BM533 Contemporary Economic Analysis: Application to Sainsbury's

This report provides a contemporary economic analysis of Sainsbury's grocery store, focusing on the principles of microeconomics, demand, and supply. It explains the law of demand and the factors affecting the demand curve, such as consumer income, taste, price of related products, and advertising. It also explains the law of supply, discussing how technology, production costs, natural conditions, government policies, and company targets influence the supply curve. The report contrasts Adam Smith's and Keynesian economic theories, alongside modern approaches like the Nudge principle, to provide a comprehensive understanding of economic factors impacting Sainsbury's business strategies. Desklib provides similar solved assignments for students.

BM533 Contemporary
Economic Analysis

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK 1............................................................................................................................................3
1.1 Explanation of law of demand and factor effecting low of demand curve...........................3
1.2. Determination of Law of supply movement and changes in supply curve with influencing
factors..........................................................................................................................................6
Task 2...............................................................................................................................................9
Comparison and contrast of economic theories : .......................................................................9
CONCLUSION .............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
In this report it describe about the variation which are presently experienced by the
SAINSBURY groceries store in its daily sales revenue and they find the best method to deal
with that problem. On the other side, firm hire a sales manager but it was also not aware
about the concept of microeconomics it mainly includes the shift in demand and supply of
the grocery store (Abanina and et.al., 2018). On that basis, company need to understand the
meaning of law of demand and changes in its demand curve along with this it also indicates
the components which create an impact on the demand curve of the organization. In other
step firm also need to understand the meaning of law of supply and the changes in supply
curve of the business along with the factors who influence the supply curve of the firm. In
the end company show the comparison and relation between two theories of business
practices.
TASK 1
1.1 Explanation of law of demand and factor effecting low of demand curve.
Microeconomic:
Microeconomic is a pert of science which refers to the scrutiny of individual consumer,
households and firm's activity in discovering and allocation of resources. Simply it deals in
micro concepts and the main focus of microeconomics is fulfilling needs and wants of
individuals. Example of microeconomic are consumer equilibrium, savings and incomes of
individuals.
Law of demand: law of demand refers to the inverse relationship between the demanded
price and the quantities for the products. Law of demand determine the needs consumers for
goods and services at a given price. If price of a commodity decrease then demand of same
commodity will increase whereas price of commodity increase, it will inversely impact on the
demand of the same commodity (Adams and Klobodu, 2019). Principles of law of demand are
taken into consideration to microeconomic and macroeconomic which states that if price of
commodity change, it will inversely influence the all the demand factors which are income, taste
and preference of consumer. Practically working of law of demand into the market explained
with the help of example below:

Sainsbury is a company which deals in the grocery products. Company already selling a product
for 20 dollar and the sale sale is constant as before. To increase the sell they decide to decrease
the price of the product to 15 dollar and as result of decrease in price sell of the product is
increased. It clearly determines that the price of a commodity increase then the demand of such
commodity will increase, it is because consumer buy more product when price of product
increase to save money. On the other hand if price of product is increase by the company to
maximise their profits, resulting demand of the product is decreased. It is because consumer can
shift to other company product which offer same product in lesser price. The taste and preference
of the consumer also change if price of a product is increase and decreased. Price factor majorly
influence the consumer decisions while purchasing a product or service. There is an exception
that the product having no competition in the market or no one in dealing in the same product
then the company can control the price of the products freely (Bucci, Prettner and Prskawetz,
2019). If the product is a necessary item for the consumers then price does not matter to them.
Sainsbury has to determine the price factor , market condition , consumer needs and their
purchase power while changing the prices. Company has to determine all factors which influence
the demands of a commodity to maximise their profits and growths.
Demand curve: It refers to the graphical representation of the relationship between price
and quantity of a demanded product. It drawn with demanded quantity on the horizontal axix and
price on the vertical axis of the graph (Chen and Zhong, 2021).
Factors affecting demand curve of Sainsbury plc:

1. Variation in income levels of Consumer: Consumer buy more product when their
earning levels increased. When consumers incomes increased, then they are more expected to
purchase Sainsbury groceries product rather than generic products. Product which shift demand
curve into right are called as normal goods. Price of normal goods are constant in short run but in
long term, price increase by seller to maximise profits.
2 . Variations in consumer taste: with the passage of time, taste and preference of the
consumer changes, resulting decrease in the demand of various product. For example clothing
style are continuously changing, Fashion that were popular in past is no longer attract today's
consumers. It is a one of the major factor which influence the demand curve (Child, 2019).
3. Variations in price of related product: Goods and services can be substituted for one
another. A change in one product price, resulting increase in another product price price. For
example if the price of beef goes up, then people start buying more chickens. It impact on the
demand curve and shift it to left .
4. Advertisement expenses and consumer expectations : Advertisement is the one of the
promotional technique which help in increasing sale and demand of a product. The main purpose
of advertising is to attract consumer towards the product. The demand of product can easily
increased by the help of advertisement. Consumer expectations regarding product future price
may influence demand of a commodity. Consumer estimate about future increase and decrease of
a particular commodity, then they decide the quantity to purchase such product. This situation
influence the demand curve (Gupta, Kannan and Sanyal, 2018).
Changes in demand curve:

1.2. Determination of Law of supply movement and changes in supply curve with influencing
factors.
Law of supply: Supply refers to the the product which is ready to distribute in the market by the
supplier or the total number of goods and services that is available for the consumers. Law of
supply refers to the positive relationship between the price of a commodity and supply of a
commodity. Concept of law of supply refers to that all factors are remain constant when the
price of a product increase, resulting supply of same product will increase and in such situation
sell of same product is also increased. When the price of a commodity decrease then the supply
of the product is also decreased (Hechter, Opp and Wippler, 2018). Supply curve move with the
prices factor in positive manner.

Law of supply is adversely related to the low of demand. When the price of a commodity
is increased, resulting supply of that commodity will decreased. Equilibrium is the point where
demand of a commodity and supply of that commodity are same. For example, when the price of
a product in Sainsbury grocery store is increase then the supply of the same product is also
increase due to decrease in the demand. It tells that company needs to fulfil consumer demands
more efficiently. Price of decrease then the supply of the same commodity decreased. Sainsbury
reduce the efficiency to harvest because price of the product is decreased (Johnston and
Ollerenshaw, 2020).
Factors effecting supply curve of the Sainsbury grocery store:
1. Technology improvement: Supply of the commodity product depends on the
technological advancement. New and advance technology helps a firm in increasing production
of the product in the minimum possible cost. This help in increasing profits and also motivate
supplier to produce more by working overtime. These advancement of technology provide better
chain to supply products. Sainsbury store need such technologies to attract more consumer and
also help firm in increasing its profits (Liang, Wang and Yang, 2022).
2. Cost of production: cost of production and supply of product are different from each
other. Cost of production have inverse relation with the supply of the product. If one increase
then another will decrease. Cost of production directly and indirectly impact on the profits of a
firm. If the cost of production is increase than the supply of the finish goods is fall down.

3. Natural conditions: Some of the product and its growth are depends on the the natural
conditions such as seasonal crops which are mainly depend on the weather conditions. Some
crops are depends on the rain, resulting if rainfall is good during monsoon than the availability of
the rainy crop is increased. Natural condition impact the supply chain .
4. Government policies: Government always set their policies or regulation in the
economic market which directly impact supply chain. Government policies
includes taxes which increase the manufacturing cost of a firm, resulting supply
of the product decreased. These policies reduce the profit margin of the firm.
Some government policies may useful for the firms when government provide
tax relaxation and subsidies. It also helpful in increasing profits and also rise in
supply (Rahman and et.al., 2018).
5. Company targets: Basically supply curve move towards the higher prices. Which
refers to the fulfilment of organisational objectives and maximisation of their
profits by increasing supply. Some company sell their product on less prices in the
competitive market to increase sale but it increase the short term profits. These
companies not focusing on the profits, their main focus on boosting company's
growth and its expansion.
Change in Supply Curve:
This diagram includes the changes in supply curve by technology improvement, cost of
production, natural conditions, government policies and company targets.

Task 2
Comparison and contrast of economic theories :
Economic theories refers to the principles and ideologies which manage the variation in
the environmental factors to control the consistency in the economic development. Such theories
give facility of interest rate, government involvement of their rules, policies and other factors of
economy. The managers of firm sainsbury plc is using varios types of theories in relation of
modern practices. These theories includes Morden and economic theories which are discussed
below:
Adam Smith Economic theory: It states that the wealth is created through the productive labours
and manpower it has capability to create power and the self -motivation that all members /people
to put their best and optimum utilization of available resources. Adam Smith states that the
market operations and functions work well as when the government roles are not involved in it
and have no references. When the government restricted the idea for the nationwide trade then
the writer Smith Laissez introduced the theory in relation with the international trade practices
where it talks on the decisions that are to be made by the citizens of the country. This notions

