Analyzing Demand, Supply, and Economic Models in Business

This report provides an analysis of contemporary business economics, focusing on demand and supply principles and their application to modern business practices. It begins by explaining the law of demand, including movements along the demand curve and shifts in the demand curve, using the example of Finery, a British women's fashion label. Similarly, it elucidates the law of supply, detailing movements along the supply curve and shifts, while relating it to Finery's operations. The report further compares and contrasts emerging economic theories and models of the 21st century with those of the 20th century, linking both to contemporary business practices, and highlights the importance of maintaining productivity and adapting to emerging markets.

CONTEMPORARY
BUSINESS
ECONOMICS

Table of Contents
INTRODUCTION: .........................................................................................................................3
TASK1:............................................................................................................................................3
1.1 Explain the law of Demand, movement along the same demand curve and ............................3
changes in demand curve:................................................................................................................3
1.2 Explain the law of Supply, movement along the same supply curve and..................................7
changes in supply curve:.................................................................................................................7
TASK 2..........................................................................................................................................10
Compare and contrast emerging theories and models in 21st century contemporary economics
with those of the 20th century, and relate both of these to modern business practices.............10
CONCLUSION:.............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION:
Most of the people think economics is only about money but it doesn't always include money in
every situation. Economics can also be defined as the idea of making choices of an individual or
a group of individuals. Its also about choosing alternatives which are more profitable for every
one. In subject matter however, it can be defined as the social science that studies the process of
production, distribution and consumption of all the goods and services that are being produced in
the economy in a financial year(Ping, 2022). It is also the study of how to use the scare resources
of an individual or an economy more effectively and efficiently to maximise its profit. It is
further being divided into two categories of macroeconomics which studies the decision making
of the aggregate economy and microeconomics which deals with the decision making of an
individual. In this report however, the company which has been taken into consideration is
Finery, which is a British women wear fashion label with the headquarter in London, England.
The company basically deals in fast fashion and accessories which are of moderate priced, very
versatile and well- styled. The company was however founded by Nickyl Raithatha in the year
2014.
TASK1:
1.1 Explain the law of Demand, movement along the same demand curve and
changes in demand curve:
Demand in the economics can be defines as the desire to buy any good and services at any given
prices and in a particular given period and at the same time he is willing and able to pay that
price. Demand can be both individual demand and market demand for a specific good or
aggregate goods in the economy (Njoh and et. al., 2022).
Law of demand:
Law of demand is the relationship between the price of a good or services and the quantity
demanded for that price by the consumer. It is through the point of view of the consumers. It
however states that if the price of the product increases, the quantity demanded for that price by
the consumers starts to decrease and vice-versa. Law of demand however, is derived from the
law of diminishing marginal utility, which states that an individual uses the economic good to
satisfy their needs first.

In the context with the company Finery, from the diagram it can be clearly seen that if the price
of all the products will go high the quantity demanded for it by the people will decrease as
people with low income can now can't afford the goods and will shift some alternative brand
(Schumpeter and Heilbroner, 2022).
DEMAND CURVE:
The graphical representation of the law of demand which shows the price of the product on the
left vertical line and the quantity demanded on the right horizontal line. It shows that how much
demand of a good will increase or decrease if the price of the same good will decrease or
increase respectively.
Therefore, the change in the demand curve can be caused due to many factors hence been
classified into two categories:
 MOVEMENT ALONG THE CURVE:
When the change in the curve is caused only due the the effect of the price of the product i.e. any
fluctuations in the price level will must cause a change in the demand for it, then it comes under
the category of movement along the curve.

