Contemporary Economic Analysis: Demand, Supply, and Theories

This report provides a comprehensive analysis of contemporary economic principles, focusing on the law of demand and supply and their practical implications. The report begins by examining the law of demand, detailing its inverse relationship between price and demand, and explores factors influencing the demand curve, such as consumer preferences, income, and expectations. It then delves into the law of supply, explaining the relationship between price and supply, along with factors that shift the supply curve, including technological advancements, transportation conditions, production costs, government policies, and company targets. The report incorporates examples related to TESCO plc, illustrating how these economic principles affect sales and market dynamics. The report concludes by discussing modern and traditional economic theories. This report provides valuable insights into microeconomic principles and their application in business contexts.

Contemporary
Economic Analysis

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1 ...........................................................................................................................................1
1. Analyses the Law of demand movement and changes in demand curve with influencing
factors..........................................................................................................................................1
2. Analyse the Law of supply movement and Fluctuations in supply curve with influencing
factors..........................................................................................................................................4
TASK 2............................................................................................................................................7
Economic theories.......................................................................................................................7
CONCLUSION................................................................................................................................9
REFERENCES .............................................................................................................................10

INTRODUCTION
The report of TESCO plc is mainly discuss about the fluctuations which they are faced in
its daily sales and they determine the best method to deal with the problem. But on the other
hand, the sales manager of an organization is not knowing about the concept of microeconomics
which generally involves the shift in the demand and supply curve of the firm(Buchholz and
Brandenburg, 2018). On that basis company want to understand the meaning of law of demand
and how its create an impact on the demand curve of the organization. In another instance
company also want to know the concept of law of supply and how the economic factors affect
the supply curve of the firm. In another task firm need to know the relation between the modern
theories of business practices.
TASK 1
1. Analyses the Law of demand movement and changes in demand curve with influencing
factors.
Law of demand: This theory of microeconomics is mainly expresses the demand for the
product at a given price. Generally, the law of demand show that the value of product and the
demand of the product have an inverse relationship. If the prices of the product rises then the
demand of the product decline. Similarly, if the prices of the goods decreases then the demand
for the goods rises. When applying this principles of economic in micro and macro economics,
economists assume that only the price of the products fluctuated and all other factors which
effect the demand of the goods (it involves consumer income and taste and preference) and other
factors remains same. Some of the examples for the law of demand which are given below:
Decrease in price of goods which leads to increase in demand: If TESCO plc sells tea for 4 dollar
each and some another day they decide to sell tea and reduce the price of tea to 2 dollar each. On
that basis the law of demand theory describe that the reduction in price of the product would
inspire more individuals to buy tea. It also includes those individuals who would not afford the
high value of the product(Childs and et.al., 2022)).
Increase in price of the product which leads to decrease in demand: If TESCO plc rise the price
of tea to gain more profit on their sales revenue then law of demand state that on this value less
individuals buy tea. On that basis, the demand of tea reduces.
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Constant the price of goods which leads to its demand constant: If TESCO plc use different price
to sell shoes and has determined that they generate the more profit by selling a shoes at 3 dollars
each pair and the demand of shoes still high at that value. So, that the price and demand of shoes
remains constant.
The above description for the law of demand state the consequences of daily fluctuations in sales
revenue of the TESCO plc and changes in price of their product. Sometimes it sell their goods at
more value or in lower value which leads to fluctuations in demand of the goods also. So, the
best method to deal with the issue is it required for the organization to maintain the stability on
one price(Cook, 2021). They can use many different prices as a sample and has determined that
in which value firm can earn high profits, with demand also remains increase at that price, then
the price and demand of their remains constant.
Factors which affect the demand curve of TESCO plc:
 Taste and preference of the customer: This is the major factor which make an impact on
the demand of the product. If taste and preference of the customer in some specific goods
is more, then its demand would be increases and the demand curve is also place at a
higher level then the taste and preference for various goods changes and it express the
result of fluctuation in demand for them(Fardeau, 2021).
