Economics for Business: Demand, Supply and Polo Mints Price Analysis

This report provides an economic analysis of Polo Mints, a UK-based mint candy manufacturer, examining the interplay of demand and supply in determining its product prices. The report begins by defining key economic concepts such as demand, supply, and equilibrium, illustrating these with diagrams. It explores the factors influencing demand, including consumer preferences, income levels, prices of substitutes, and the number of customers. The report also investigates the factors affecting supply, such as raw material costs, taxation policies, technological advancements, and competitor strategies. Furthermore, the report details the impact of changes in both demand and supply on the price of Polo Mints, demonstrating how these forces interact to establish market equilibrium. The analysis covers the impact of various factors on the price of the product and their effect on the demand and supply curves. The report offers a comprehensive overview of the economic principles governing the Polo Mints market.

TOPIC:
Economics for Business

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK...............................................................................................................................................1
Explaining main factors for determining the price of Polo mints in UK using demand and
supply analysis............................................................................................................................1
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
Economics for business can be defined as a applied economics that includes various
theories and methods that can help in analysing numerous situations and diversity in its whole
structure (Merigó, Rocafort and Aznar-Alarcón, 2016). Polo mint is a UK based company that
manufactures various types of mint candies. The company was establishes on 1948. The present
assignment shows a description about relationship between demand and supply of the business
along with showing their equilibriums. It also includes an explanation about the reasons that
results in change in demand and supply. Further, the study also shows various impacts of change
in demand and supply over the price of product.
TASK
Explaining main factors for determining the price of Polo mints in UK using demand and supply
analysis
Demand and supply
Both demand and supply are the key factors of the economics of a business. Demand
refers to the amount or quantity of products that the customers wishes to buy (Buckley, 2016).
On the other hand, supply refers to the quantity of products provided by the company for
satisfying the needs and demands of the customers.
For the purpose of analysing relationship between demand and supply, the organization
need to analyse and compare the amount of products demanded by the customers and number of
products supplied by the supplier.
Further, for the purpose of determining the relationship between demand and price, Polo
needs to analyse the price at which the consumers wants to buy its mints and compare it with the
price at which the company is selling its products to them.
Explaining equilibrium for demand and supply diagram
Demand curve refers to a diagram that represents the dependency of demand of the
products over the change in its price. The movement of demand curve of polo mints happens
when various factors, like, inflation rate, change in preference of the products, etc. remains
constant except of the price of products (Hao and et.al., 2017). The demand curve shows the
relationship between the price and demand of polo mints. Further, if the price of polo mints
changes and results in change in the demand of products, it would result in shift of demand
curve.
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On the other hand, Supply curve can be defined as a graphical representation in which
the dependency of price of products over the supply of products. Generally, the supply curve is
upward, slopping curve, as the when the price of product increases, the supplier increases the
quantity to be supplied by them for generating maximum profits. In the supply curve, the price
of products keeps same. In case the price of product changes, the result will be shift of supply
curve.
Equilibrium point refers to a point where two points meets. In context with the demand
and supply diagram, equilibrium point can be defined as the point where both demand and
supply curve meets.
In the market, the equilibrium price point is achieved when for a specific amount of
quantity, the highest price that the customer can pay for the products equates with the minimum
price at which the supplier wants to sale the product (Amlung and et.al., 2015). On the other
hand, the quantity equilibrium point can also be achieved in the economic market when for a
specific price, the minimum quantity of products that the customer wants to get equates with the
maximum amount of quantity that supplier can provide to its buyers. Therefore, it can be
analysed that the equilibrium can be defined as an agreed point between the customer and
supplier of products.
The change movement in demand and supply curve also effects the equilibrium point of
the curve. Price equilibrium point can be get by balancing both demand and supply over a certain
price. The equilibrium price can be easily understand by analysing demand and supply diagram
as under:
For example, if the price of Polo mints gets reduced, the quantity of mints will be
increased. On the other hand, due to reduction in price of product, the supply of product will also
reduce. This situation would lead in shift of both demand and supply curves. In this regard, the
equilibrium price point will be get as follows:
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Interpretation
As per the above curve, due to reduction in price of polo, the demand of products got
increased. Further, for fulfilling the increase of demand and earn more profit from increased
price, the compan also increased the quantity of supply of the mint candy . Further, as the
change in demand and supply were made due to change in price of the product, it resulted iin
shift of demand curve and supply curve as well.
Further, as per the above diagram, this shift in the demand and supply curves also
resulted in changing the equilibrium point of the polo mint candies.
Reasons behind change in demand
Demand of polo mints depends upon various factors like, price of products, quality of
products, change in inflation rate, change in preference of customers, etc. These factors affect the
quantity of products that the buyers are willing to purchase. Change in these factors results in
movement in the demand curve or even shift of demand curve as well.
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Illustration 1: increase in demand and decrease in
supply
(Source: APMacro: Supply and Demand Complex,
2018)