From the above diagram it can be concluded that there is again two parts of movement along the
curve which are:
1. CONTRACTION: When there is an increase in the price level of the product, it comes
under the category of contraction in demand. However from the above diagram if it can
be seen with the context to the company, say when the prices of the fashion wear will go
high from $10 to $12, the quantity demanded for it will decrease from 55 units to 40 units
which will result in the movement along the demand curve(Martek, 2022).
2. EXTENSION:On the other hand however, if the price of the good decreases say again
taking the above diagram in context with Finery from $10 to $7, the quantity demanded
for it will automatically increase from 55 units to 75 units proving the law of demand.
 SHIFT IN THE DEMAND CURVE:
All the other factors including the price factor which show an impact and cause a shift in the
demand curve to left or right is termed as the shift in the curve. However the factors that affect
demand and cause a shift in the curve are as follows:
FACTORS AFFECTING DEMAND:
1. TASTE AND PREFERENCES: consumers can be very picky and fickle especially when
it comes to buy some good or something. As a rational consumer, he will always want to
buy the good from which he gets full satisfaction and at the same time it is cheaper in
price. Hence it has an inverse relationship with demand. For Finery say, if the prices of

fashion wear increases, the demand for their goods decreases keeping in mind that it is an
affordable luxury brand that tagetes people with moderate income levels
(Vakulabharanam, 2022).
2. INCOME OF THE CONSUMER: Ability of any individual to buy any good or
services totally depends upon the income of the consumer. Hence if the income increases,
he'll buy more quality and luxury goods like in the case of Finery. Whereas if the income
will be low for the people, they'll first buy their necessary goods of living which will
result in the decrease in demand of their products in the market. There is a positive
relation(Leung, 2022).
3. AVAILABILITY OF SUBSTITUTE GOODS: No matter what type of business they
run in the economy, every business have its competitors and they continuously have to
compete to be on the top in the market. If say the prices of the competitor product of
Finery decreases then people will then choose that product with cheap prices as they want
to fulfil their needs in low cost. It has Positive relation.
4. NUMBER OF CONSUMERS IN THE MARKET: Demand can be defined by how
many people are able and willing to buy the goods and services at any given price level.
Therefore, more the consumers the more will be the demand for the product. Hence for
Finery, if they decrease their product prices, the number of consumers for their product
will increase resulting in the increase in the demand in market. There is a positive
relationship.

From the above diagram however, it can be seen that one shift is from D0 to D1 and other is
from D0 to D2 and it is caused due to all the factors that has been discussed above.
1.2 Explain the law of Supply, movement along the same supply curve and
changes in supply curve:
Supply in economics basically can be defined as the amount of all goods and services that a
producer is willing and able to supply for the given demand in the market. Therefore, a rise in the
price level always leads to an increase in the quantity supplied of that particular good or service.
Quantity supplied on the other hand is the certain point on the supply curve or on the supply
schedule. This is been studied from the point of view of the sellers.
LAW OF SUPPLY: Law of supply can be defined as the relationship between the price
of a good or services and the quantity supplied by the seller for that price. It is through the point
of view of the sellers. It however states that if the price of the product increases, the quantity
supplies for that price by the sellers starts to increase in the market(Langevoort, 2022).

From the above diagram however , well see this with the context of the company Finery, if the
prices of the fashion wear and accessories increases by the sellers, the quantity supplied for it
will also increase as they are indulging more cost of production which means more good quality
and hence people of particular income group demands more of it(Gupta, 2022).
SUPPLY CURVE:
The graphical representation of the law of supply which shows the price of the product on the
left vertical line and the quantity supplied on the right horizontal line. It shows that how much
good supplied will increase or decrease if the price of the same good will increase or decrease
respectively.
Therefore, the change in the supply curve can be caused due to many factors hence been
classified into two categories:
 MOVEMENT ALONG THE CURVE:
In easy words however, it can be defines as the change in the quantity supplied of any
goods and services by the seller when there is a change in its price assuming that all other
factors remaining constant.

