BM533 Contemporary Economic Analysis: Demand and Supply - Familymart

This report delves into the fluctuations experienced by Familymart Groceries in its daily sales revenue, applying microeconomic principles to determine effective solutions. It explains the law of demand, detailing the inverse relationship between price and demand, and explores factors influencing the demand curve, such as customer preferences, advertising expenditure, income, and future price expectations. The report also elucidates the law of supply, highlighting the direct relationship between price and supply, and examines factors affecting the supply curve, including technological improvements, government schemes, company targets, and raw material costs. Additionally, it briefly touches upon economic theories. This analysis aims to provide insights for Familymart Groceries to stabilize its sales revenue by understanding and managing the dynamics of demand and supply.

Contemporary
Economic Analysis

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1 ...........................................................................................................................................1
Describe the law of Demand, movement along the same demand curve and fluctuations in
demand curve with influencing factors ......................................................................................1
Describe the law of Supply, movement along the same supply curve and fluctuations in
supply curve with influencing factors.........................................................................................4
TASK 2............................................................................................................................................7
Theories of economic..................................................................................................................7
CONCLUSION................................................................................................................................9
REFERENCES .............................................................................................................................10

INTRODUCTION
In this report it basically describe about the fluctuations which are presently faced by the
Familymart groceries business in its day to day sales revenue and it determine the perfect
solution to deal with that problem. Apart from this company already hired a sales manager which
is not understand about the basic concept of microeconomics. In the concept of microeconomics
it includes the shift in demand and supply of the company(Althaus, Cizmar and Gimpel, 2009).
So, on that basis firm need to understand the meaning of law of demand with its demand curve
which show the movement of commodity prices and demand as well. In other instance firm need
to know the meaning of law of supply with its supply curve which indicates the movement of
prices and supply of the product. Along with this it discuss about some factors which influence
the demand and supply curve of the business. In another task company do the comparison and
show some relation between two modern theories of firm practices.
TASK 1
Describe the law of Demand, movement along the same demand curve and fluctuations in
demand curve with influencing factors .
Law of demand : The theory of microeconomics which mainly indicates the demand of
product and services at available price. Generally, the law of demand show that the product price
and the product demand have a inverse relationship. If the price of the product rises then the
demand of the goods declined Apart from this, if the price of the commodity reduces than the
demand of the goods rises . When using this principles of economic in micro and macro
economics , it evaluate that only the price of the goods fluctuated and all other components
which create an impact on the demand of the goods (it mainly involves customer income and
taste and preference) remain same(Awudu and Zhang, 2013). There are some illustrative
examples which mainly helps to understand it clearly the law of demand concept which are as
given below:
If the price of the product decline, then demand rises: The company familymart groceries
sell apples for 3 dollars each and the another day it decide to sell apples and decrease it price
from 3 dollar to 2 dollar each. So, on that basis the law of demand theory say that the reduction
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prices of the product would encourage more peoples to buy apples. Including those individual
also who would not buy at the high value.
If the prices of the product rises, then demand reduces: If familymart grocery store rise the price
of shoes to earn more profit on their sales revenue then law of demand say that on this value few
individuals buy shoes (Babich and et.al., 2012). So, on that basis the demand of shoes decline.
If price of the product remain same, then demand remain same: If familymart grocery store use
different prices to sell mangoes and has determine that they generate a more profit by selling a
mangoes at 2 dollar each and the demand of the commodity still rises on that price. So, on that
basis the price and demand of the mangoes remains constant.
The above description of the law of demand clearly state the reason of day to day
fluctuations in sales revenue of the familymart grocery store due to the changes in price of their
product. Generally, it sell their goods at high price or in less price which make fluctuations in
demand of the goods also. So, on that basis the better method to deal with that issue is it required
for the company to remain stick on the one price. They tested various prices for their commodity
and has determined that in which price firm can generate high profit, along with the demand
which also remains high at that value(Feizabadi, 2022). Then, in that circumstances price and
demand of their goods remain constant.
Factors which create an impact on the demand curve of Familymart groceries:
 Taste and preference of the customer: This factor of microeconomics influence the
demand curve of the familymart grocery store. The demand of the product are affected
due to the changes in taste and preference of the customer. If the consumer taste and
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preference for some specific good is more then its demand would be more and the
demand curve also move at the higher level. Generally, the taste and preference for
different products are changed and it indicates the result of fluctuations in demand for
them(González-García and et.al., 2020).
 Advertisement expenditure: This is one of the best promotional technique to promote
their business through various channels. It is the important component to determine the
demand of the product. The main goal of every advertisement is to influence the
customer towards their product. It express their product advertisement through different
media which includes newspaper, television and radio. They repeat product
advertisement so many times so, that customer can influence about their good quality
product. When advertisement prove them better than its cause an increase in demand for
the goods.
 Customer income: The income of consumer also affect the demand of a product through
create fluctuations in income of consumer(Huang and Finegold, 2013). If the income of
customer is more then it buy more and the demand for the goods is also rises but in case
if income of consumer is less then it purchase less and demand for a product is also
decline.
