Contemporary Economic Analysis: Demand, Supply, and Theory Changes

This report provides a comprehensive economic analysis, beginning with an introduction to economic analysis and its impact on organizational decision-making, particularly within the retail sector, using Tesco as a case study. The first task explores the law of demand and supply, detailing factors influencing demand and supply curves, such as customer preferences, income, related goods prices, weather disruptions, trade restrictions, inflation, and technology. The report then transitions to task two, comparing emerging economic theories of the 21st century with those of the 20th, highlighting shifts from neoclassical theories to those addressing climate change, resource scarcity, and environmental crises. The analysis considers theories of economic growth and the impact of globalization and urbanization. The report examines the evolution of economic thought and its implications for businesses in the modern era.

Contemporary
Economic Analysis

INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Demonstration of Demand Law, along with factors that create changes in demand curve...1
1.2 Demonstration of Supply Law, along with factors that create changes in supply curve.......4
TASK 2............................................................................................................................................7
Changes in emerging theories of contemporary economics in 21st century as compared with
20th................................................................................................................................................7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Economic analysis defined as a study of economic system in which experts understand the
manner in which economic factors are affecting organisational functioning upon region, industry
or any other particular aspect in order to make future decisions wiser. Economic analysis allows
organisation to incorporate factors from economic environment like exchange rate, inflation,
GDP growth and interest rate into corporate planning (Turner and et. al., 2018). For this effective
evaluation of economic variables allow business entity to identify threats as well as opportunities
that can have significant impact on performance of company. Present report has been conducted
on Tesco company operate their functioning in retailing sector and was founded in the year 1998.
Entity offer wide range of products and services to customers with more than 6800 shop in
different locations with having it’s headquartering in England. Company offer their product
through hypermarket, supermarket, convenient shop and superstore. In these report formative
discussions has been made on factors that are affecting demand and supply including theories as
well as models of contemporary that changes from 20th to 21st century.
TASK 1
1.1 Demonstration of Demand Law, along with factors that create changes in demand curve
Law of demand is a fundamental principle of economics that demonstrate that if price of a
product or a service is higher, than consumer will demand for lower quantity of goods. It has
been identified that if in a marketplace product is available at high price then there is automatic
decline in demand of product. Thus, it has been evaluated that according to law of demand
fluctuation in price determine demand and supply prevails in marketplace. In terms with retail
industrial sector with the help of law of demand organisation can set price of their product only
for those who are having high demand in market place. With the help of this entity can ensure
maximum profitability and can make maximum supply of their products. With the help of law of
demand Tesco can effectively able to decide price of their groceries, cosmetics, household in
their stories in a well defined manner. This not only increases organisational profitability but also
allow customers to maximize their shopping experience. According to statistical record this has
been identified that in United Kingdom individual are more than tends towards spending on retail
goods comparatively to other necessities. However there are different types of elements that have
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influence upon demand of goods through which entity can determine movement of demand
curve.
(a) Change in customer preference and taste: It is one of the most essential aspects of
economics with the help of which entity can determine demand of particular products. For
instance if preferences of consumers shift towards consuming coffee for a specific brand then
this shift demand curve from D1 to D2 which is father being elaborated by a diagram, reducing
demand of others from D1 to D3. With the help of this Tesco can effectively make sure that
offerings of organisation at stores must meet consumer taste and preferences effectively.
(b) Per capita income – Per capita income is also determined as an essential factor that has
capability to affect demand. It has been identified that if in a region individuals is having high
income then they are more likely to spend (Tam and et. al., 2018). For instance if an individual is
having high income then it automatically increases demand curve in economy of a nation, that
shift it in a rightward direction and also change equilibrium price. In this situation it is important
for Tesco to offer their products in time effective manner in marketplace and also provide
discounts and other attractive offers according to market situation in order to grab more
customers.
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(c)Change in price of related goods – Position of demand of specific product or service change
according to the change in substitute that shape demand curve in a upward or downward
direction. For instance if price of Pepsi same but it substitute product Coco Coca Cola suddenly
come down, then it ultimately decreases demand of Coca Cola as before. Thus in this Tesco is
required to ensure that if price of some products change then they are require to be ready to
ensure that substitute are available within stores.