1. CONTRACTION: If there is an increase in the price of product, it comes under the
category of contraction in supply. However from the above diagram if it can be seen
with the context to Finery, say when the prices of the fashion wear will go high from P1
to P3, the quantity supplied for it will also increase from Q1 to Q3.
2. EXTENSION: If the quantity supplied of a good starts to increase because of the rise in
its price level, assuming other things remain constant, then there is an extension of supply
curve. From the above diagram, it can be seen that when the prices of Nike goes high
from P0 to P1, the demand of the product also increases from Q0 to Q1 and making an
extension in the supply curve.
 SHIFT IN SUPPLY CURVE: A change in the supply curve because of all the factors
that affects the supply. An increase in the change in the supply shift cause the curve to
shift to the right and vice versa(Devine and Ash, T.L., 2022).
FACTORS AFFECTING DEMAND:
 PRICE OF THE COMMODITY: There is a direct relationship between the quantity
supplied and the price of the product. This can be defined as the main factor that
determine supply. In context with the company however, if the prices of Finery products
increases then the quantity supplied will also increase as being a luxury brand, people
will tend to buy more if the price increases for a status symbol.

 PRICE OF THE FACTORS OF PRODUCTION: The price which the seller sets can
be determined by the raw material prices and the labour hours invested at the time of
production. Hence if raw materials like basic cloth's prices increases,. Then Finery has to
increase the prices of the finished product.
 TECHNOLOGY: Cost of production can be low if one uses an advanced and modern
technology for the production. Finery, if uses this can low the cost of production and
increase the revenue and hence can sell at the same high price in the market.
TASK 2
Compare and contrast emerging theories and models in 21st century contemporary economics
with those of the 20th century, and relate both of these to modern business practices.
Contemporary economics involves the certain theoretical with the effective research of
various fields of economics, accounting and management which also full fill the impact to
develop the disciplines. In relation to Finery has to maintain their productivity and having the
major consideration to the market that are emerging in the 20th and 21st century are given below:
Traditional Economic Theories
Neoclassical theory: This is the theory which is given and developed by Carl Menger,
Leon Walras. Their emphasis is related to the supply and demand which are acting as the drivers
which also supporting to the better organisational services so that they can have the effective
utilisation of resources and the commodities. In relation to Finery, it is states that preferences and
the taste of the organisation is different and they are having the changing demand in context to
the current consumption as the person is having various assumption of the their products and also
having the consideration to the entire organisational model (Cao and et. al., 2022).
Keynesian Economics theory: This is the theory who are working on the basis of the
assumption that wages and the prices of goods are fixed and the employees also having the major
focus so that they can ensures the better working within the organisation within the aim of
having more profits and revenue. The first factor is the aggregate demand that is having direct
impact on the profits and the outcomes which is related to the macroeconomics and also includes
the reduction in context to the consumption to the spending power of the individual. Other factor
is related to the prices and the wages which is having the major consideration in the market and
also having the direct impact over the profitability of the company.

Contemporary Economic Theories
Behavioural theory: These are the factors which is given by Richard Thaler and also
having the better combination of psychology and the economics so that they can effectively
understand the reasons for the better behaviour given by the individual and the people who are
living in the real world. In relation to Finery, they can effectively evaluates the behaviour of the
employees in context to the employees as this is helpful in making the better communications
benefits. At the time of pandemic, it is the theory that is basically given by the people who is
having the sole aim of generating more profits by lowering the overall cost which is being sent
on big data(Achiume and Lake, D., 2022).
Nudge theory: These are the economical concept that is having the indirect suggestions
with the effective enforcement in order to have the reflective behavioural of the people foe
having better decision making. In context to Finery, They are analysing the results and this can
be applied nudge theory by which they can rightly understand the environment in order to have
the automatic cognitive process foe the better results. In the time of pandemic, they can have the
betterment of the theories by which they can right use the people with their more control for the
financial considerations.
CONCLUSION:
It is concluded from the above report that organisation is operating their business in the
economy and the demand and supply are the two major aspects which are sustaining in the
market and also ensures the flow of goods and services to their prospective buyers. There are
various emerging theories which are sustaining in the market so that they can have the better
consideration that includes the Keynesian economics theory, behavioural theory and Nudge
theory that all are contributing to the growth of the business.

REFERENCES
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