change in price which
from P0 to P1 has outcome arrived is Q0 to Q1.
Demand analysis in the study of economics it is important to give emphasis on shift of the
curve in demand law. When there is change in capacity demanded of specific goods at each
possible price due to variation in one or other determinant factor of demand is called shift in
curve. Most important factor in concept to remember is that other elements that were expected to
remain constant get changed over here which forces the curve to shift in right or left direction
(Henrico, 2020). These factors are altered and impacted amount demanded by customers of
particular product. In addition to this, it depends on factors that curve will shift to right or left.
The most important part on which consideration should be given is factors determining he
demand to get accurate knowledge regarding changes in curve. In addition to this, changes in arc
occurs due to increase or decrease in quantity that may result of incline or decline of factors like
income of consumer, seasonal, etc.
Increase in demand at unchanged price due to inclination in income, rise in substitute
value, fall of complement , etc it outcome in shifting curve from left to the right (Khan, 2020). It
can be interpreted that axis X and Y are presenting quantity demanded & price of commodity.
Decrease in required quantity caused due to mentioned factors declination at same price that

occurs is shifting arc from right to left. At constant price quantity increase from Q to Q2 reflects
increases in amount of goods required that has shifted from curve D to D2. Transfer from right
to left D to D1is due to decrease in amount from Q to Q1.
Explaining the law of supply with diagram of movement along and change in supply curve
It is one the economic theory that is utilized as fundamental principle to analyze relation
between supply and price of commodity. This is crucial to take into consideration as it assists
organization to decide the level of making supply for particular goods and services according to
price changes. It states that higher would the price greater quantity will be supplied and vice
versa (Law of supply, 2021). Law of supply depicts producers behavior in respect to change in
price. In addition to this, rise in price is most favorably by business to supply their products in
order to generate higher revenue through maximizing profit. Producers supply less at lower value
o commodity by expecting rise in value to sell.
Movement along the supply arc occurs due to alter in price level and other determinants
of supply remaining constant. In addition to this, this result in two parts such as expands or
contracts because of direct relationship between value and amounted demanded in market. It is
referred as movement along the supply curve which is considered as change in quantity supplied.
Expansion in supply is result of increase in supply due to rise in price. Expansion is graphically

presented by upwards movement on same supply arc. Contraction in provided quantity of
commodity due to fall in worth that is reflected by the movement in downward direction along
the same bend (Orrell, 2020). In addition to this, it is important to keep focus on other elements
that kept constant which is biggest assumption that leads to make changes in quantity provided
by suppliers in market. It contributes largely in analyzing the various components that can
impact the growth of industry.
From the above diagram it can be interpreted that on the X and Y alliance quantity
supplied & price are presented. For instance the original price& quantity of commodity is 20 and
200 respectively (Buechner, 2018). By analyzing the diagram it can be understood that when
value goes up from 20 to 30 in turn quantity supplied also move from 200 to 300. The movement
on supply curve is from point B to C that is an example of expansion in quantity supplied that
lead to upward movement direction change on the same curvature. There is same change from
30-40 that is also influencing amount supplied which is favorably accepted by producers to gain
higher revenue through selling at greater value.
The amount of goods producer will to offer to customers in market may vary due to
variation in case of other elements than worth. These factors that are non price can be Tax rate,
technological changes, factors of productions, etc. It’s all are determinants of supply which are
highly taken into practice while supplying commodities at particular price (Dean and et.al.,
2020). Changes in non price factor entirely reallocate the bend either in right or left direction.
When amount of commodities supplied increases at same price due to favorable variation in

other factors. The factors that can positive influence supply results in rightward shift. The
leftward move occurs when amount of provided commodity decrease at same price. From in the
above diagram on the Y and X axis price & amount of goods are presented. By referring the
above illustrated table it can be seen that SS is original bend and there is change in amount
provided which is from Q to Q2 that has lead to right side shift. The shift can be seen from SS to
S2 that is right side directional transfer presenting increase in supply. On the other side, quantity
supplied from Q to Q1 at similar price that lead to shift in S1 from original arc.
TASK 2
Comparing and contrasting the 21st and 20th century economics theories and model and relating
it to modern practices
On account of 20th century, the classical theory was proposed by Adam Smith which is
also the founder of the invisible hands theory as well. As per this theory, democracies and the
capitalistic market is developed or created based upon the classical theories. It has mainly done
in respect to the free trade along with concepts such as the invisible hands which was basically
utilized in the starting stages of the domestics and the foreign demand and demand (Drylie,
2021). This theory provides assistance in promoting trade and commerce which is built upon the
demand and supply. This theory presented the way in which the apparent chaos is created under
the situation of competitive buying and selling which is then transformed into structured and
organized system which results into better accomplishing the requirements of the people in
addition to the creation of wealth in accordance to the individual choices.
Another theory is Maxism theory which was developed by Karl Marx and also depicts
about the social and political theory. As per this theory, the capitalist society is bifurcated into 2,
which are business owners who are having the extensive control over the production and the
other is workers who have applied labor and hard work which ahs resulted into transformed into
valuable goods having an economic value. In accordance with this theory, the ordinary laborer is
not having the required means of production and this therefore, results into providing them with
the less power within the capitalist economy. Along with that, the workers are additionally
promptly replaceable under the circumstance of high joblessness which results into further
degrading their apparent worth. To amplify the productivity and enhance profits, the
entrepreneurs give motivations in the form of incentives to its workers while paying them with

