Contemporary Business Economics: Analysis of Demand and Supply

This report provides a detailed analysis of demand and supply in contemporary business economics. It explains the law of demand and supply, including movements along and shifts in the respective curves, and the factors influencing these changes. The report also compares economic models and theories from the 20th and 21st centuries, relating them to modern business practices. Furthermore, it touches on macroeconomic issues such as unemployment and inflation, and discusses Keynesian economics, highlighting their relevance to today's business environment. The study emphasizes the importance of understanding these concepts for business growth and success, particularly in relation to resource management and policy-making.

Contemporary Business
Economics CW

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1.1 Explaining the law of demand, movement along the same demand curve and
changes in demand curve with its factors............................................................................3
1.2 Explaining the law of supply, movement along the same supply curve and
changes in supply curve with its factors...............................................................................5
TASK 2............................................................................................................................................8
CONCLUSION.............................................................................................................................10
REFERENCES............................................................................................................................12

INTRODUCTION
In economics, demand and supply have an important relationship because both
of them together determine the quantities and cost of most of the services and products
which is available in a business market. In today’s business environment, supply and
demand plays a vital role thus every company needs to understand the concept of
demand and supply and its impact. The present study will provide detailed information
about law of demand and law supply with the help of chart. It is necessary to
understand demand and supply analysis because it shows the growth and success of
most businesses in today’s world. Furthermore, the study will compare models and
theories in 21st century with those of the 20th century contemporary economic. Also it will
relate both of them to modern business practices.
TASK 1
1.1 Explaining the law of demand, movement along the same demand curve and
changes in demand curve with its factors.
Law of demand
The law of demand is one of the most important business concepts in
economics, it states that at high price of products or services customers will demand a
low quantity of a product or service. For example- if in a retail industry, a businessman
sells a good at high price, then the demand for that good goes down. Whereas, if the
they want to sell a product at low price then the demand goes up. According to (Alemi
and et.al., 2018)., this occurs just because of diminishing marginal utility, which means
when the customers utilize the first units of an economic products they buy to serve
their preferences. The demand of goods changes as a result of change in the cost of
goods, hence, there are many factors determine the position or demand curve level of a
goods.
Movement and shift along the demand curve
In today’s business world, one can expect the changes in the demand curve
based on factors like: a change in the number and demand for products. So, all the
marketers can understand the movement of curve on the basis of demand and number
of goods and their changing behaviour. In the following graph, it has been noted that all

factors other than quantity demanded remain unchanged. Hence, the graph moves
along the y axis as the goods price is plotted against it.
Shift in the demand curve
There are few factors that impact the shifting movement in the demand curve
such as increase in demand quantity due to goods popularity, increase in the price of
competitive product, increase in the income of customers and other factors depending
on the market condition or economic condition.
Factors shift the demand curve to a new position
It has been said that change in the price of goods can be reflected in movement
along the same demand curve. In other words, demand curve shifts due to changes in
customer needs and wants, their income earnings and economic development and
growth.
Needs, preferences and tastes of the customers
This is the most important factor which can impact the demand of products or
services, if the customers’ needs and wants changes, then it will affect the demand
curve. In other words, when the taste and needs of customers are greater, its demand
would be large and its curve will move at a higher level as shown in the figure. Due to
many factors the tastes and needs for different goods changes and as a result there will
be change in the demand curve. Factors examples- fashion, economic condition,
income of people, advertisement pressure and selling strategy of other company.

Hence, when certain products go out of fashion, then they are no longer in the list of
customers and their taste and needs remain unfavourable, therefore demand for goods
decreases.
Income of customers
The demand curve moves due to income of the people, demand for products
depends on the purchasing capacity. According to , The higher the income of the
customers, the greater will be the demand for products. Hence, the demand curve shifts
upwards due to rise in the income of customers and demand will increases.
In other words, purchasing power of people is depended on the income they
earn. So Tesco plc has to understand the concept of demand curve and its movement
along the curve with factors affecting demand. Therefore, when incomes of the
customer increase, they can easily afford to purchase more goods as per their
requirements. Hence, increase in the earning of people has a positive impact on the
good demanded by the people.
Customers’ expectations with regard to future prices of goods.
In business economics, the another factor which influences the demand of
products is customer’s expectation with respect to price of goods in the future.
Nowadays, customers expect that in the future cost of products would increase, then in
the current situation (Zhen, Huang, and Wang, 2019). They would demand large
quantities of products so that they should not have to pay for the same good high prices
in the future. In the same way, if the customer expect that the cost of goods will
decrease in the near future, then in the current situation they will postpone their
purchase.
1.2 Explaining the law of supply, movement along the same supply curve and changes
in supply curve with its factors.
Law of supply
In economic, the law of supply means when all other factors being equal, as the
cost of products increases, the quantity offered by suppliers in the market will increase
and conversely. In the economic condition, when the price of goods goes up, then
market suppliers will make sure to maximize their profits by increasing the quantity to
customers. In other words, the supply curve will show how the quantity supplied by

