BM533 Contemporary Economic Analysis: Demand, Supply & Theories

This report provides an analysis of demand and supply, focusing on the laws that govern these economic principles. It explains how demand and supply curves function, detailing the factors that cause movement along and shifts within these curves, using Marks & Spencer as a case study. The report further compares 21st-century economic theories with those of the 20th century, highlighting their relevance to modern business practices. It examines the influence of variables such as price, consumer income, and market factors on the demand and supply dynamics, offering a comprehensive overview of contemporary economic analysis. Desklib provides a platform for students to access this and other solved assignments and past papers.

BM533 Contemporary
Economic Analysis

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK 1............................................................................................................................................3
1. Give an explanation of the law of demand, how the demand curve moves, and the variables
that influence how the demand curve evolves........................................................................3
2. Give a succinct explanation of the law of supply, the movement along the supply curve, and
the variables that affect and cause changes to the supply curve.............................................7
TASK 2..........................................................................................................................................12
1. Compare and analyse the various economic theories of 21st century contemporary
economics and the theories of 20th century to the modern business practises. ..................12
CONCLUSION .............................................................................................................................14
REFERENCES .............................................................................................................................15

INTRODUCTION
Demand and supply are two of the most essential concepts of economics. They build for
the base of the law of demand and supply which define the quantity demanded and supplied in
the market at different market situations (An, 2020). In this report an explanation of the
economic laws of demand and supply are explained briefly to give an overview of the concepts.
The company taken in the report to assist in the explanation of these economic concepts is Marks
& Spencer. There is an explanation for the different changes along the demand and supply curves
of Marks & Spencer in the form of movement and shift along the curve. The various factors
which affect the demand and supply curve and cause movement and shift in the demand and
supply curves of the company taken are also mentioned. Further in the report, few of the
emerging theories and models of the 21st century contemporary economics are also mentioned
and compared with those of the 20th century models.
TASK 1
1. Give an explanation of the law of demand, how the demand curve moves, and the variables
that influence how the demand curve evolves.
Demand: It is the inclination of people to buy products and their willingness to pay a certain
price for a given object or service. When it comes to demand, a price hike causes a fall in
product demand and conversely, all other things being equal.
Law of demand:
In accordance with the law of demand, a rise in a product's or service's price causes a drop
in demand for such merchandise or service, all those other things being equal. The law is based
upon the most crucial needs of consumers and the respective demand of those customers for
those products and services which fulfil these demands. According to this law, price and demand
are inversely related to each other (Byrne, 2018). Thus, when a product's price increases, demand
decreases, and when a product's price decreases, demand increases.

Changes in demand curve: It refers to the changes that occur in the demand curve due to
various factors relating to the product including the price of the product. The other factors
include price of substitute goods, availability of substitute goods, consumer income and tastes
and preferences of the customers. Mobility and transition in the demand curve are the two
distinct methods that the demand curve changes. A shift in the demand curve causes certain
fundamental changes in the demand and supply of the products, which have an impact on the
amount demanded at a similar price. A movement is induced by changes in the product's price
(Conroyand et.al., 2022).
Factor affecting demand and causing drive alongside the demand curve:
The mobility along the demand curve takes place solely due to the changes in the price of
the products and is correspondingly recognised as modification in quantity demanded. This
happens as the quantity demanded for a product in the market changes with the change in the
Illustration 1: Demand curve for Marks and spencer for Women wear range

prices, keeping all the other factors constant. It results in a movement in the demand curve for
the quantity demanded. The movement can either be an upward movement or a downward
movement along the demand curve. The important aspect is that all the other factor remains
constant as the movement along the demand curve only takes place due to change in the price of
the products.
Explanation of the movement:
 Demand for the women wear products of marks and spencer decreases from volume Q2
to Q1 when the price of those products rises from P2 to P1. This decrease in the quantity
demanded for the women wear products causes the demand curve to go upward (Ghosh,
2021).
Figure 1: Movement in Demand Curve of Marks & Spencer for
women wear