Reason behind change in demand due to change in various factors can be analysed as
under:
 Taste and preference of customers: Change in taste and preference of the customers
directly effects the demand of polo mints. If the taste of target customers of polo mints
i.e. kids and teenagers changes, and shift to another types of candies, the demand of the
mint candies will get reduced (Garcia-Heller, Espinasa and Paredes, 2016). On the other
hand, in case, if the taste and preference of customers increases towards the mint candies,
it will result in increasing the demand of polo mints. This change will result in movement
in the demand curve of the polo mint.
 Income of population: The income of population have direct impact over the demand of
any product. The increase in income of the target customers will result in enhancing the
demand of polo mints. On the other hand, the reduction in income of population will
directly result in reducing its demand.
 Change in price of substitutes: Price of substitute also have potential impact over the
demand of products. This factor have indirect effect over the demand of product of the
company. In case, the competitors of polo mint increases their price, the customers will
shift towards the polo mint which will result in increasing the demand of its product. On
the other hand, in case, if the price of the substitute products of the polo mint reduces and
of polo mint remains same, its customers will get shift towards the substitute products.
This change will reduce the demand of products. This factor also results in movement in
the demand curve.
 Change in number of customers: other major factor influencing the demand of product
is the change in number of customers held by the company (Alessandri and Nelson,
2015). This factor directly effects the demand of products. In case, the number of targeted
and loyal customer increases, it will lead in increasing the demand of product. Whereas,
the reduction in customers of polo mint company will amount in reduction in demand of
its products as well.
 Price of product: The key factor influencing the price of product is change in its price.
This factor results in the shift of demand curve. The increase in price of the polo mint
may reduce the demand of its product. On the other hand, the reduction in its product's
price will definitely increase the demand of polo mint candies.
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In this regard, it can be evaluated that, all these factors leads in changing the supply of
products. Change in these conditions, may result in either movement in the demand of product or
even shift of the demand curve.
Reasons behind change in supply of polo mints
Supply refers to the quantity of products supplied by the company in order to satisfy the
needs and demands of the products. The amount of products to be supplied by the company can
be changed due to various factors like, change in natural conditions, change in cost of
production, etc. the major factors that leads in change in supply of products can be analysed as
under:
 Price of raw materials: Price of raw material effects the cost of production of the polo
mint candies. This will affect the quantity of products supplied by the company, as due to
change in the cost of production, the capacity of the company to produce the products
gets changes (Behboodi and et.al., 2016). In case of increase in the cost, the capacity of
company reduces. On the other hand, the reduction in cost of production enhances the
capacity of the company. Change in capacity of production affects the quantity of supply,
as it depends upon the number of products produced by the company.
 Change in taxation policy: Change in the taxation policy of the government effects the
cost of production of the company. Being a global company, taxation policy of each
country in which it has its business effects the supply of polo mint candies in that
country. As increase in tax over the company results in reduction of number of product
supplied by the customers.
 Improvement in technology: As the technological advancement in the company results
in increasing the efficiency of the overall production process of polo mint company, it
makes the company more cost efficient. The improvement in the technology used by the
company may result in reducing the cost of production which directly influences the
supply by increasing the supply of polo mint candies. In this regard, this factor also
affects the supply of company.
 Change in policy of competitors: A company need to change its policy as per the
change in supply of products. This factor also effects the supply of product of the
company. If the competitors makes a policy to reduce the cost of product, it will result in
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shifting the customers towards the competitors. This may effects the change in demand of
product and supply of it as well for the purpose of fulfilling the demand of products.
 Change in international business market conditions: Being a global manufacturing
company, the change in international business market condition also affects the supply of
polo mint candies. In case of favourable change like, liberalisation of policies, reduction
in tax, etc., the supply of product may increase, on the other hand, the unfavourable
condition would lead in reduction in the supply of goods of the company.
 Disasters and wars: The conditions of disasters and wars effects the business market of
the company in particular country. These are the unfavourable conditions that results in
restricting the supply of goods in those countries with which the war is happening. In this
regard, it also leads in changing the supply of products.
In his order, it can be analysed that all these mentioned factor directly or indirectly leads
in changing the supply of products of the polo mint.
Impact of change in demand and supply over the price of product of the polo mint
Change in demand and supply
Change in demand refers to increase or decrease in the need of the customer for a
particular product. The change may occur due to numerous reason like, change in price of
products, change in income of target consumers, change in price of substitute products, etc.
Further, change in supply can be defined as the change occurred in the supply of product
due to numerous reasons like, change in cost of production, change in demand of product,
change in the market conditions, etc.
The change in demand and supply are indirectly related to each other. Therefore, both of
them have inverse relation between each other (Knittel and Pindyck, 2016). Further, change in
demand and supply of the polo mint will also amount to change in its equilibrium point.
Effect of change in demand and supply
Due to change in both demand and supply, have direct effect over the price of product. In
case, the demand of polo mint substantially increases, and the supply of product remains same, it
will result in enhancement of price of the product of company.
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Whereas, if due to any reason, the company enhances the amount of supply, but the
demand remains the constant, it will also result in shift of supply curve and reduction in the price
of product. In this regard, due to change in both demand and supply would result in shift of
demand and supply cover (APMacro: Supply and Demand Complex, 2018). It will lead in
equilibrium point of the demand and supply curves and hence over the price of product.
For example, If the taste and preference of the customer increases towards the company,
its impact over the price will be as under:
Interpretation
As per the above diagram, due to enhancement of preference, the demand of the polo
mint increased. Further, as the supply of the product remained same, its equilibrium gets affected
which resulted in increasing the price of product.
Example, If the cost of production reduces, its effect over the price of product will be as under:
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Illustration 2: effect of change in demand
(Source: Effects of Changes in Demand, 2019)

