Analysis of Economic Factors: Demand, Supply, Elasticity, and GDP

This report provides a detailed analysis of the economic environment, covering key aspects such as the determinants of demand and supply, including factors like income, consumer preferences, and prices of related goods. It delves into the concept of price elasticity, calculating different types and evaluating their impact on price determination within various scenarios. The report also explores macroeconomic objectives, defining them as stable low inflation, high employment, rising living standards, and improvement in productivity. Furthermore, it evaluates the roles of monetary and fiscal policies in regulating gross domestic product, highlighting their influence on economic stability and growth. The report concludes by summarizing the key findings and referencing relevant sources to support the analysis.

THE ECONOMIC
ENVIRONMENT

Table of Contents
INTRODUCTION...........................................................................................................................1
Analyse changes in the determinants of demand.........................................................................1
Analyse changes in the determinant of supply............................................................................2
Analyse the influence of price elasticity in price determination..................................................3
Calculate different types of elasticity..........................................................................................4
Evaluate the impact of different elasticities in a given scenario..................................................6
Define the two-government macroeconomic objective. .............................................................6
Evaluation on the role of monetary and fiscal policy in regulating gross domestic product. .....7
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Economic environment can be termed out as combination of various factor that have
huge affect on working of business. Therefore, these factors influence the buying behaviour and
spending patterns of consumers.
Furthermore, report will cover the topics as Determinacies of demand and supply with diagrams,
type of elasticity and impact of different price elasticity on price determination. Lastly, role of
monetary and fiscal policy in regulating gross domestic product.
Analyse changes in the determinants of demand.
Demand is enhanced the growth of economy. Enterprise want to enhance the demands, so they
can improve the Income (Al Mamun and Ibrahim, 2019). For example, when price changes, its
effects on the demands of the product. Therefore, when prices are not changes and other factors
is change, so the demand curve will shift. These other factors are determinants of demand. There
are five determinants of demand which describe below-
The five determinates of demand
Income of customers — A high income of customers leads to enhance the demand of the
product that means a demand curves shift to the right. Thus, high income of customers reduced
the demand of normal goods. On the side, The low income of person it can reduce the demand of
the product and increase the demand of normal goods.

For example, if the demand for TV enhance with an increase in income, then TV will be called a
normal good. Income effect is positive in case of normal goods.
Consumer preferences — The favourable changes in prices or product it can lead to enhance
the demand. On the other side, the unfavourable changes in prices or product it can reduce the
demand.
Number of buyers — High number of buyers enhance the demand and low number of buyer is
reduced the demand of the product (Geipel and Hetherington, 2018.).
Prices of related goods.
 Substitute goods — These goods are those goods who are easily replaced to each other
for example, tea and coffer, The prices of coffee is increase, so the demand of tea would
be risen.
 Complementary goods — These goods are those goods who related to each other For
example, The price of ink will increase so the demand of pen will decrease.
In the above diagram, it has been clearly stated that the price of ink is increase so the demand of
pen is decrease. On the other side, the price of ink is decrease so the demand of pen will increase.
Expectation of future — these are commonly related to weather prices is increase.
Analyse changes in the determinant of supply.
Determinates of supply is also called factors which affects the supply and quantity of product.

Number of sellers — Higher the number of sellers, higher will be the quantity of a product or
service supplied in a market and vice versa. Thus, enhance the number of sellers it will increase
the supply (supply curve shift rightwards) (Narasuci, Setiawan and Noermijati, 2018 .). On the
other side, decrease the number of sellers it will decrease the supply(shift the supply curve
leftwards).
Prices of resources — Increase the prices of resources it will increase the cost of product and
reduce the profit. On the other side, Decrease the prices of resources it will decrease the cost of
production and enhance the profit.
Any change in an underlying determinant of supply, such as a change in the availability of
resources, it will shift the supply curve to the left or right.
Technology — improvements in new technology is creates more efficient production of goods
and services. Thus, For improving in technology it can reduce the production costs and
increasing the profits. Therefore, As a result supply is increased and supply curve is shifted
rightwards.
Suppliers' Expectations — Change in expectations of suppliers about future price, it can
directly impact on product or service it may affect their current supply
Analyse the influence of price elasticity in price determination.
The price elasticity of the demand is determined by the measure of change in quality demanded.
This is affected by the price change level. As demand of the luxurious goods are generally high.

Thus, the price elasticity of this good will be high. The customers demand with quantity
demanded get changed (Narasuci, Setiawan and Noermijati, 2018 .). The equilibrium of the
market price is also affiliated with the price elasticity. The prices of the products are determined
by the law of the supply. The manufacture produced higher quantity of the goods in order to
meet the current demand of the consumers.
Calculate different types of elasticity.
There are 5 types of elasticity of demand:
Perfectly Elastic Demand (EP= ∞) — in this stage, the price is constant but the demand is
infinity.
Perfectly Inelastic Demand (EP = 0)- in this stage, The demand is constant but the prices is
changed (Cheng and Kadir, 2018 ).