 When the price for the women wear products of marks and spencer drops from P1 to P2,
the quantity demanded increases from Q1 to Q2. The demand curve shifts lower as a
result of this increase in demand for the women wear products.
Market Factors affecting demand and causing shift in demand curve:
The demand of products and services in the market gets affected by various market factors.
An analysis of all such factors is necessary to understand the product and services demand in the
market. Price of substitute product: The price of the substitute product is among one of the most
affecting factor for the demand of a product in the market. An increase in price of the
substitute product leads to the increase in the demand of the products of the company.
Whereas a decrease in price of substitutes leads to a decrease in the demand of the
products of the company (Ilyas and Ara, 2021). Tastes and preferences: The tastes and preferences of the customers in the market hugely
affects the demand of the goods in the market. The preferences of the consumer’s
changes on varying levels in the market due to various reasons. This occurs due to
reasons which are both internal to the company and some of the external factors also. Consumers income: The customer section with more money spends more on the
purchase of goods and services. The richer sections of the society spend a lot more as
compared to the middle class households due to the consumer income that they have. As
it plays a crucial role to provide individuals with the capacity to purchase the products
from the markets (Kovach, 2020).
 Availability of substitutes: The amount of product substitutes available in the market
highly determine the demand of the products of the company in the market. The price of
the competitors’ products, the availability of their products and the substitute relation
with the products of the company determine altogether the demand of the products that
will prevail in the market.

Explanation of the shift:
 The demand curve turns to the right when the level of household income rises, signifying
an increase in the amount demanded for the women wear products of marks and spencer
as a result of the higher level of consumer income (Kumar and Panda, 2019).
 With a fall in the level of consumer income leads to a left shift in the demand curve
showing a decrease in the quantity demanded for the women wear products of marks and
spencer and shifting the demand curve to the left.
2. Give a succinct explanation of the law of supply, the movement along the supply curve, and
the variables that affect and cause changes to the supply curve.
Supply: The economic idea of supply is the volume of commodities or services that are made
available to consumers. It had to do with the quantity of an item that was offered to consumers at
various costs.
Figure 2: Shift along the demand curve of Marks & Spencer for
women wear

Law of supply:
The law of supply states that keeping all the other factors constant, the increase in the
price of products leads to an increase in the supply of goods and services. As the quantity of the
product that the supplier offers in the market increases with the aim of profit maximisation
through increased sales (Laurent and Mallard, 2020). Due to this condition of an item price going
up, the supply increases with the sole aim of maximising the profits with an increased number of
sales expecting a higher revenue.
Change in supply curve: It refers to the changes that occur in the supply curve due to factors
other than the price of the product. The factors responsible for changes in the supply curve are
prices of the factors of production, government fiscal policies and goals and objectives of the
company. The changes in the supply curve are caused in two different ways as movement in the
supply curve and shift in the supply curve. A movement in the supply curve is caused by changes
Illustrati
on 2: Supply curve for Marks and spencer for women wear range

in the price of the product whereas shift in the supply curve brings some important changes in
the demand and supply of the products which affects the quantity demanded at the same price
(Lenhart, 2021).
Factor affecting supply and causing Movement along the supply curve:
Change in amount supplied is another name for the movement along the supply curve,
which is exclusively caused by changes in product prices. This occurs despite all other elements
remaining constant because the prices of the things on the market change. This modification is
shown as shifting along the same supply curve. The movement can either be downward with a
reduction in the supply of goods or upward with an increase in the supply, as appropriate.
Explanation of the movement:
 An upward movement along the supply curve is the result of the price rises for the
women wear products of marks and spencer in the market. An increases in the price leads
to an increased demand for the line of products of women wear among the female
customers of the brand in the market due to the rise in the quantity supplied to the market.
Figure 3: Movement along the supply curve of Marks & Spencer
for Women wear

