Economics for Business: Consumer Retail Demand and Supply Report

This report, titled "Economics for Business," delves into the fluctuations within the consumer goods and services sector, examining both positive and negative impacts. It meticulously analyzes factors causing shifts in market demand and supply curves, drawing upon various economic theories. The report highlights the influence of the COVID-19 pandemic on consumer retail demand, spending, and market equilibrium, including the effects of income loss, unemployment, and changes in consumer behavior. Furthermore, it investigates the role of government interventions, such as subsidies and stimulus packages, in mitigating negative impacts and aiding economic recovery in the UK. The report provides detailed insights into the implemented policies and their effects on the retail industry, offering a comprehensive overview of the economic landscape during this period.

Economics for business

TABLE OF CONTENTS
THESIS STATEMENT.............................................................................................................3
INTRODUCTION......................................................................................................................4
TASK 1......................................................................................................................................4
Factors impacting consumer retail demand and supply.........................................................4
TASK 2......................................................................................................................................9
UK governmental and economic policies implemented to aid economic recovery from loss
of consumer retail spending...................................................................................................9
CONCLUSION........................................................................................................................11
REFERENCES.........................................................................................................................12

THESIS STATEMENT
This report is on the topic “Economics for Business” which states about the current
fluctuations which can be seen in the consumer goods and services industry having both
positive and negative impact. The report provides an explanation about the various factors
which has resulted into shift in the demand and supply curve in the market. The report draws
attention towards various theories of economics. Based on the findings, there are different
governmental and economic policies which are being imposed in order to control the
situation and reducing the negative impact of it over the business such as providing retail
subsidies, stimulus packages, industry-specific measures and so forth.

INTRODUCTION
Economics for business referred to as the field of applied economics which involves
the study of financial, industry and market related issues which is being came across an
organization. It takes into account various factors having an influence over the change in the
demand and supply of the product in the market. Economic is based on the various principles
such as resource scarcity, opportunity cost, marginal decision making, incentives and gain
from trade, market equilibrium point, resource and market efficiency, government
intervention, spending vs income and production capacity. All these factors are considered
for examining the market condition. This report provides analysis of the factors having a
positive or negative impact over the demand and supply of the consumer retail demand and
spending due to Covid-19 along with the response of retail market on it. Along with this, it
covers the UK governmental and economic policies that could have an impact over the
demand and consumer retail spending in UK.
TASK 1
Factors impacting consumer retail demand and supply
There are many theories pertaining to economics but the most important theories
which are important for understanding economics re the law of demand and law of supply.
The law of demand defines that as the price of the product increases, the less people will
demand the same product resulting into decline in the demand of that product (Law of Supply
and Demand. 2019). The measure of a product that purchasers buy at a greater cost is less in
light of the fact that as the cost of a product goes up, so does the opportunity cost pertaining
to the purchasing that product. Thus, individuals will normally try not to purchase an item
that will compel them to do without the utilization of something different they value more
(Krugman and Wells, 2017). In the similar way, the law of supply, shows the amounts that
will be sold at a specific cost. In any case, in contrast to the law of demand, the flexibly
relationship shows an upward slope. This implies that the higher the value, the higher of the
quantity of the product being provided. From the vender's point of view, the opportunity cost
of each extra unit that they offer will in general be ever more greater. Makers supply more
quantity of the product at a greater cost in light of the fact that the higher selling cost
legitimizes the higher opportunity cost of each extra unit sold.
Economics is often considered as the social science but it has been criticized that by
some authors related to that field that economics falls short, in respect to meeting up with the
definition of science due to the variety of the reasons such as the lack of consensus, political

factors and so forth. But even after the arguments, the economics shares certain elements
which are common to social science in terms of quantitative and qualitative. The social
science likewise utilizes various quantitative instruments utilized in the regular sciences to
diagram and get patterns (Is Economics a Science? 2020). For instance, financial specialists
use measurements and numerical speculations to test theories and estimate drifts, a cycle
known as econometrics. Also, numerous sociologies use surveys and other inflexible
examination procedures to decide the trends and give clearness to future practices.
Due to the emergence of Covid-19, there is a huge fluctuation in the demand and
supply of the goods and services. This has caused major shift in the consumer retail demand,
spending level, market equilibrium. The entire retail industry was affected.
Fall in income and loss of employment
During this tough time, many people lost their job, small businesses just shut down
which ash affected the earnings of the people, resulted into reduction in the disposable
income along with the demand of the consumer retail products. This can be illustrated with
the help of the below graph. Under the both the graph there is a shift in the demand curve
which is because as the income falls or if there is increase in unemployment, the demand for
the product reduces because of cash crunch. Therefore, the first figure shows the impact of
fall in income on the demand of the normal good as the demand shifts from D1 to D2, an
inward shift in the curve. The figure 2 states that due to decline in the normal goods there is
an increase in the demands of the inferior goods. But in both the cases the supply remains the
same or there might be little reduction in the supply as well.
Income
C
A
B
S1
D2
D1
Q1Q2O
I2
Quantity
Figure 1
I1