 Consumer income: The product demand is mainly related to the income of customer. If
income of consumer is more then it buy more and the demand for the commodity is also
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increases but in any case if income of the customer is less then it purchase low and the
product demand is also reduces.
 Expectations of consumer in respect of future prices: This is an another factor of
economics which also affect the demand for goods is consumer expectations with respect
to the future value of the goods. There are some cases in which consumer expect that in
coming future the price of the goods would higher, then in the present they buy the high
quantities of the product so in future they no need to spend on higher prices. On the other
side, if customer expect that the price of products reduces in future, then in the present it
will postpone to consume the goods that means the product demand will reduce in
present(Hosseini-Motlagh and et.al., 2019).
 Advertisement expenditure: This is one of the most effective promotional technique
which helps to encourage the sales of the commodity which is an important factor to
determine the demand for a goods. The main targets of the advertisement is to influence
the customer in favour of the goods. Advertisements are displayed in various media such
as newspapers, television and radio. These advertisement are repeated so many times so
that it attract the consumer about their better quality product. When advertisement prove
them better and get successful to attract the customer towards their product then its cause
an higher demand for the goods.
Changes in demand curve:
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2. Analyse the Law of supply movement and Fluctuations in supply curve with influencing
factors.
Law of supply: This is the basic theory of microeconomics which is fundamental
concept for the law of supply that express the supply at a given value. In general, the law of
supply means that when the price of commodity higher then the supplier will also increase the
supply of the commodity. Similarly, if prices of the product reduces then the quantity of the
goods they will supply is also reduces(Ignaciuk and Dziomdziora, 2020). When applying the
concepts of law of supply, economists expect that when the price changes all other factors who
influence the supply such as ( cost of material and mindset of customer) are remain constant. The
graph with quantity express the dependent variable on the horizontal axis and the value express
the independent variable on the vertical axis, the law of supply generate an upward slope is
called as supply curve. Which mainly shows the relation between the cost of a product and the
amount of quantity that suppliers can supply.
The law of supply is nearly related to the law of demand, which describe that higher the price of
the commodity leads to decline in demand, and reduction in prices leads to more in demand. The
consumer demand curve graph showing the relation between the cost of goods and consumer
demand it is a downward moving curve and intersect the supply curve at the market equilibrium
level, it's happen when the demand for a good and the supply are equal. Some of the examples
for the law of supply which are given below:
Increase in prices of goods leads to increase in supply: If shoes price in TESCO plc store is
more, then the manufacturer also increase the supply of shoes that means it produce high and
work overtime to rise the supply of shoes and offer in high quantity to public.
Decrease in prices of goods leads to reduce in supply: If the price of the clothes in TESCO plc
store is decline then the manufacture produce less and it reduce the supply of new and innovative
clothes in the market.
Different price for the different provider: If a manager offers employees time and pay half for the
overtime hours, then it increase the efficiency of the employees and they are more willing to
supply with high overtime hours; if a manager offer a high pay for overtime hours, then
employees will supply in low overtime hours(Kiran and et.al., 2018).
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The above description for the law of supply state the consequences of daily fluctuations in the
sales of TESCO plc is the price fluctuations of their commodity. If firm sell their goods
sometimes 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 increases then supply increases. Similarly, if price of the goods
decreases then supply also reduces. So, the better solution to deal with the issue firm necessary to
fix its price of the product or it can tell that in equilibrium price in which firm get high demand
and better supply as well. On that basis it can decline the changes in sales of the firm.
Factor influencing supply curve of TESCO plc:
 Technological Improvement: It is the one of most crucial factor of supply. If there is an
advancement in the technology then it will improve production of the product which
resulting in an increase in supply. Technology advancement reduce the cost of production
and maximise the profit as per same price. It is a good sign to maximise profitability at
same price. TESCO plc is suggested to adopt new technologies which enhance its
performance(Kong and et.al., 2021).
 Transportation Conditions: A good transportation structure help in increasing supply.