 Consumer expectations with respect of future prices: This factor also affect the demand
of the product is consumer expectations with respect to the future prices of the
commodity. Some cases in which consumer evaluate that in the coming future the prices
of the goods would rises, then they purchase more quantity of goods in present so, in the
future they no required to pay more prices. On the other side if customer estimate that the
price of the goods reduce in future, then in the present it will postpone to consume goods
that means the demand for a commodity will reduce in present. Because consumer don't
want to pay higher prices in present.
Fluctuations in demand curve
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Describe the law of Supply, movement along the same supply curve and fluctuations in supply
curve with influencing factors.
Law of supply: This microeconomics theory is a fundamental concept of the law of
supply that indicates the supply in a available price. The law of supply is generally means that
when the price of product rises than the supplier also increase the supply of the goods. Similarly,
if the price of the goods decreases than the quantity of the goods it will supply is also
reduces(Huang, Bor and Peng, 2011). After using the law of supply concept, economists
evaluate that when the price changes all other which affect the supply which includes (mindset of
customer and material cost) are remain constant. The graph with quantity indicates the dependent
variable on the horizontal axis and price express the independent variable on the vertical axis, the
law of supply make an upward movement slope which is called as supply curve. Which mainly
indicates the relationship between the cost of a product and the value of quantity that supplier
can supply.
This law is closely related to the law of demand, which say that rise in prices leads to
reduce in demand, and reduce in prices leads to reduce in demand. The consumer demand curve
is a graph in which it expressing the relation between the cost of a goods and consumer demand.
It is a downward sloping curve and intersect the supply curve at the market equilibrium point, it
is only happen when the demand and supply of a goods are constant(Lee, Kwon and Lee, 2014).
There are some examples for the law of supply which are given below:
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 If the price of the product rises, then supply also rises: If the price of footwear in
familymart grocery store is more, than the supplier also rises the supply of footwear that
means it manufacture more and work extra to increase the supply of footwear and provide
more to the public.
 If the price of the goods decline, then supply also decreases: In Familymart grocery store
if the the prices of clothes is reduces then the manufacturer produce less and it reduce the
supply of clothes in the market.
 Different price, for the different manufacturer: If a supervisor offer employees time and
half time for overtime hours, then it rises the efficiency of the staff members and more
willing to supply with high overtime hours, if a manager offer a high pay for overtime
hours then employees will supply in less extra time hours(Luong, 2007).
The above description of law of supply give that the reason of day to day fluctuations in
the sales revenue of familymart grocery store due to the price fluctuations of their commodity. If
firm sell their goods somewhere in more price or in less price then it is create the changes in the
supply of the goods also. If price of the goods rises then supply rises. Similarly, if the value of
the goods reduces then supply also decreases. So, the best method to deal with the issue firm
necessary to constant its price of the goods or it can be say that in equilibrium price in which
organization get high demand and better supply as well(Teksan and Geunes, 2016). So, it can
decrease the changes in sales revenue of the company.
Factors which create an impact on the supply curve of Familymart groceries store:
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 Technology improvement: If new and innovative technology is introduce in the market
then its generate low cost to manufacture and increase the profit in the given price and the
manufacturer produce high and work extra time to supply high in the market. In the case
of familymart grocery store they required to use some new technology to increase their
sales revenue like innovative packaging and advertising of the goods(Wang and et.al.,
2017).
 Schemes of government: The government always set their rules and obligations in terms
of market tasks. It involves some policies of government which includes tax rises the cost
of producing of the firm and it decreases the supply of the company. Thus it also
decreases the profit margin of the company. But in some circumstances government
schemes are also helpful when it gives tax relaxation and subsidies it also rises the
quantity supplied and make more profit for the organization.
 Company targets: In general, the sup[ply of the goods move towards the more prices.
Which basically means more supply helps to fulfil the desired objectives of the business
and increment of profit. Similarly, some organization sell their products in low prices that
not rises the company profit. These are the organization which are not concentrating on
the profit, they only want to increase the firm goodwill and its development in the
economic market.
 value of raw materials: It mainly explain the impact of raw material in profit generating.
The firm need to maximize the raw material for manufacturing the finished goods. Raw
material make an impact on the firm profitable condition, if the price of raw material
which are applying to maximize in the production of the commodity. If this situation
coming into the market, then firm sell less product. The business go through with this
factor at the time of manufacturing.
Fluctuations in supply curve
This picture indicates the fluctuations in the technology and innovation, price of raw material,
cost of production, government policies and price of other product.
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TASK 2
Theories of economic
The principles and ideologies which support and manage the fluctuations in
environmental components to maintain the stability in economic growth and expansion. These
models facilitate the rate of interest and involvement of government in respect of the rules and
regulations and another components of economy. The supervisor of firm familmart groceries has
utilize traditional and modern theory of economic in relation to the modern practice which are to
be given below:
Traditional economic theory
The economic theory of Adam smith – This type of model is introduced by Adam smith under
the idea that markets work very nicely if there is no interruption of government included. It
clearly include in its model about how the funds of nation would normally better utilize by
mindful individual and consider involvement of government which is potentially destructive to
economic growth.