Complementary or substitute goods
The limited availability of the products has resulted into increase in the price of the
products. Therefore, under the situation of complementary goods the increase in the price of
one good has affected the demand for another good which is complementary to each other
like bread and butter. In case of substitute good, there is increase in the demand of the
substitute goods because of the increase in the price of normal goods. The below graph
depicts it very clearly.
S1
D1
D2
Income
I1
I2
Quantity Q1 Q2
P1
Q1Q2
P2
S
S

UK population and demographics
The emergence of Covid-19 has resulted into major shift in the population and UK is
hardly hit by this pandemic. This transition period has caused the rapid demographic change.
The movement of people has reduced, for instance, the proportion of the adults in UK who
have travelled to work between the time frame of 28 October to 1st November 2020 is
declined by 3% in contrast to the previous week of 56%. People who have worked from
home and haven’t worked or travelled are at the same level. Therefore, this has affected the
demand of the products because of lower pay and no job.
Government subsidies
Subsidy is the amount which is being given by the government to the firms for the
purpose of encouraging production and consumption of the retail goods in the market. The
UK government has imposed a licensing policy with the objective to support the demand and
supply in the consumer retail market. This has resulted into shift in the supply curve
downward along with the amount of subsidy. Under such situation, a new supply curve
parallel to the original will be there. Depending upon the elasticity of the demand, the impact
of it will be reduce the price and the rise the output level. According to the theory of
economic incidence, the subsidy indicates who has effectively taken advantage of subsidy.
And on the other hand, the legal incidence, indicates that the subsidy is intended to provide
support.
Income
C
A
B
S1
D2
D1
Q1Q2O
I2
Quantity
I1

The price that the consumer pays does not reduce by the full amount in regard to the subsidy,
but instead, it declines to P1 from point P. the intention of the subsidy is to minimize the
price that the consumer is required to pay. And the producer gets the advantage in terms of
additional revenue. The gain of the consumer is P-P1 per unit of the product while the whole
gain is PFBP1. The gain incurred to the producer is C – P per unit and the complete gain is
CAFP. Therefore, the overall cost that the government is required to incur for subsidy is the
area CABP1.
Benefits to producers
Benefits to consumers
B
A
F
S
S + subsidy
P1
P
D
Q Q1
P1
P
C
S1
S
D
Q1QO
O

TASK 2
UK governmental and economic policies implemented to aid economic recovery from loss of
consumer retail spending
The volume of basic food item buys rose strongly not long before lockdown on 23
March and volume deals are as yet higher than at a similar point in 2019. Since lockdown
started, customers have made less outings than in a similar period a year ago yet have been
purchasing more per trip. Changes in food use practices are generally noticeable among the
more younger age gatherings, families with youngsters and the individuals who were self-
isolating. About portion of the 16-to 34-year-olds changed their food use structure among
April and June while the propensities for the greater part of the more established age bunches
stay predictable (Coronavirus and the impact on output in the UK economy: July. 2020).
There has been a move towards cooking more from the zero level, eating all together and
eating well dinners, yet in addition a checked expansion in eating, particularly in April and
May. This has impacted the retail industry in UK on a massive scale.
Notwithstanding month to month growth of 1.0%, the food items ventures were
3.6% more fragile in July than in February 2020, with the other food items classification the
hardest hit since the beginning of the pandemic. Just four of the eight sub-businesses inside
this area rose, featuring the mixed picture for month to month growth, with the most striking
ascent in meat items (3.6%). Based on the respondent-drove proof that the resuming of the
food administrations area during July (for instance, bars, eateries and bistros) positively
affected demand for food items. Somewhere else, there were report of negative COVID-19
impacts on the food items industry. A few responders that saw expanded demand from the
"panic purchasing stage", noticeable in grocery stores during March 2020, have seen turnover
re-visitation of ordinary levels in the course of recent months, while others, particularly those
providing the products to the hospitality segment, have seen a fall in demand for their items.
There are various policies which are being implemented for controlling the chaos
and situation arisen due to Covid-19. Few of the are stated below.
Stimulus package
The policies that has been implemented is mainly for the purpose of stimulating the
demands and especially in the business sectors which are hardly hit by the pandemic or the
social distancing. It also involves providing help to those who lost their jobs and are
unemployed. The government of UK has estimated the cost pertaining to the stimulus
package which also includes ‘Plan for Jobs’ and this would cost nearly £30bn which is a