suppliers will respond to different prices over a time period. It is just because marketers
seek to rise revenue, whenever they expect to receive greater price of goods, they will
produce more for profits.
The supply curve is upward sloping because, in today’s market suppliers can
choose about their production of goods and later launch it to market. The supply curve
movement is depended on the customer demand for goods and how they set the price.
Therefore, sellers can only charge what the business market will bear.
It has been noted that if the customer demand for goods rise, the price will also
increase, and then suppliers have to choose about new resources to production of
goods. In the competitive market the Demand for goods ultimately sets the price as the
supplier response to the cost. According to (Jarsulic, 2019), law of supply works with the
low of demand in order to explain how market condition and economies allocate
different resources and hence determine the cost of products. For example- a retail
industry Tesco will make more food items if the price of those food increases. In other
words, the company might supply 1 million food items if the cost is $100 each, but if the
price increase to $200 they might supply 1.5 million food items.
Change in supply of goods
In law of supply, change in supply refers to shifting of line either to the right or
left, therefore, it is said that an increase and decrease in the quantity supplied by
supplier that is being paired with low or high price of goods.
Change in supply of goods leads to a shift in the curve of supply, which can
affect the market position of company and cause an imbalance in the business world.
An increase in the change in supply shifts the curve of supply towards right, on the other
hand, decrease in the supply change shifts the curve left.

Factors that can cause a shift in supply curve
The changes in the prices of inputs in the process of production will impact the
price of production and thus the supply curve. The following factors cause a various
quantity to be supplied at any price given, which include:
changes in technology
In today’s world, supply of goods is also influence by progress in the technical
progress or changing in technology of production. In manufacturing industries, this
factor plays a vital role in supply curve movement. Hence, the purchasing power and
supply of goods is totally depended on innovation and technology. As people are more
attracted towards new techniques and technology world, the firm needs to discover and
improve technique of production while launching new goods. For example- according to
law of supply, if a technology decreases the price of gaming console manufacturers
production, the consoles output will increase. On the other side, if the price of consoles
falls, then it will create greater demand and hence overall sales of gaming consoles in
the marketplace.
government policies and regulations
If there is a change in polices made by government, then cost of production and
supply curve will get affected. Fiscal policy can impact the supply curve, because a
higher import duty of goods will restrict the supply of goods.
natural conditions
nowadays, the cost of production for many industries goods will be impacted by
the changes in natural calamities or conditions. For example- in agriculture field, if the

price of agricultural goods decreases then it will shift the supply curve to right means
quantity of goods will be supplied by supplier at lowest.
TASK 2
In today’s world, economics matters a lot, hence business industries need to
understand the concept of economics and theories. The models and theories used by
company to tackle global issues and manage things is based on how company utilizes
its resources. In business economics, students are being taught about the challenges of
21st century- from natural calamities, change in climate to financial crises- these factors
are shaping up to be a disaster.
Years ago, when the students learn economics, they believed it would empower
them to help handle challenges which is related to society and environment. But like
many of today’s business environment, students deal with real world economic
challenges.
Macroeconomic issues
There are many reason from which the market gets affected. It has been said
that when the product price goes up, it affects the purchasing power of customers,
willingness to pay and other elements also. In order to stabilize the economic condition,
the government has to make policies such as monetary and fiscal. Macroeconomics is
the set of business economics that studies the overall economy. This concept is totally
different from the concept of microeconomics, which focus on individuals and how they
make important decisions related to business economic. By understanding the factors
which influence macroeconomics, marketers can know about the overall health of
economy. Nowadays, macro economists try to forecast economic and market conditions
in order to help firms, industries and governments make good decisions.
Unemployment- unemployment rate will highlight about how many people from the
available pool of labour market are unable to work. When the labour is not able to find
work then unemployment rate tend to be low. This situation occurs because with an
increase in GDP levels, the output is higher and more labourers are needed to keep up
high production levels.

