Contemporary Economic Analysis BM533: Demand and Supply Report

This report provides a comprehensive analysis of demand and supply principles within the context of microeconomics, specifically addressing the challenges faced by Familymart Groceries. It begins with an explanation of the law of demand, illustrating its movements and fluctuations through examples, tables, and diagrams, and identifies the factors that influence the demand curve, such as consumer income, taste, advertising, and customer expectations. Similarly, the report explains the law of supply, its movements, and the factors affecting the supply curve, including technology, company objectives, government schemes, and raw material prices. The report also includes graphical representations to illustrate changes in both demand and supply curves. Finally, the report compares and relates traditional and modern economic theories, such as Adam Smith's theory, and their application to modern business practices, providing insights for effective economic decision-making within Familymart Groceries. This report offers a detailed guide to understanding microeconomic concepts and their practical implications for business operations.

BM533 Contemporary
Economic Analysis

Table of Contents
INTRODUCTION...........................................................................................................................1
Task 1...............................................................................................................................................1
1. Determination of Law of demand movement and fluctuations in demand curve with
influencing factors.......................................................................................................................1
2. Determination of Law of supply movement and changes in supply curve with influencing
factors..........................................................................................................................................4
TASK 2............................................................................................................................................7
Economic theories.......................................................................................................................7
CONCLUSION..............................................................................................................................10
REFERENCES .............................................................................................................................11

INTRODUCTION
This report mainly discusses about the changes which are currently faced by Familymart
groceries in its daily sales and they identify the best solution to deal with that issue. On the other
side, company hire a recruited sales manager is not aware about the concept of microeconomics
which basically includes the shift in demand and supply of the business(Jankovic, 2020). So, on
that basis company want to know the meaning of law of demand along with its demand curve
and it also show the factors which effect the demand curve of the firm. In another step
organization want to the meaning of law of supply along with its supply curve and also wanted to
know about those factors which effect the supply curve of the business. In last step company
need a comparison and relation between two modern theories of business practices.
Task 1
1. Determination of Law of demand movement and fluctuations in demand curve with
influencing factors.
Law of demand : This is the theory of microeconomics which mainly shows the demand
for goods and services at a given price. In general, the law of demand express that the price of a
commodity and the demand of commodity have an opposite relationship. If the prices of a
commodity increases then the demand of the commodity decreases on the other hand, if the
prices of the product decreases then the demand of the product increases. When applying this
elements of economic in microeconomics and macroeconomics, economists estimate that only
the price of the commodity changes and all other factors which influence the demand of the
commodity (which includes income of consumer and taste and preference) remain
constant(Marx, 2022). There are some examples of law of demand which are as follows:
Price of commodity falls, demand increases: If familymart groceries sell mangoes for 2 dollar
each and the other day they decide to have a sell on mangoes and decrease the price of mangoes
to one dollar each. On that basis law of demand theory say that the less price of the commodity
would encourage more people to purchase mangoes. Including those peoples who would not
normally purchase at the more value.
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Price of commodity increases, demand decreases: If grocery store increase the price of apples to
earn high profit on their sales then law of demand state that on this price few peoples purchase
apples. So, it basically means the demand of apples decreases(Halling, Yu and Zechner, 2020).
Price of commodity remain constant, demand remain constant: If Familymart use various of
prices to sell watermelon and has identified that they make the high profit by selling a
watermelon at one dollar each and the demand still increases at that price. On that basis, the price
and demand of the watermelon remains the same.
From the above explanation of law of demand state the reason of daily changes in sales of the
familymart groceries is the price fluctuation of their commodity. Sometimes it sell their product
at high price or in lower price which create changes in demand of the product also. So, the best
solution to deal with the problem is it necessary for the firm to stick on the one price. They can
tested many different prices for their product and has identified that in which price company get
earn more profit, with demand remaining high at that price. Then price of their commodity
remains the same and demand remains the same(Hamory and et.al., 2021).