Transportation work as a bridge between customer and supplier. If transportation
infrastructure is not good than the products are not deliver on time which impact the
supply curve. Sometimes products are damaged in the transportation, resulting loss for
the vendor. A supply curve also affected by delay in delivery which results as lose of
consumer trust._
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 Production Cost and Calamities : Cost of production and supply are opposite to each-
other. If cos of production increase due to high wages and high material cost which result
as decrease in supply in order to save money. Production cost increase the price of
product, resulting supply of such product falls. Natural disasters also involve in
decreasing the supply of product for example situation of war introduce hunger and
shortage of products. Supply is not available even at higher cost.
 Government Policy: Government policies have an adverse impact on the supply of a
product. If government rise tax than profit margin on the product will decreased and
supply of the product falls. Subsidies and tax rebates on specific products may enhance
supply of such products by insuring high profitability for the providers(Liu and et.al.,
2018).
 Targets of company: The price of the commodity move towards high supply. Higher
supply can fulfil the aims and objectives of a firm more effectively and it also increse the
profits. Due to high competition in the market, some company decrease their profits to
increase sell. These situations put negative impact on the supply curve.
Changes in supply curve
This supply curve express the fluctuations in the cost of production, innovation and technology,
price of raw materials, price of other products and gover_nment policies.
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TASK 2
Economic theories
The main principles and ideologies which support and manage the fluctuations in
environmental components to maintain the stability in economic expansion. These theories of
economics leads to facilitate the rates of interest, involvement of government in respect of their
rules and regulations and another factors of an economy. The supervisor of firm TESCO plc has
used traditional and modern theories of economic in relation to the modern practices which are
given below:
Traditional economic theories – This economic theory is introduced by the Adam smith below
the idea that markets be achievable to work best if there is no government intervention. The
father of economy Adam smith is clearly mentioned in its theory about how the funds of nation's
would normally best use by valuable people and consider intervention of government as
probably destructing to economic development(Niu, Dai and Chen, 2022).
When government demotivate international trade, then the smith's laissez- faire prospect to
economic schemes and process come into alive. The monopoly power of same group as well as
schemes which related to the direct commerce which are included by government was criticised
by smith. In this particular theory, it specify that the generation benefit for the nation by allowing
people to select how to utilize their money, labour, land and tools an how it saw the process of
fit. This theory suggest that to get result in a self -organized system, it is better to allow people to
choose their self- interest.
Keynesian economic theory – This theory of macroeconomic which explain in detail about the
total paying in the economy and its create an effect on outputs, employment and inflation. This
theory was introduced by the John Maynard Keynes it was an British economist during the
period of 1930s in an attempt to understand the great depression. Keynesian theory is observed
as 'demand side' theory that shows the fluctuations in the economy in the short period. It suggest
that if total demand in the economy fell, the resulting weakness in jobs and production would
bring out a decreases in price and wages(Olmen and et.al.,, 2018). The use of this theory in firm
TESCO plc is included when the government of any nation rise the supply of funds then it will
provide an output in an increase in demand of the goods. The Keynesian theory can take place
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into consideration by TESCO plc is an exception to law of demand which says that if the price of
the goods increases then similarly, there will be decline in demand of them or vice-versa. In
relation to the firm TESCO plc, this theory is beneficial for increasing the employment
opportunity, reduction in inflation rate which leads to decrease in price and reduction in interest
rate as well.
Modern theories – nudge theory: This theory is recommend those factors which influence and
give small advise and positive criticism on the behaviour of consumer. In support of nudge
theory it argued that the placing of nudges theory is very important aspect of an organization. If
nudges are come into the best place then it may reduce the market failure, save the money and
helps in increasing the efficiency of resources use(Peng and et.al., 2019). With the application of
nudge theory in TESCO plc, the firm encourage desirable activities as well as it improve the
efficiency in order to utilizing of resources.