 A downward movement in the supply curve is the result of a price decreases for the
women wear products of marks and spencer in the market which tends to move the
supply curve in a downward direction with the fall in the quantity supplied for the women
wear products of the brand (Luckhurst, 2018).
Market Factors affecting supply and causing shift in supply curve:
The supply of products and services in the market gets affected by different market components.
An analysis of all such element is essential to understand the product and services which needs to
be supplied in the market. Change in the prices of factors: The change in the cost of the production factors affects
the supply of the products in the market. So if the factors of production become costly,
the overall production cost increases leading to high final product prices affecting the
market supply of the product. If the production factors become cheap, the overall cost
decreases which makes the products cheap and hence the supply increases. Fiscal policy: The fiscal policy of the government hugely affects the supply of the
products in the market. As these factors are external and in the control of the government
of the country, the firm is not in any position to work upon these factors and hence the
supply gets affected.
 Goals and objectives of firm: In case of a price increase in the market, the supply of the
products in the market increases. This increase happens due to the objective of the
company for profit maximisation (Płonka, Kożuch and Stanienda, 2022). But there are
situations where the supply increases even when the prices are not high. It occurs in the
situation where the main objective of the firm is not profit maximisation but capturing
intensive market space.

Explanation of the shift:
 The supply curve shifts as a result of a change in other variables. The cost of the items of
women wear range of big data rises as a result of rising prices for the raw material being
used in production.
 A reduction in the cost of production elements' prices of the women wear products leads
to a rightward shift in the supply curve as the overall cost of production of the women
wear range decreases and hence the quantity supplied of them in the market increases.
Fig
ure 4: Shift in he supply curve of Marks and spencer for women wears

TASK 2
1. Compare and analyse the various economic theories of 21st century contemporary economics
and the theories of 20th century to the modern business practises.
The two major economic theories for comparing the models of 21st century contemporary
economics with the theories of 20th century are: Keynesian theory and neoclassical theory. Keynesian economics: The macroscopic economic theory of overall economic
expenditure and its impacts on production, employment, and inflation make up
Keynesian economics. It is also termed a demand side theory which puts more focus on
the changes that take place in a short period in the economy (Qinand, Stewart,2020). The
primary belief of this concept is that the intervention and involvement of the government
help in stabilizing the economy. It focuses on utilising the government policies and
interventions to direct the aggregate demand in the economy and restrict the economic
recessions that may occur. The two most essential tools utilised by this economic theory
are activist fiscal and monetary policy to control the economy and prevent and restrain
unemployment. The Keynesian economic theory has also been termed the theory of
depression economics as this theory was written in the times of deep depression. It has
been noted and said by the theorists of Keynesian economics that the economy needs an
active and strong intervention to stabilize and boost the demand in the economy to make
it stable s the economies cannot be balanced on themselves. The application and
implication of the theory explained above in the organisation of Marks and spencer
assists the organisation to generate an effective and efficient application of its activities
and desired results. The use of the Keynesian theory has enabled the company to utilise
the government policies and interventions for the benefit of its own. It helps the company
to stabilize and boost the demand of the products of the company in the economic
situation which prevails in the economy.
 Neoclassical Economics: It is a comprehensive theory that emphasises the ideas of
supply and demand as the driving forces underlying the ideas of production, price, and
consumption of goods and services. The economists of the neoclassical theory believe
that the prime factor in deciding the value of the price of any product is the consumer's
perception of the product (Sánchez, 2018). The assumption of the neoclassical concept is
the utility provided to the customers is the most crucial factor in calculating the value of