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Factors which influence the demand curve of Familymart groceries:
 Income of consumer: The demand of a commodity is mainly depends upon the income of
consumer. If consumer income is high then it purchase more and the demand for the
commodity is also high but in case if income of the consumer is low then it purchases
less and demand for the commodity is also decreases.
 Taste and preference of the consumer: This is one of the most important factor which
creates an impact of the demand of the commodity. If taste and preference of the
consumer in some particular product is higher then its demand would be higher and the
demand curve also lie at a higher stage. Basically the taste and preference for various
commodity fluctuated and it shows the result of changes in demand for them(Alok,
Kumar and Wermers, 2020).
 Advertisement expenses: This promotional technique of the firm which helps to promote
the sales of the product is an important factor to identify the demand for a commodity.
The main objective of the advertisement is to influence the consumer in favour of the
commodity. Advertisements are shown in various media which involves newspapers,
television and radio. Advertisement are repeated so many times so that customer are
influence about their good quality. When advertisements prove themselves better then its
cause an increase in the demand for the commodity.
 Customer expectations with respect future prices: This factor in economics also influence
the demand for commodity is customers expectations with respect to the future price of
the product. In some cases consumer estimate that in the near future the prices of the
product would increases, then in the present they would purchase the more quantities of
the commodity so in the future they no need to pay higher prices. On the other hand if
consumer expect that the price of goods decreases in future, then in the present they will
postpone to consume the goods that means the demand for the product will decrease in
present(Yuelin, Yujie and Xiaohui, 2021).
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Changes in demand curve:
2. Determination of Law of supply movement and changes in supply curve with influencing
factors.
Law of supply: This theory of microeconomics is fundamental concept of the law of
supply that show the supply at a given price. The law of supply is basically means that when the
price of goods increases then the supplier will also increase the supply of the product. Similarly,
if prices of the product decreases then the quantity of the product they will supply is also
decreases. When applying the law of supply concepts, economists estimate that when the price
fluctuated all other factors who affect the supply which involves (consumer mindset and cost of
material) are remain same. On a graph with quantity show the dependent variable on the
horizontal axis and price show the independent variable on the vertical axis, the law of supply
create an upward slope is know as supply curve. Which basically show the relationship between
the cost of a commodity and the amount of quantity that suppliers can supply(Igami and Sugaya,
2022).
The law of supply is closely related to the law of demand, which state that increases in price
leads to decrease in demand, and decrease in prices leads to increase in demand. The customer
demand curve is graph showing the relation between the cost of product and customer demand it
is a downward sloping curve and cut the supply curve at the market equilibrium point, it's happen
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when the demand for a commodity and the supply are same. There are three examples for the law
of supply which are as follows:
when the price of the commodity increases, then supply increases: if prices of the apple in
familymart grocery store is high then the supplier also increase the supply of apple that means it
harvest more and work overtime to increase the supply of apples and offer more to the public.
When the price of the commodity falls, then supply also falls: If the price of the mangoes in
familymart grocery store is decreases then the harvester less harvest and it decrease the supply of
mangoes in the market.
Different price, for the different suppliers: If a employer offers employees time and half pay for
overtime hours, then it increase the productivity of the workers and more willing to supply with
more overtime hours; if a supervisor offer a more pay for overtime hours, then workers will
supply in less overtime hours(Alhassan, 2018).
From the above explanation of law of supply state that the reason of daily changes in the sales of
grocery store is the price changes of their product. If company sell their products sometimes in
high price or in low price then it's create the fluctuations in the supply of the product also. If
price of the product increase then supply increases. Similarly, if price of the product decreases
then supply also falls. So, the best solution to deal with the problem company need to fix its price
of the commodity or it can say that in equilibrium price in which company get more demand and
good supply as well. So it can reduce the fluctuations in sales of the organization.
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Factors which influence the supply curve of the familymart grocery store.