When government demotivate the international trade, then the smith's laissez-faire concept to
economic policy and process come in front(Zhang and et.al., 2012). The monopoly power of
same group as well as policies which are directly based upon the direct commerce which are
included by government was criticized by smith. In this model, it specify that the generation
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benefit for the nation by allowing people to select how to utilize their money, labour, land and
tools an how they saw the process of fit. This theory suggest that to get result in self- making
system, it is better to allow people to choose their self interest.
Keynesian economic theory
This macroeconomics theory which explain about in detail overall paying out in the economy
and its create an impact on outputs, employment and inflation . This model is is described by the
economist British John Maynard Keynes during the period of 1930s in an attempt to understand
the great depression. Keynesian model is measured as 'demand side' theory which indicates the
fluctuations in economy in the short time duration. It suggest that if complete demand in the
economy fell, the resulting weakness in jobs and manufacturing would bring out the decline in
price and wages. The use of this model in company familymart groceries is included when the
government of any nation rise the supply of funds then it will provide an output to maximize the
demand of product. This model can be taken into the consideration by grocery store is an
excluded to the law of demand which says that if the product price rises then similarly, there will
be decreases in demand of them or vice-versa. In relation to the firm familymart groceries, this
model is beneficial for rising the opportunities of employment, reduce in inflation rate which
support to decline in price and rate of interest as well.
Modern theories
Nudge theory: This theory is suggesting the impact of short advised and positive criticism on
consumer nature. Supporting of nudge model argue that the way of nudges is very important
aspect of a company as if nudges are good placed then, they may reduce the market failure,
retain the government money and helps in rising the efficiency of resources use. With the form
of nudge model in familymart groceries, the organization encourage desirable tasks as well as
improve efficiency in respect to utilization of resources.
Behavioural theory: This model is expanded by Richard Thaler which has a good composition of
psychology and economic components . In the familymart groceries, application of the model in
firm practices by the use of shortcuts and rules of thumb for fast decision making. In modern
world, firms take initiative for understanding that consumers are not rational and use the model
for decision making policies of the firm which makes shareholders worth while they done
efficiently.
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Comparison and contrast
In familymart groceries business, the form of traditional models are done with the assumption
that mindful individual devise rational choice with a main goal of rising economic welfare.
Similarly, this model are used for considering such factors which involves paying out, taxation
policies and borrowings from fiat currency which are fully powered and not operationally
affected through revenue of federal government.
By applying the traditional and modern models on the familymart groceries, it can be clear that
there is only one component is constant in all these models as they are somehow helpful in
individual terms according to the status and factors of the firm and sanctioned to the leaders and
measure for understanding macroeconomics issues in the economy.
CONCLUSION
As it is concluded from the above report of family mart groceries store firm required to
stick on one price of the goods to stop the fluctuations in the sales revenue . Because the price of
the goods create an impact on the demand and supply of the organization. So, firm needed to fix
the value of the product in which organization having more demand of their commodity and high
supply as well. In other task it describe about some important models of economics which are
basically used in 20th and 21st century in the economy.
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REFERENCES
Books and Journals
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demand and price uncertainties. Applied Energy. 103. pp.189-196.
Babich, V and et.al., 2012. Contracting with asymmetric demand information in supply
chains. European Journal of Operational Research. 217(2). pp.333-341.
Feizabadi, J., 2022. Machine learning demand forecasting and supply chain
performance. International Journal of Logistics Research and Applications. 25(2).
pp.119-142.
González-García, A and et.al., 2020. Quantifying spatial supply-demand mismatches in
ecosystem services provides insights for land-use planning. Land Use Policy. 94.
p.104493.
Huang, E.S. and Finegold, K., 2013. Seven million Americans live in areas where demand for
primary care may exceed supply by more than 10 percent. Health Affairs. 32(3). pp.614-
621.
Huang, Y., Bor, Y.J. and Peng, C.Y., 2011. The long-term forecast of Taiwan’s energy supply
and demand: LEAP model application. Energy policy. 39(11). pp.6790-6803.
Lee, S., Kwon, B. and Lee, S., 2014. Joint energy management system of electric supply and
demand in houses and buildings. IEEE Transactions on Power Systems. 29(6). pp.2804-
2812.
Luong, H.T., 2007. Measure of bullwhip effect in supply chains with autoregressive demand
process. European Journal of Operational Research. 180(3). pp.1086-1097.
Teksan, Z.M. and Geunes, J., 2016. An EOQ model with price-dependent supply and
demand. International Journal of Production Economics. 178. pp.22-33.
Wang, L and et.al., 2017. Integrated scheduling of energy supply and demand in microgrids
under uncertainty: A robust multi-objective optimization approach. Energy. 130. pp.1-
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Zhang, Y and et.al., 2012. Analysis of the distribution and evolution of energy supply and
demand centers of gravity in China. Energy Policy. 49. pp.695-706.
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