Behavioural theory: This theory is developed by Richard Thaler which has best arrangement of
psychology and economic factors. In organization TESCO plc, this theory application in firm
practices use shortcuts or thumb rule for creating speedily decisions. In modern world, firms
initiate for understanding that consumers are not rational and apply the decision making policy
theory of company which generate shareholders worth while it done efficiently.
Comparison and contrast
In the firm of TESCO plc, the application of traditional theory are complete with the estimation
that mindful people provide rational opportunity with a main goal of increasing welfare of
economy. Similarly, this theory which are applying for considering such components which
involves taxation policies, spending and borrowings. Which are fully controlled and not create an
impact operationally through sales revenue of federal government(Vairagade and et.al., 2019).
After using the traditional and modern theories on the TESCO plc, it concluded that there is only
one component is same in all the above theories it somehow helpful in individual terms
according to the position and factors of the firm and enabling supervisor and analysts for
understanding macroeconomics issues in the economy.
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CONCLUSION
As it is concluded from the above report TESCO plc company required to stable its price
of the goods to stop the fluctuations in the sales revenue. Because the value of goods create an
impact on the demand and supply of the organization. On that basis, firm need to constant the
price of the product in which firm having more demand of their goods and high supply as well.
In other task it explain about some main important theories of 20th and 21st century which are
mainly used in the economy.
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REFERENCES
Books and Journals
Buchholz, P. and Brandenburg, T., 2018. Demand, supply, and price trends for mineral raw
materials relevant to the renewable energy transition wind energy, solar photovoltaic
energy, and energy storage. Chemie Ingenieur Technik. 90(1-2). pp.141-153.
Childs, J.D. and et.al., 2022. Challenging Assumptions about the Future Supply and Demand of
Physical Therapists in the United States. Physical therapy. 102(1). p.pzab239.
Cook, M., 2021. Trends in global energy supply and demand. In Developments in Petroleum
Science (Vol. 71, pp. 15-42). Elsevier.
Fardeau, V., 2021. Strategic trading around anticipated supply/demand shocks. Demand Shocks
(November 30, 2021).
Hosseini-Motlagh, S.M. and et.al., 2019. An adjustable bi-level wholesale price contract for
coordinating a supply chain under scenario-based stochastic demand. International
Journal of Production Economics. 214. pp.175-195.
Ignaciuk, P. and Dziomdziora, A., 2020, October. Bullwhip effect–supply chain stability
examination in the presence of demand uncertainty and delay. In 2020 24th
International Conference on System Theory, Control and Computing (ICSTCC) (pp.
624-629). IEEE.
Kiran, R. and et.al., 2018. Demand driven supply chains in augmenting the farm income of
vegetable producers-evidence from eastern dry zone of Karnataka. Indian Journal of
Agricultural Marketing. 32(3s), pp.136-140.
Kong, X.T. and et.al., 2021. Cyber physical system-enabled on-demand logistics
trading. International Journal of Production Economics, 233, p.108005.
Liu, J. and et.al., 2018. Emergency material allocation with time-varying supply-demand based
on dynamic optimization method for river chemical spills. Environmental Science and
Pollution Research. 25(18). pp.17343-17353.
Niu, B., Dai, Z. and Chen, L., 2022. Information leakage in a cross-border logistics supply chain
considering demand uncertainty and signal inference. Annals of Operations Research.
309(2). pp.785-816.
Olmen, B.D. and et.al.,, 2018, September. Evolving proppant supply and demand: The
implications on the hydraulic fracturing industry. In SPE Annual Technical Conference
and Exhibition. OnePetro.
Peng, Z. and et.al., 2019, November. Deep reinforcement learning approach for capacitated
supply chain optimization under demand uncertainty. In 2019 Chinese Automation
Congress (CAC) (pp. 3512-3517). IEEE.
Vairagade, N. and et.al., 2019, September. Demand forecasting using random forest and artificial
neural network for supply chain management. In International Conference on
Computational Collective Intelligence (pp. 328-339). Springer, Cham.
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