 Improvement in technology: If new technology is coming into the market then it create
less cost to produce and increase the profit in the available price and the supplier produce
more and work overtime to supply more in the market. In case of familymart groceries
they need to use some innovative technology to increase their sales like innovative
packaging of the product(Jankovic, 2020).
 Company targets: Generally, the supply of the commodity move towards the higher
prices. Which means higher supply assist to fulfil the objectives of the firm and
maximisation of profit.But some organizations sell their goods in less prices that could
not increase the firm profit. These are the companies which are not focusing on the profit,
they only want to maximise the organization goodwill and its growth in the economic
market.
 Government schemes: The government of economy always set their policy in terms of
market activities. It includes some government policies like taxes increase the cost of
manufacturing of the organization and it reduces the supply of the firm. Thus, it reduces
the profit margin of the organization. But in some cases government schemes are also
useful when it provide tax relaxation and subsidies it also increases the quantity supplied
and create high profit for the firm.
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 Price of raw material: It describe the impact of raw material in profit making . The firm
necessary to increase the raw material for producing the finished products. Raw material
create an impact on the company profitability if the price of raw material which are using
to increase in the manufacturing of the products(Fackler, Mueller and Stegmaier, 2021).
If this situation happens in the market, then firm sell low commodity. This familymart
groceries business going through from this factor at the time of production.
Change in Supply Curve:
This digram show the changes in the technology and innovation, cost of production, price of
Raw material, prices of other product and government policies.
TASK 2
Economic theories
The elements and ideologies which leads and manage the changes in environmental
factors to maintain the consistency in economic development. These theories provide facility of
interest rates, government involvement in order to their rules and obligations and other factors of
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an economy(Wright and Phan, 2020). The managers of organization Familymart groceries has
used traditional and modern economic theories in relation to the modern practices which are
given below:
Traditional economic theories
Economic theory of Adam smith – This type of theory is discovered by Adam smith
under the idea that markets be possible to work better if there is no government involvement.
Adam smith clearly include in its theory about how the resources of countries would normally
better use by logical people and consider government involvement as potentially devastating to
economic development.
When government demoralised international trade, then the smith's laissez-faire concept to
economic policy and procedure come into the existence. The monopoly control of equal group as
well as policies which related to the direct commerce which are involved by government was
argued by smith. In this theory, it specify that the generation advantage for the country by
permitting individual to choose how to use their money, labour, land and equipments an how
they saw the procedure of fit. This theory recommend that to become result in a self-organising
system, it is good to permit individual to pursue their own interest.
Keynesian economic theory – This is the theory of macroeconomic which describe in detail
about the overall spending in the economy and its impact on outcomes, employment and
inflation. This theory was introduced by the british economist john maynard keynes during the
period of 1930s in an attempt to know the great depression. Keynesian theory is analysed as
'demand side' theory that express the changes in economy in the short duration. It recommend
that if overall demand in the economy fell, the resulting weakness in jobs and production would
bring out a reduction in price and wages . The usage of this theory in organization familymart
groceries is involved when the government of any country increase the supply of resources then
it will give an outcome in an increase in demand of commodity(Caruso, Canon and Mueller,
2021). This keynesian theory can be taken into consideration by familymart groceries is an
exclusion to demand law which says that if the price of products increases then similarly, there
will be reduction in demand of them or vice-versa. In comparison to the organization familymart
groceries, this theory is advantageous for increasing the opportunities of employment, decline in
inflation rate which leads to reduction in prices and decrease in rate of interest as well.
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Modern theories
Nudge theory: This theory of nudge is recommending the influence of short advised and
positive argumentation on customer behaviour. Leading of nudge theory criticised that the
placing of nudges is very crucial aspect of a firm as if nudges are better placed then, they may
decline the market failure, save the money of government and assist in increasing the
productivity of funds use. With the application of nudge theory in familymart groceries, the
organization promotes desirable actions as well as improve productivity in order to uses of funds.