the products and services and not the production cost. According to them, the difference
between the retail price of the product and the actual cost of production is known as the
economic surplus. It is also believed by this theory that strong competition results in an
effective resource allocation in the economy and the establishment of the market
equilibrium by the market forces of demand and supply (Stork, 2021). The utilization of
the Neoclassical economic theory which has been justified above assists the organisation
of Marks and spencer to generate an effective and efficient application of its activities
and desired results. The Neoclassical Economical theory guides and assists Marks and
spencer to analyse the value which is associated by the customers for the company's
products and evaluate the utility that the customer receives from the purchase and uses of
the products of the company. It helps Marks and spencer in effective pricing of its
products and generate efficient profits by maximising the revenue through correct pricing
of products.
In comparison with Keynesian economics with neoclassical economics, it is believed in the
later theory that the savings ascertain the investment. It says that the market equilibrium and
growth at its full employment potential should be the two primary precedencies of the
government in the economic context. The critics of the neoclassical approach in comparison to
the Keynesian theory believe that the former theory fails to accurately explain the actual
economics and its concepts. In contrast to classical economics, Keynesian theory justified that in
times when the economy is troubling the government should take the required steps to control
deficit spending in order to make up for the investment reductions and to boost and increase
customer spending for balancing the aggregate demand in the economy (Yotov, 2022).
According to Keynesian theorists, the failure of the government to intervene creates an unstable
and excessive displaced economic environment.

CONCLUSION
From the above report, it is clear that the laws of supply and demand are the two most
crucial economic ideas. In the context of Marks & Spencer, the laws of demand and supply are
briefly explained. The factors which affects the demand curve and the supply curve of the
company in relation to the various different factors are mentioned in the report with the
assistance of the respective graphs. Also the changes that take place in the graphs of demand and
supply with respect to the movement and the shift are given. The report also concluded upon
explaining and comparing the different economic theories of the 20th and the 21st century along
with the contemporary economic theories.

REFERENCES
Books and Journals
An, M.Y., 2020. Economic Dependence, Gender-Role Beliefs, and Housework Hours of
Husbands and Wives in Contemporary Korea. Journal of asian sociology, 49(2), pp.193-
218.
Byrne, E., 2018. Handbook of regions and competitiveness: contemporary theories and
perspectives on economic development. Competitiveness Review: An International
Business Journal.
Conroy, P.C., and et.al., 2022. Determining hospital volume threshold for safety of minimally
invasive pancreaticoduodenectomy: a contemporary cutpoint analysis. Annals of
Surgical Oncology, 29(3), pp.1566-1574.
Ghosh, J., 2021. Interpreting contemporary imperialism: lessons from Samir Amin. Review of
African Political Economy, 48(167), pp.8-14.
Ilyas, K. and Ara, A., 2021. Contemporary trends of vlogging in Pakistan: A content analysis of
popular vlogs. ILMA Journal of Social Sciences & Economics (IJSSE), 1(1), pp.74-91.
Kovach, E., 2020. Collapsing the Economic and Creative Values of Contemporary Literature in
Sheila Heti’s Motherhood and Ben Lerner’s 10: 04. REAL, 36(1), p.185.
Kumar, N. and Panda, R.K., 2019. Place branding and place marketing: a contemporary analysis
of the literature and usage of terminology. International Review on Public and Nonprofit
Marketing, 16(2), pp.255-292.
Laurent, B. and Mallard, A., 2020. Introduction labels in economic and political life: Studying
labelling in contemporary markets. In Labelling the Economy (pp. 1-31). Palgrave
Macmillan, Singapore.
Lenhart, O., 2021. Earned income tax credit and crime. Contemporary Economic Policy, 39(3),
pp.589-607.
Luckhurst, J., 2018. The shifting global economic architecture: Decentralizing authority in
contemporary global governance. Springer International Publishing.
Płonka, M., Kożuch, M. and Stanienda, J., 2022. The Fourth Industrial Revolution and
contemporary technological, economic and cultural megatrends. In Public Goods and
the Fourth Industrial Revolution (pp. 7-34). Routledge.
Qin, H. and Stewart, M.G., 2020. Wind and rain losses for metal-roofed contemporary houses
subjected to non-cyclonic windstorms. Structural Safety, 86, p.101979.
Sánchez, V.M.G., 2018. Self-employment, knowledge and economic growth: An empirical study
for Latin American countries. Contemporary Economics, 12(4), pp.473-484.
Stork, J., 2021. State power and economic structure: class determination and state formation in
contemporary Iraq. In Iraq (pp. 27-46). Routledge.
Yotov, Y.V., 2022. On the role of domestic trade flows for estimating the gravity model of
trade. Contemporary Economic Policy.