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(d) Expectations of increase or decrease in prices –
It is defined as expectation or certain kind of assumption in terms with increase or
decrease in price of a particular product or service in upcoming time period (Ruming, 2018). For
instance good weather conditions demonstrate adequate supply of groceries in upcoming month,
this automatically increases demand of the product in market place and further shift curve of
demand in rightward direction.
Along with this it has been identified that advertisements and promotional campaigns have
also significant impact upon demand of products. Thus with the help of this TESCO can
determine availability of products at different stores in order to retain customers for long period
of times as to ensure maximum profitability. In addition to these non-price factors like
advertisement, consumer trends have capacity to create shift in demand curve from left or right.
While it is different in daily essential needs like fruits, milk, vegetables and more. This state’s
shift in demand curve it formulates movement in context with quantity which is further being
define by diagram.
1.2 Demonstration of Supply Law, along with factors that create changes in supply curve
Law of supply according to economics term is termed as a change in price of product that
further fluctuate supply in marketplace (Hunter and Yap, 2018). It has been identified that supply
of a product get change according to the factors like price that creates supply curve movement.
In terms with retail industrial sector with the application of law of supply Tesco can maintain
stock of demanded products as well as inventory. Thus it is important for Tesco management to
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initialise different type of factors that have significant impact on supply of company products
and groceries.
(a) Weather disruption:
United Kingdom provinces is mainly affected by heavy rains and strong winds along with
this flooding and storm also act as major whether destructive factors that have significant impact
upon farmers and manufacturing companies. It significantly leads towards decrease in production
of groceries that automatically reduces supply along with making increase in price. Mentioned
below there is a figure that demonstrate shift in supply curve from downward to rightwards due
to weather disruptions that increases in quantity. This factor is somehow uncontrollable; for this
Tesco is required to make sure that they have sufficient products available in warehouses of
nearby stores in order to gain maximum advantage in order to earn high revenue.
(b) Trade restrictions: This factor also tends to influence the supply of goods at market. This is
because in the case of shortage of products, a nation does imports from foreign country to fulfil
the needs and demands of customers. However, owing to the trade restrictions underlying
between the countries, the shortage of supply of products tend to rise. In relation to UK, such
factors are overcome by importing goods at higher rates which leads to increment in market price
also (Browning and Zupan, 2020). The below mentioned diagram reflects the imposed tariff rates
upon products owing to the shortage in domestic ones.
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(c) Inflation and interest rate: Inflation or deflation phase of an economy also influence the
supply patterns. As can be seen in the below diagram, increment of national income reflects
inflation period, leading to overall increase in supply. Thus, this aids TESCO in setting pricing of
products in accordance with the situations prevailing in market place.
(d) Technology – This influences supply in a direct or indirect way. This is so because the
utilisation of effective technology by production companies for provision of high quality
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offerings aid in increment in supply of goods, leading to overall price increment. In this relation,
TESCO uses food technology to provide best quality products to customer base.
TASK 2
Changes in emerging theories of contemporary economics in 21st century as compared with 20th
The economics used in the 20th century as well as the industrial phase does not seem to be
complementing the service economy of 21st century whereby the primary requirement is that the
human along with the natural resources need to be constantly valued. In this relation, over the
course of time, it has been estimated that human satisfaction, questions are largely being put
upon facets such as wealth and national product. On the contrary, it has been examined that the
economy as well as the environment at the global scale have been damaged in a severe manner
as a result of the economic ideas most of the times, especially while the phase of the Great
Recession. At present time, 21st century, the nations have duly started emphasizing over inflating
the Gross Domestic Product, abbreviated as GDP, rather than ethics, which leads to decrement in
the wealth. Thus, the range of outmoded paradigms is largely required to be substituted with the
contemporary economics theories (De Vass, Shee and Miah, 2018). The 21st century economic
theories are needed to centralise the conditions such as constant changes taking place within the
climate, scarce natural along with financial resource bundle, environmental crisis and many
more.
The Neoclassical theory is associated with the economic growth and has largely been
dominant enough to make its place within the economic literatures till the time period of 90s.
Within this period, it was seen that economic theories were largely considered as the investment
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made in fixed asset as well as in increment of employment, for the achievement of long run
growth. Thus, the growth models of 20th century were seen to be testing the growth of developed
economies in the form of fixed asset as well as employment. However, with the passage of time,
a complete transformation or change has been witnessed in the economic growth theories. Such
alterations have led to the remolding of nature along with the trends of market. Over the course
of time, such changes are acknowledged to have been introduced owing to some crucial reasons.