Behavioural theory: This theory is developed by Richard Thaler which has a better composition
of psychology and economic factor(Khrapkina, Kobets and Stratonov, 2021). In firm familymart
groceries, application of the theory in business practices use of shortcuts or rules of thumb for
making fast decisions. In modern world, companies initiate for knowing that customers are
irrational and apply the theory for decision-making policies of organization which creates
shareholders value while when done productively.
Comparison and contrast
In the business of familymart groceries, the application of traditional theories are
complete with the assumption that logical people devise rational opportunities with a main aim
of increasing economic welfare. Similarly, this theory are applied for considering such
circumstances which includes spending, taxation policies and borrowings from fiat currency
which are completely controlled and not operationally affected through revenues of federal
government.
By using the traditional and modern theories on the familymart groceries, it can be concluded
that there is one factor is same in all these theories as they are somehow useful in seperate terms
according to the status and components of the organization and sanctioning managers and
analysts for knowing macroeconomics problems in the economy.
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CONCLUSION
As it is concluded from the above report familymart groceries business need to stick in
one price of the product to stop the changes in the sales. Because the prices of the commodity
affect the demand and supply of the firm. So, company necessary to fix the price of the
commodity in which company having higher demand of their product and more supply as well.
In another task it discuss about some important theories of economics which are used in 20th and
21st century in the economy.
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REFERENCES
Books and Journals
Jankovic, I., 2020. What’s Left—The Influence of the Psychological School. In Mengerian
Microeconomics (pp. 181-214). Palgrave Macmillan, Cham.
Marx, P., 2022. An absolute test of racial prejudice. The Journal of Law, Economics, and
Organization. 38(1). pp.42-91.
Halling, M., Yu, J. and Zechner, J., 2020. How did COVID-19 affect firms’ access to public
capital markets?. The Review of Corporate Finance Studies. 9(3). pp.501-533.
Hamory, J and et.al., 2021. Reevaluating agricultural productivity gaps with longitudinal
microdata. Journal of the European Economic Association. 19(3). pp.1522-1555.
Alok, S., Kumar, N. and Wermers, R., 2020. Do fund managers misestimate climatic disaster
risk. The Review of Financial Studies. 33(3). pp.1146-1183.
Yuelin, L., Yujie, L. and Xiaohui, S., 2021. Disrupted Class, Undisrupted Learning: A Study on
the Effect of Online Learning Among Primary and Middle School Students. Studies in
Microeconomics, p.23210222211024436.
Igami, M. and Sugaya, T., 2022. Measuring the Incentive to Collude: The Vitamin Cartels,
1990–99. The Review of Economic Studies. 89(3). pp.1460-1494.
Alhassan, K., 2018. Energy-poverty nexus: Conceptual framework analysis of cooking fuel
consumption in Ghanaian households. Developing Country Studies. 8(11).
Jankovic, I., 2020. The Demise of the Caldron and Laddle Model: Psychological Theory of
Distribution. In Mengerian Microeconomics (pp. 83-115). Palgrave Macmillan, Cham.
Fackler, D., Mueller, S. and Stegmaier, J., 2021. Explaining wage losses after job displacement:
Employer size and lost firm wage premiums. Journal of the European Economic
Association. 19(5). pp.2695-2736.
Wright, M. and Phan, P., 2020. Opportunity: is there a future in the construct?. Academy of
management perspectives. 34(3). pp.297-299.
Caruso, G., Canon, C.G. and Mueller, V., 2021. Spillover effects of the Venezuelan crisis:
migration impacts in Colombia. Oxford Economic Papers. 73(2). pp.771-795.
Khrapkina, V., Kobets, V. and Stratonov, V., 2021. Market Dynamics of Ensuring Financial
Security and Sustainable Development of Enterprise. Studies in Microeconomics,
p.23210222211024382.
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