Analyzing the Economic Environment: Demand, Supply, and Policies

This report provides an in-depth analysis of the economic environment, examining key concepts such as demand and supply, including their determinants and graphical representations. It delves into the influence of price elasticity on pricing strategies and explores different types of elasticity, illustrating their impact with examples. The report further investigates the effects of elasticity across various product ranges and discusses two microeconomic objectives. Additionally, it evaluates the roles of monetary and fiscal policies in regulating Gross Domestic Product (GDP) growth, offering a comprehensive overview of economic principles and their practical applications. The report utilizes diagrams and examples to illustrate the concepts, providing a clear understanding of the complex economic environment. The analysis covers various factors affecting businesses due to changes in price and quantity, along with shifts in demand curves. Finally, the report concludes with a discussion on the impact of elasticity on various product ranges and the roles of monetary and fiscal policies in regulating GDP growth.

The Economic
Environment

INTRODUCTION
Economic environment is the kind of business which affect it the most and it includes
various factors such as external which divide the environment into microeconomic environment.
It further affect the decision making process of the organization. Some of the factors are
controllable and some not. So it is important to analyse them before they going to affect the
individual as well as whole organization.
This report include the various topics such as analyse the change in the determined of
demand or supply. Influence of price elasticity and different types of elasticity. In addition, it
includes the impact of elasticity of the different range of products and two micro economic
objectives. Along with this, evaluate the role of monitory and fiscal policy in regulating GDP
growth.
1.1 Analyse the determinants of demand with the help of two diagrams
Demand: It is an economic term which denote the value of product & services which
individual wanted to consume. It is the basis need which required by the consumer to satisfy
themselves with the help consuming products & services.
Determinant of demand: It includes the various factors which cause the fluctuation in the
economy due to change in demand for the product & services. Demand will be affected due to
change in the price. As below mention picture represent that, when demand of product increased
then price of the product & services also increase. Similarly, as demand decrease price of the
product decreased. Basically, price and demand have positive relation which affects the each
other at the same time.
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Figure 1Demand Curve
There are various factors which affect the demand of the product & service and some of it
discussed below:
Above mention factors affect the business due to change in the price and quantity. Demand
curve can be shift from right as well as left side which clearly shows the relationship between
demand & price of products.
 Product & services: Increase in the consumer’s income will automatically increase the
demand of the product because it creates the willing power to purchase more goods.
Demand will increase as per the raise in the income and demand will decrease when
individual income going to decrease.
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 Preference: Change in the preference also changes the demand of products & services. Such
as demand of tea will reduce the demand of coffee.
 Complimentary goods: Decrease in the price of complimentary goods will automatically
decrease the demand of the product & services. Basically both have inverse relation which
affects each other or the whole organization.
 Substitute: Price of substitute affect the demand curve such as Pepsi or Cola-cola both are
closest substitute of each other. It has inverse relation with each other.
1.2 Analyse the determinants of supply with the support of 2 diagrams
Supply: It is the total amount of goods which are ready to sell on a specific price range.
Here quantity and price have positive relation. As well as quantity demanded by the individual
price of the product also increased and similarly in case of demanded quantity is low then price
of the product & services automatically low. It will be represented with the help of supply which
shows the relationship between price and quantity demanded by the individual.
Determinants of supply:
There are various factors which affect the supply and it is discussed below:
Change in the technology: Due to change in the technology, use of human force will
reduced which affect the demand of product & services. With the help of technology change,
business reduces their product cost which further increases the profit margin.
Price of substitute: Substitute always affects the other goods because it will affect the
demand as well as supply.
Number of seller: It will affect the market demand because as well as demand will
increase supply also increased.
Above mention determinants of supply affect the demand of the consumer as well as its
supply.
1.3 Analyse the influence of price elasticity in determining price with the help of 2 examples
There are various factors which affect the price elasticity of demand and it will further
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2.1 Evaluate the different types of elasticity
4.1 Impact of two different types of elasticity in as chosen range of product
3.1 Evaluate two government macro-economic objectives
3.2 Role of monetary and fiscal policies in regulating gross domestic product growth
CONCLUSION
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REFERENCES
Books & Journals
Buckley, P. J., 2016. The contribution of internalisation theory to international business: New realities and
unanswered questions. Journal of World Business. 51(1). pp.74-82.
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