states that the people shall be allowed to make decisions that are based on the usage of land,
labour, capital and machine equipment, so that their choices and suggestions can come up with
the good ideas and meaningful perspectives that will help the economy in a long run. All this will
help in creating value (Söderbaum, 2019).
Keynesian Economic theory: This theory examines the fiscal system a of the large -scale
economy it also discusses the affect that is caused due to main factors that are production,
employment and inflation due to the changes in money spending structure in the financial
system. This idea can be applicable in the scenario of Sainsbury Co. that if the state and the
federal power and authorities expands the amount and supply of money then it can help the
economy in various kinds. If the money is more in the states, then the purchasing power of the
consumer will increase and so the economy will improve in every aspect as it will have more
amount of money to spend on infrastructure that will result in creating more employment
opportunities (.Strathern, 2018).
The modern approaches are as following:
Nudge principle: It is the concept in the behavioural economics, political theory and behavioural
science that indicates the positive implications and suggest as to influence the behaviour and
decision- making of groups and individuals. This is the modern approach that elaborates the
decision quality of the customer. This model helps the people to make reliable decisions. This
standard also assists people to make assessment on the present economic factors and helps the
people to learn and manage how they have to live with the changes that might happen in an
economy.
Behavioural Theory: This theory was established by Richard Thaler. It is good mix of the
psychology and economics. It provides valuable knowledge to the businesses about how the
people think and act in the real scenarios by assisting them to make quick decisions. This model
states that the consumer is not rational of their choices and hence is more focused on gaining the
profitable welfare even if they are providing with the mechanism through which the data can be
accessed.
Overall, it is said that from the all the theories stated above the economic theory will help the
economy for serving better in all the fields (Voynarenko and et.al., 2020).
Comparison and Contrast:

In the operation of Sainsbury plc, the elements of historical or traditional theories are absolute
with the assumption that logical consumer devise rational opportunities with the aim of
enhancing economic welfare. Basically, such theories are used to consider some situations which
includes spending, taxation policies and borrowings from fiat currency that are controlled and
operationally impact by revenue of federal government.
By applying both the theories on sainsbury plc, it can be concluded that there is one n
only factor is common among these theories as they are beneficial in separate terms. According
to the position and components of the firm and sanctioning manager and analysts for informing
macroeconomics difficulties in a company.
CONCLUSION
It is concluded from the above report that the SAINSBURY grocery store necessary to
stick on the one price of the commodity to stop the variations in the sales. Because the price of
the goods create an impact on the demand and supply of the organization. So, firm need to fix the
price of their goods in which firm having the more demand of their commodity and high supply
as well. In last task it describe about some mandatory economic theories which are used in 20th
and 21st century of the economy.

REFERENCES
Books and Journals
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Adams, S. and Klobodu, E.K.M., 2019. Urbanization, economic structure, political regime, and
income inequality. Social Indicators Research. 142(3), pp.971-995.
Bucci, A., Prettner, K. and Prskawetz, A., 2019. Human capital and economic growth. The
Impact of Health, Education and Demographic Change, Springer. Milano, doi, 10,
pp.978-3.
Chen, Y. and Zhong, S., 2021. Uncertainty Motivates Morality: Evidence and Theory. Available
at SSRN 3737959.
Child, B., 2019. Sustainable Governance of Wildlife and Community-based Natural Resource
Management: From Economic Principles to Practical Governance. Routledge.
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Quarterly. 42(2), pp.595-606.
Hechter, M., Opp, K.D. and Wippler, R., 2018. Social institutions: their emergence, maintenance
and effects. Taylor and Francis.
Johnston, C.D. and Ollerenshaw, T., 2020. How different are cultural and economic
ideology?. Current Opinion in Behavioral Sciences. 34, pp.94-101.
Liang, Y., Wang, L.F. and Yang, Y., 2022. What role should public firms play in the upstream
market?. International Journal of Economic Theory.
Rahman, M.Z. and et.al., 2018. Assessment of socio-economic and sexual vulnerability of tea
workers in Bangladesh. The Journal of Social Sciences Research. 4(11), pp.229-240.
Söderbaum, P., 2019. Ecological economics: Redefining economics for democracy and
sustainability. In Alternative Approaches to Economic Theory (pp. 207-221).
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Strathern, P., 2018. Dr Strangelove's game: A brief history of economic genius. Crux Publishing
Ltd.
Voynarenko, M. and et.al.,2020, September. Modeling Emergence Properties of Economic
System. In 2020 10th International Conference on Advanced Computer Information
Technologies (ACIT) (pp. 607-612). IEEE.