Business Economics: Analyzing the Economic Behavior of a UK Firm

This report delves into the business economics principles influencing a UK-based organization, focusing on scarcity, resource allocation, and the importance of various market systems like perfect competition, monopoly, and oligopoly. It examines the role of opportunity costs in economic decisions, elasticity of demand, and the implications of pricing and corporate objectives on operations, using ASDA as a case study. The report compares price-setting mechanisms in different market structures and analyzes the impact of UK regulations on market power, including the Competition Act 1988 and the Enterprise Act 2002. Furthermore, it evaluates the tools available to meet macroeconomic policy changes, assesses the performance of the UK economy in the global market, and demonstrates the theory of comparative advantage, concluding that market structure and free trade policies significantly influence economic behavior, with UK government policies playing a crucial role in achieving macroeconomic objectives.

Business Economics

economic problem of scarcity and
demand resource allocation
 Scarcity is the term which means limited quantity of sources available in
the economy.
 It is necessary to assure efficient resource allocation so that optimum
use of scare resources will helps to accomplish greater level of
consumer demand
 Natural resources such as land, oil, coal, natural gases, water etc. are
available in limited quantity which results in arising scarcity problem in
the economy

Importance of different market system
 Perfect competition
 Monopoly
 Oligopoly

the role of opportunity costs in
determining the economic decisions
 Opportunity cost is the cost of sacrificing one alternative so as to pursue
a specified action which is already taken.
 In the situation of scarcity, Asda has to choose best option from the
available competing alternatives
 Asda is a profit motive business organization who wants to maximise its
turnover and minimise costs so as to get better profitability.

Elasticity of demand
 The level at which product demand get changes with the fluctuation in price is called
elasticity of demand.
 In general, higher the price will lead to decrease consumer demand and vice-versa.

Importance of Elasticity of Demand
 International trade:
 Taxation policy:
 Monopolist's decisions
 Factor pricing

implications of pricing and corporate
objectives on its operations
 Asda is a privately owned enterprise who mainly aims at maximize their
profitability to compete effectively in the market
 Its corporate objective is to provide cheap and affordable goods and
services to great customer base.
 Less prices helps Asda to generate larger turnover and high profit
margin.

Compare how prices can be set in
different market structure
 Perfect competition
 Monopoly
 Oligopoly

Impact of UK regulations on market
power
 Competition Act, 1988 is designed so as to prevent domestic
organizations from the fierce level of competition from the international
corporations.
 Asda need to comply with all the provisions and run operations in
faithful manner
 , Enterprise Act, 2002 is also applied to the organization specially for
detecting the terms and punish abuse of market dominance
 OFT's (office for fair trading) objective is to ensure fair trading practices
to protect consumer interest.

how the structure of UK economy has
changed in 21st Century
 In 21st Century, UK economic structure changed at staggering rate.
 Technological improvement due to extensive research and development
operations increased UK nation growth rate to a great extent
 Due to globalization, more international rules and regulations came into
force
 High number of firms lead to enhance competition level among
organizations.

Evaluate the tools available to meet
macroeconomic policy changes
 If central bank declined CRR, SLR and interest rate on loan than Asda
can take cheaper loan of large amount.
 In context to UK economy, high credit supply influenced economic
activities by affecting savings and investment
 In context to Asda, strong pound value provide benefits of foreign trade
by exporting goods to the other countries