significant amount but lower than the packages being announced by the other nations (The
government’s post-Covid 19 stimulus package. 2020). This initiative involves the total govt.
Spending for supporting the entire economy in this time of crisis is £190 billion or 9% of
GDP. Of this amount, £5.6bn is towards the infrastructure spending and it has been assumed
that this figure will take up 100% of the £1000 job retention bonus which is being offered to
the employers for bringing back the employees.
On 8 July 2020, the UK govt. declared that it would present a temporary 5%
diminished pace of Value Added Tax (VAT), which would influence organizations in this
area. Food and refreshments administrations saw a 99.0% development in July 2020 yet
stayed 58.7% underneath February 2020, with the greater part of the effect from more appeal
from organizations that had returned or were planning to resume, yet the general yield level
stayed powerless.
Retail subsidies
The UK government has also announced a series of measures for the purpose of
supporting the businesses under the consumer and retail sector to export products overseas
which is apart of the measure for helping the sector recovering from Covid-19 (Coronavirus
grants for retail, hospitality and leisure businesses. 2020). It will provide immediate
assistance to the organizations through the way of ensuring that the experts offering advice on
the aspects such as the online retail including the overseas marketplace. Apart from this, the
government has come up with the grants as well (Support for businesses and self-employed
people during coronavirus. 2020). The businesses in within the retail, hospitality industry is
entitled for cash grant of up to £25000 from their local councils. For being eligible for the
grant, the busines should be based in UK in the prescribed sector and should be having
rateable value as on11 March 220 under £51,000. If the rateable value of the business is equal
to under £15,000 then the amount that will be granted is £10,000. On the other hand, if the
value is more than £15,000 and lower than £51,000, then the businesses would be eligible for
£25000. According to the latest report, government has paid more than £16 million to over
1,000 businesses from April.
Industry-specific measures
Along with that, “Consumer and Retail Export Academy” has been launched which
provides the retailers or the businesses with the varied knowledge and understanding and
skills required to meet with the needs of the exports. This plan will outline the long-term
assistance to the sector as the new opportunities will emerge because of the trade deals being
negotiated with the other nations such as US and Australia (Bounce-back plans launched for

consumer and retail industry.2020). This academy will provide knowledge on digital
learning, webinars on the consumer and retail concentrated by the DITs online portals. It will
also include a coaching programme along with an extensive library which will provide
information on the industry specific. Another initiative is the “International Clicks Fast Track
Initiative” in which the access to the new DIT interactions and agreements from B2B
marketplaces has resulted into increase in the routes for the purpose of marketing the store
closures because of the Covid-19. Along with this, the omnichannel optimiser initiative has
been undertaken in which taking advice for the businesses will help in creating an overseas
multi-channel plan in order to support the online business (Coronavirus: How much will it
cost the UK? 2020). Conducting an expert driven webinar with the purpose of equipping the
exporters with the knowledge pertaining to the e-commerce and how they can take the
advantage of digital opportunities which has created its way from the coronavirus outbreak.
Government transfers
The UK central bank is the first bank in the world in regard to adopting the direct
monetary financing for the purpose of funding the government spending’s during the time of
pandemic. Along with that, the Bank of England has also announced that it would expand the
existing overdraft known as the Ways and Means facility in relation to offering government
with more funds for responding to the Covid-19. The bank has already established the
indirect financing the treasury by the way of the quantitative easing programme.
CONCLUSION
It can be inferred from the above that the covid-19 has impacted the retail sector
drastically which has influenced the growth the economy on an overall basis. The impact has
been analysed with the help of the diagrams like demands and supply in accordance with the
various factors which ahs been impacted as a result of the pandemic and how it has
influenced the consumers the spending power and over retail market. This involves, income
of the income of the people, unemployment, related goods and so forth. At last, the various
policies and programmes which are being implemented by the UK government in order to
accelerate the demand and supply of the retail consumers goods along with meeting with the
or overcoming the negative impact of COVID-19 19 on the consumer retail spending and the
loss which ahs been incurred to the business in the retail sector.

REFERENCES
Books and Journals
Krugman, P. and Wells, R., 2017. Economics . Schäffer-Poeschel.
Online
Bounce-back plans launched for consumer and retail industry.2020. [Online]. Available
Through:< https://www.gov.uk/government/news/bounce-back-plans-launched-for-
consumer-and-retail-industry>.
Coronavirus and the impact on output in the UK economy: July. 2020. Online. Available
Through:<https://www.ons.gov.uk/economy/grossdomesticproductgdp/articles/
coronavirusandtheimpactonoutputintheukeconomy/july2020>.
Coronavirus grants for retail, hospitality and leisure businesses. 2020. [Online]. Available
Through:<
https://www.merton.gov.uk/business-and-consumers/business-rates/grants-for-retail-
hospitality-and-leisure-businesses>.
Coronavirus: How much will it cost the UK? 2020. [Online]. Available Through:<
https://www.bbc.com/news/business-52663523>.
Is Economics a Science? 2020. [Online]. Available Through:<
https://www.investopedia.com/ask/answers/030315/economics-science.asp>.
Law of Supply and Demand. 2019. [Online]. Available Through:<
https://www.investopedia.com/terms/l/law-of-supply-demand.asp>.
Support for businesses and self-employed people during coronavirus. 2020. [Online].
Available Through:< https://www.gov.uk/guidance/check-if-youre-eligible-for-the-
coronavirus-retail-hospitality-and-leisure-grant-fund#:~:text=Businesses%20in
%20England%20in%20the,25%2C000%20from%20their%20local%20council>.
The government’s post-Covid 19 stimulus package. 2020. [Online]. Available Through:<
https://www.instituteforgovernment.org.uk/explainers/governments-post-covid-19-
stimulus-package>.