Interpretation
From the above diagram, it is clear that due to reduction in cost of production, the
capacity of production of polo mint increased that resulted in enhancement of supply of the
candies. Further, due to constant demand. The equilibrium price point of both demand and
supply curve went down. In this regard, this situation resulted in reduction in the price of polo
mint candies.
From the above illustration it can be evaluated that the change in demand and supply of
the product affects the market price of product. Further, it can also be evaluated that the demand
and price have direct relation whereas, the supply and price of product have inverse relation with
each other.
CONCLUSION
From the study of above assignment, it can be concluded that the demand and supply of
the product are the major factor of the business economy. There are numerous factors that
directly or indirectly effects the affects the demand or supply of the polo mint products. Further,
the study has also concluded that the demand and price have inverse relation with each other due
to which increase in price results in reduction in the demand of product. Whereas, the supply and
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Illustration 3:
effect of change in supply
(Source: Supply | Boundless Economics, 2019

price have inverse direct relation with each other, due to which increase in price of product
results in increasing the supply of products. Further, change in demand and supply of products
also have effect over the change in equilibrium price of the product and hence over the price of
specific product.
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REFERENCES
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demand for alcohol. Experimental and clinical psychopharmacology. 23(3). p.168.
Behboodi, S. and et.al., 2016. Renewable resources portfolio optimization in the presence of
demand response. Applied Energy. 162. pp.139-148.
Buckley, P. J., 2016. International business: economics and anthropology, theory and method.
Springer.
Garcia-Heller, V., Espinasa, R. and Paredes, S., 2016. Forecast study of the supply curve of solar
and wind technologies in Argentina, Brazil, Chile and Mexico. Renewable Energy. 93.
pp.168-179.
Hao, H. and et.al., 2017. Transactive control of commercial buildings for demand response. IEEE
Transactions on Power Systems. 32(1). pp.774-783.
Knittel, C. R. and Pindyck, R. S., 2016. The simple economics of commodity price
speculation. American Economic Journal: Macroeconomics. 8(2). pp.85-110.
Merigó, J. M., Rocafort, A. and Aznar-Alarcón, J. P., 2016. Bibliometric overview of business &
economics research. Journal of Business Economics and Management. 17(3). pp.397-
413.
Online
APMacro: Supply and Demand Complex .2018 [Online] Available Through:
<https://tamoclass.wordpress.com/2016/02/06/apmacro-supply-and-demand-complex-
cases/>
Shift in Demand Curve .2018 [Online] Available Through: <https://www.thebalance.com/shift-
in-demand-curve-when-price-doesn-t-matter-3305720>
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