Relatively Elastic Demand (EP> 1) — In this stage, The demand is said to be relatively elastic
if the percentage change in demand is arisen than the percentage change in price.
Relatively Inelastic Demand (Ep< 1 ) — in this stage, it describes that, when the percentage
change in price demand is less than the percentage change in price.

Evaluate the impact of different elasticities in a given scenario.
The impact of different elasticities helps to identify the different prices that may
influences the demand of the product. Therefore, rise in prices it leads to fall in demand on other
side, fall in price leads to rise in demand ( Woods and Kong, 2018 ).
Define the two-government macroeconomic objective.
The objective of macroeconomic policies defined as to maximise the level of nation
income of the country, to provide economic growth and to raise the utility and living of
participate in the economy. Hence, major objective of macro economics defined in following
manner as are-
Stable low inflation- The legal authorities inflation target is 2.0% for the consumer price index.
High employment- Legal authorities takes initiatives towards to achieve enhancement in
employment and eventually situation arrives where all those available can find the meaning full
work.
Rising living standards and fall in relative poverty- The legal authorities of the UK wants to
cut the child poverty and to have reduction in pensioner poverty.
Improvement in productivity- The legal authority has main purpose to have improvement in
global trade performance and competitiveness.
Therefore, it can be stated that economic stability and low volatility in key indicators
such as price, income, economic growth, interest rate and investment and trade need to be stable.

Thus, it leads to promote better functioning within the country.
Evaluation on the role of monetary and fiscal policy in regulating gross domestic product.
The legal authorities intervene in economies to maintain the economic stability (How
Fiscal Policy and Monetary Policy Affect the Economy, 2018.). Hence, the role of fiscal and
monetary policy towards gross domestic product will be defined in following manner as-
Fiscal policy- It is the use of legal authority spending and taxation that can have effective
influenced over the economy. However, the legal authorities must have use the fiscal policy
because it has influence over the level of aggregate demand in the economy to achieve the
economic objective of the price stability, economic growth and employment. Henceforth, the
Fiscal policy impacts the federal, state, local government taxes. Therefore, it can be stated that
while the government taxes decrease, disposable income increases. Fiscal policy has huge impact
over the aggregate demand through change in government spending and taxation. Thus, increase
in spending for good and services will aid to stimulate the growth within economy
Monetary policy- These policies affects the money supply in an economy. Therefore,
enhancement in money supply is mirrored by an equal rise in nominal output and also in gross
domestic product. Henceforth, it can be stated that increase in money supply will also leads to
enhancement in spending of consumers. Thus, it can be stated that when the inflation is high and
variable that it can interferes the efficient operation of the economy and this can also lead to
reduction in economic growth. This is the decision that takes by the legal authorities to make the
rules regarding the supply can interest rates.
CONCLUSION
Hereby, it can be concluded that environment economies termed out as an area of economies that
deal with relationship between the environment and economy. Thus, report is based on economic
environment of the country world.
Thus, report will cover following topics as determinants if demand and supply, impact of prices
elasticity over the prices decision. Lastly, define the prices elasticity of demand of various
components.

REFERENCES
Books and Journals
Al Mamun, A. and Ibrahim, M.D. 2019. Evaluating the Effectiveness of Development Initiatives
on Enterprise Income, Growth and Assets in Peninsular Malaysia.Economics &
Sociology, 12(1), pp.39-366.
Narasuci, W., Setiawan, M. and Noermijati, N. 2018. EFFECT OF WORK ENVIRONMENT
ON LECTURER PERFORMANCE MEDIATED BY WORK MOTIVATION AND JOB
SATISFACTION. Jurnal Aplikasi Manajemen, 16(4).
Cheng, N.P. and Kadir, S.A. 2018. Relationship between Work Environment and Organizational
Commitment among Private School Teachers in Klang Valley. International Journal of
Academic Research in Business and Social Sciences, 8(7), pp.781-793.
Davis, R. 2018. Construction Insolvency: Security, Risk and Renewal in
Construction. CONSTRUCTION LAW INTERNATIONAL, 13(2).
Woods, O. and Kong, L. 2018. New cultures of care? The spatio-temporal modalities of home-
based smart eldercare technologies in Singapore. Social & Cultural Geography, pp.1-21.
Policy, L.C., Geipel, J. and Hetherington, D. 2018. Business Environment Reform Facility.
Online
Types of Price Elasticity of Demand 2016. [Online]. Available through :
<http://www.economicsdiscussion.net/elasticity-of-demand/5-types-of-price-elasticity-of-
demand-explained/3509>.
Effect of Demand Curve on Normal Goods [Online]. Available through :
<http://cdn.yourarticlelibrary.com/wp-content/uploads/2013/09/clip_image00623.jpg>.
Shifts in supply. 2017. [Online]. Available through
<https://www.economicsonline.co.uk/Competitive_markets/Shifts_in_supply.html>.