It takes into account two primary assumptions. Although elasticity of substitution tends to differ
between the capital as well as labor on a wide scale across the sectors, the progress taken place
within the technological domain has resulted in changes within certain production outlets and
other aspects of qualitative nature. In addition to this, the Returns to Scale that is acknowledged
to be almost constant is yet another main assumption that underlies behind the emerging
concepts as well as theories of modern day economics of 21st century (Goods, Veen and Barratt,
2019).
Another primary concept linked to economics is discussed on the basis of the theory
propounded by the renowned economist Nicholas Kaldor during the year 1961. This theory can
be largely summed up into 6 main statements in accordance with the fundamental features linked
to economic growth on an international scale. Yet it has been found out that this theory is limited
in accordance with the modern times in terms of per capita income as well as labor productivity,
interest rates, returns on capital, capital or output ratios, share of labor and capital in the national
income. However, with the emergence of 21st century, such facts have largely come up, with the
increment in goods flow, trade, and finance and so on owing to the two main factors namely the
urbanization and globalization. These 2 factors have led to the complete transformation of
operational activities of organizations whereby they can trade their goods on the global scale in
an easy way. This has also led to increment in market place for the laborers, consumers and
manufacturers. Besides this, the economic growth taking place at an international scale can be
measured in terms of per capita income, base of population and Gross Domestic Product. Such
kinds of variations taken place in the growth rates have largely accelerated the overall national
economy (Bagla and Prasad, 2020). Further, the trends of 20th century which were centralized
upon national economy growth included growth in Per Capita GDP taking place due to
progression of technologies. However, fluctuations have taken place as a result of the unrelated
economic policies. In an instance of lesser technology progression, the growth in GDP was
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diversified within the nations and became unstable over a time period. With the increment taking
place within the domain of population, economic growth also decreases. In relation to the 21st
century, Per Capita Growth within technological as well as non technological areas is largely
accelerated owing to the changes that have taken place within the economic theories over the
course of time in terms of supply and demand ratio.
CONCLUSION
On the basis of above discussion, it can be said that micro economic concepts such as
measurement of demand and supply ratios as per the sectors, provide assistance in analysis of
market situations in a more specific manner. This also renders aid to the corporations in
determination of quantum of each product that is required to be available within the stores, so as
to ensure the maintenance of stock and inventory levels. Besides this, with the analysis of current
market situations, companies can stipulate pricing policies for setting balance and fulfilling the
customer demands in an efficient manner. Along with this, it can also be inferred that the
economic theories used in the 20th century have largely evolved and transformed to encompass a
number of new concepts, thereby giving rise to the emergence of contemporary economic
theories in the 21st century.
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REFERENCES
Books and Journals
Bagla, B. S. and Prasad, N., 2020. Block-3 Production and Costs.
Browning, E. K. and Zupan, M. A., 2020. Microeconomics: Theory and Applications. John
Wiley & Sons.
De Vass, T., Shee, H. and Miah, S. J., 2018. The effect of “Internet of Things” on supply chain
integration and performance: An organisational capability perspective. Australasian
Journal of Information Systems. 22.
Goods, C., Veen, A. and Barratt, T., 2019. “Is your gig any good?” Analysing job quality in the
Australian platform-based food-delivery sector. Journal of Industrial Relations. 61(4).
pp.502-527.
Hunter, B. and Yap, M., 2018. Income, work and education: insights for closing the gap in
Urban Australia. Canberra, ACT: Centre for Aboriginal Economic Policy Research
(CAEPR), The Australian National University.
Ruming, K. ed., 2018. Urban regeneration in Australia: Policies, processes and projects of
contemporary urban change. Routledge.
Tam, W. V. and et. al., 2018. A review on contemporary computational programs for Building's
life-cycle energy consumption and greenhouse-gas emissions assessment: An empirical
study in Australia. Journal of Cleaner Production. 172. pp.4220-4230.
Tanzi, V., 2018. The Ecology of Tax Systems: Factors that Shape the Demand and Supply of
Taxes. Edward Elgar Publishing.
Turner, G. M. and et. al., 2018. Squandering Australia’s food security—The environmental and
economic costs of our unhealthy diet and the policy Path We’re On. Journal of cleaner
production. 195. pp.1581-1599.
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