the most minimal potential wages. This has led to creation of an imbalance in between the
workers and the owners.
Aside from this, Karl additionally expressed that entrepreneurs likewise utilize the
social foundations which includes the public authority, media, any coordinated religion or the
monetary organizations as an apparatus against the laborers with the target of keeping up their
position of power (Kotz, D. M., 2017). Accordingly, these inborn imbalances and the
manipulative connection among these two classes results into revolution and agitators against the
proprietors, holding onto control of the methods for creation alongside the abolishment of free
enterprise (capitalism). This equivalent circumstance can measure up to the current Covid-19
pandemic circumstance which has influenced the work of numerous and other who are as yet
having occupations are being paid less money and thusly, are abused as they are not having the
necessary methods for creation.
In addition to this, another important 20th century theory is Neoclassical economics
which is concentrated on the supply and demand essential for production and pricing of the end
products. The assumption behind this theory is the utility to the consumers is an important aspect
pertaining to identifying the worth of the products and services. Based upon this, theory, it is
believed that the major concern for the consumer’s is to increase the personal satisfaction which
is dependent upon the purchasing decisions of the consumers in respect to the utility of the
product.
On the other hand, the 21st century economic theories are different form the 20th one.
The nudge theory is the notable theory which proposes that the shopper conduct can be impacted
by the little ideas or suggestions alongside uplifting reinforcements. The primary proponents of
this theory express that the very much positioned nudges can possibly decrease the market
disappointment, that is, failure, setting aside the cash of government alongside that empowering
desirable activities as well as expanding the productivity of asset use (Sunstein and Reisch,
2017). However, there was contention which are being made by the economic analysts relating to
the abuse of the nudges alongside urging the buyers to purchase the things which they don't
actually require. In the context to the present situation of Covid-19, it can be associated with the
government actions which puts nudges at the right place while in some situations it fails to do so,
leading to unfavorable consequences. Another theory is behavioral theory which incorporates the

psychological experiments for the purpose of developing theories based upon the human decision
making and the basis on which people think and feel.
Subsequent to dissecting these theories, it very well may be expressed that in the
modern days, the organizations are utilizing the mix of such speculations. Prior the organizations
were predominantly centered around achieving higher benefits yet now the impression of the
organizations has changed and includes dealing with its laborers which upholds them in
accomplishing long term advantages (Reisch and Zhao, 2017). Subsequently, these economic
theories are having an immediate connection with the advanced strategic approaches which helps
in successful arranging and handling of the things. Therefore, in the modern time both 20th and
the 21st century theories are being used in the current business practices in order to meet with the
changing business requirements.
CONCLUSION
It can be concluded from the above that the businesses are operated on the basis of the
concepts of economic and mainly the demand and supply which helps or supports in conducting
the business in a better and effective way. The laws of demand and supply are very important
along with effectively undertaking the factors having an influence over the movement and shift
in the curve. This helps in undertaking various business-related activities and decisions which
takes int consideration the production, distribution and the consumption of the products as per
the customers preferences. In the modern days, the business practices followed by the firms are
the combination of the both 20th and 21st century resulting into effectively meeting up with the
business needs. These theories are having a huge impact over the functioning of the businesses
and has resulted into effectively accomplishing the desired customer satisfaction and the
profitability.

REFERENCES
Books and Journals
Buechner, M. N., 2018. A comment on the law of supply and demand. Journal of Philosophical
Economics. 11(2). pp.67-80.s
Dean, E. and et.al., 2020. Demand, Supply, and Equilibrium in Markets for Goods and
Services. Principles of Economics: Scarcity and Social Provisioning (2nd
Ed.).
Drylie, S., 2021. Adam Smith on schooling: A classical liberal rereading. Journal of Economic
Behavior & Organization. 184. pp.748-770.
Franks, E. and Bryant, W. D., 2017. The Uncompensated Law of Demand: A ‘Revealed
Preference’approach. Economics Letters. 152. pp.105-111.
Henrico, R., 2020. The functus officio doctrine and invalid administrative acts in South African
administrative law: the demand for a more flexible approach.
Khan, H., 2020. Behavioral Economic Analysis of Demand for Hypothetical Work Performance:
A Partial Replication. McNair Research Journal SJSU. 16(1). p.7.
Kotz, D. M., 2017. Social structure of accumulation theory, Marxist theory, and system
transformation. Review of Radical Political Economics. 49(4). pp.534-542.
Mazurek, J., García, C.F. and Rico, C. P., 2019. The law of demand and the loss of confidence
effect: An experimental study. Heliyon. 5(11). p.e02685.
Orrell, D., 2020. A quantum model of supply and demand. Physica A: statistical Mechanics and
its Applications. 539. p.122928.
Reisch, L. A. and Zhao, M. I. N., 2017. Behavioural economics, consumer behaviour and
consumer policy: state of the art. Behavioural Public Policy. 1(2). p.190.
Sunstein, C. R. and Reisch, L. A., 2017. The economics of nudge. Routledge.
Online
Law of supply. 2021. [Online]. Available through: <
https://corporatefinanceinstitute.com/resources/knowledge/economics/
law-of-supply-economics/ >