Inflation – It is necessary for Tesco look at inflation rate while making decisions,
because this is the most primarily factor that influence the demand and supply of goods.
With the help of customer price index and gross domestic product, inflation can be
measured.
Keynesian economics
This is the most popular macroeconomic theory which was developed by john
Maynard Keynes who was British economist. This theory shows the economic situation
based on of total spending in the business economy and its impact on employment,
inflation, national output. When Keynes was studying about the great depression during
the 1930s, he invented this theory. It is considered a demand side theory that
concentrate on economic changes over the short run (Beker, 2019). This theory
separate the markets based and study of economic behaviour on individual incentives
from the understanding of national economic variable.
In order to stimulate demand and pull, Keynes advocated for lower taxes
regulation and increased government expenditures. He has given a new way of looking
at inflation, output and spending. According to Keynes, economic output creates profit
opportunities that marketers would have an incentive and by doing so they can easily
balance business in the economy.
On the basis of Keynesian economics, if demand decreases, then jobs would
decline in wages and prices (Sparkes and Wood, 2021). He argues that a lower inflation
level would induce employers to make more investments and provide jobs to more
people, hence it will restore economic development and growth.
Keynes also argues against construction of classical theory, that at the time of
recessions certain business of market would cause demand. Lower wages can restore
employment as whole because labor demand curves slope downward which is different
from any other curve. He also said that in the company employers will not add new
employees to production process of products that cannot be sold by them ( Pekkarinen,
2020). Because demand for their goods is weak and hence impact the business
conditions. It will change the decision about the capital investment and thus companies
reduce their investment related to capital. This step would have the impact of reducing
overall employment and expenditure.

He also told about idea of saving so that people can live their life greatly and
helpful for education and retirement purpose. Keynes says that the government was in a
good position than marketplaces when it became robust economy.
Nudge theory
This theory is the most famous theory of 21st century, developed by Richard H
Thaler and Cass R Sunstein. This concept tells about behavioural economics, sciences
that shows positive response and indirect recommendations as ways to influence the
decision making and behaviour of individuals.
This theory is based on the technique an idea that by shaping the business
environment in a positive way, that one options has been chosen by the people. This
theory says about the ability of a people to maintain and manager freedom of choice
and to feel this factors. Therefore, they can easily control their decision making process
throughout their life (Wang and et.al., 2020). In other words, customer purchasing
behaviour can be instantly influenced by small recommendations and positive response
of people. This theory shows the importance of customer behaviour and its purchasing
power along with reinforcements. It has been noted that well placed nudges can
decrease market failure, save the money of government and motivate desirable actions
which is helpful to increase the resource efficiency.
According to (Kim and Hyun, 2021), argue this nudges can be misused by people
and may become a way to motivate customers to purchase products they don’t want to
buy. With the help of this theory, one can improve choices and make public service
more effective in nature. It will improve outcomes by introducing a human behaviour
model and says to focus on use of technology (Nudges, 2022). Lastly, it will make
people understand to make better decisions for themselves after understanding insights
of human behavioural units.
CONCLUSION
To conclude, supply and demand analysis plays an important role in the business
space, as it shows the relationship between the commodity quantity that producers wish
to sell at different prices and goods quantity that customers wants to purchase. Both
determine the quantities and prices of most products available in business market.
furthermore, the report has concluded that there are various factors that influence the

demand and supply curve. Factors which can shift the demand curve and movement
are income of people, advertisement pressure, trends and price fluctuations. With the
help of nudge and Keynesian economics theory, one can understand about the
contemporary economics.

REFERENCES
Books and Journals
Alemi, F. and et.al., 2018. What influences travelers to use Uber? Exploring the factors
affecting the adoption of on-demand ride services in California. Travel Behaviour
and Society. 13. pp.88-104.
Beker, V. A. ed., 2019. Alternative Approaches to Economic Theory: Complexity, Post
Keynesian and Ecological Economics. Routledge.
Jarsulic, M., 2019. Effective demand and income distribution: issues in alternative
economic theory. Routledge.
Kim, H. L. and Hyun, S. S., 2021. The anchoring effect of aviation green tax for
sustainable tourism, based on the nudge theory. Journal of Sustainable
Tourism. 29(7). pp.1082-1097.
Pekkarinen, J., 2020. 12. Keynesianism and the Scandinavian Models of Economic
Policy (pp. 311-346). Princeton University Press.
Sparkes, M. and Wood, J. D., 2021. The political economy of household debt & the
Keynesian policy paradigm. New Political Economy. 26(4). pp.598-615.
Wang, H. and et.al., 2020. Blockchain-based data privacy management with nudge
theory in open banking. Future Generation Computer Systems. 110. pp.812-823.
Zhen, L., Huang, L. and Wang, W., 2019. Green and sustainable closed-loop supply
chain network design under uncertainty. Journal of Cleaner Production. 227.
pp.1195-1209.
Online
Nudges. 2022. [Online]. Available through: <
https://www.economicshelp.org/blog/glossary/nudges/ >