Economics for Business: Demand, Supply, and UK Policy Analysis Report

This report provides an executive summary and an in-depth analysis of economics for business, focusing on demand and supply dynamics within the UK retail sector. It begins with an introduction to managerial economics, highlighting its role in business decision-making. Task 1 delves into demand and supply analysis, explaining how demand curves shift due to factors such as changes in substitute and complementary goods' prices, consumer income, advertising, and population demographics. It also explores supply analysis, illustrating how supply curves shift in response to production costs, technology, government policies, and the number of producers. The report uses diagrams to visually represent these shifts and provides real-world examples, including the impact of COVID-19. Task 2 examines UK governmental and economic policies, such as poverty programs and government transfers, and evaluates their influence on consumer spending. The report underscores the importance of these policies in shaping the retail landscape and supporting economic recovery, especially during crises like the COVID-19 pandemic, offering insights into how these policies can impact retail spending.

Economics
for
business

EXECUTIVE SUMMARY
This report is about economics for business, some economic methods that are used in real
business world. Managerial economics helps business for decision-making by analysis of
demand and supply in the market. Demand refers to consumers wants to buy goods or services at
a given price in a particular period of time and supply refers availability of goods or services for
consumers at a given price in a particular time. UK government has various governmental and
economic policies in order to influence consumers spending.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Demand and supply analysis:.......................................................................................................1
TASK 2............................................................................................................................................7
1. Analysis and evaluation of the major governmental and economic policies of the UK that
can be used to influence the retail spending by the consumers in the UK...................................7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................11

INTRODUCTION
Business economics is field that applied economics in matter of financial organisation,
market related and environmental issues which are faced by corporations. Economics for
business looks at major factors of economics that applying to the real world of business.
Managerial economics is the method of decision-making. It is about how business approach
pricing strategy, evaluate market demand , market supply and factors that influence a business.
The report is on retail business how economic factors affects any organisation. The topics which
is covered in this report are increase and decrease in demand curve, right and left shift in supply
curve and UK governmental and economic policies to aid economic recovery from loss of
consumer retail spendings.
TASK 1
Demand and supply analysis:
Demand analysis: it is process of understanding customers demand for a goods or
services in a target market. In this management takes decision related to production, cost
allocation, advertisement and pricing etc. within the organisation. Demand represents the
quantity of goods or services which customers wants to buy at a given price in a given time
period. In COVID 19 customers demand has impacts for goods prices. In retail sector demand
forecasting is a key component which firm has to analyse, it depends on consumers buying
habits, income, preferences, complementary and subsidiary goods, population and demographics
(Analysis of demand, 2020). In COVID 19 the demand for goods & services are effects for
customers. If curve shift to the right than it is an increase in demand and if curve shifts towards
left than it will be decrease in demand.
Demand curve:
1

Illustration 1: Analysis of demand, 2020
(Source: Analysis of demand, 2020)
Rise in demand curve, this diagram shows increase in demand with increase in price. It
can be possible in such a way when the price of subsidiaries are lower than x product and change
of income level of consumer. Apart from this in UK, increment in population also leads to
increase in consumers demand (changes in demand, 2020).
(Source: changes in demand, 2020)
2
Illustration 2: changes in demand, 2020

Fall in demand, This curve shows firstly demand was D1 that decreases from D1 to D2.
According to this price of the coffee decreases but the demand of the coffee goes down because
of fall in tea price. Also decrease in income level of consumers leads to fall in demand of coffee.
The conditions of change in demand are mentioned below:
 change in price of substitute goods: Substitute goods refers to competitive things or
replacement option for another product. For example in retail sector, if a rise of the price
dove soap and pears has less price than it it leads to rise in demand of the Pears soap
(Factors of demand, 2020).
 Changing price of a complement: complementary goods refers to joint demand of two
things that cannot exist without each other, for example ink and pen. Without ink a pen is
useless. Rise in x pen price will affects ink of that pen's demand because higher price of
pen will decrease the demand of it and also decrease the demand of ink. In opposite, if
the price of pen will decrease then leads to rise in demand of ink riffle.
 Change in the income of consumers: consumers buying habits directly affects by their
income level. If income goes up, it leads to ability to increase in ability to buy goods or
services and in opposite if income goes down it leads to decrease in demand.
 The effects of advertising and marketing: Advertising and marketing can help a retail
company to attract customers and change their taste that leads to increase in demand.
 UK population and demographics: In UK population affects retail goods demand easily.
UK population is growing and projected to rise in new market demand and growing a
market place. Demographics is related to age, gender, religion etc. In UK customers
demand differ by their religion and gender.
3

As per this data when price are lower than demand of goods or services are higher as it shows
when price is 3 demand refers 7. in opposite when price is 12 demand of product is 2. that shows
negative relation between price and demand.
Supply analysis: Supply analysis is a research and analysis that helps organisation to understand
the supply trends and respond to change market. Supply is the fundamental way of economic that
indicates available goods or services for consumers in the market. In retail industry, supply is
depends on customers demand at a specific price (Krugman and Wells, 2017).
Supply curve: change in supply refers to a shift in supply either right or left with the entire price
quality relationship. Price and supply quantity has positive relationship. Increase in price leads to
increase in supply and decrease in price leads to0 fall in supply. For example, if the price of dove
will rise than pears than supply of dove will rise than pears soap. If supply curve move towards
right than it leads to increase in supply, if curve move towards left then it is a decrease in supply
curve (Changes in supply, 2020).
4

(Source: Changes in supply, 2020)
Rise in supply curve, In this curve it shows increase in supply that can be reason of using new
technology that offers consumer at lower price. One of the reason is higher number of suppliers
in the market and reflects towards change in non price factors. According to this diagram it
shows increase in supply with increase in price that happens in the case of innovation and higher
competitors.
5
Illustration 3: Changes in supply, 2020
Illustration 4: Factors of supply, 2020

(Source: Factors of supply, 2020)
Fall in supply, this diagram shows decrease in supply with decrease in price. Supply is move
right to the curve that means it is not possible for producers for supply more at each price level.
The reason behind it at a constant price it will give less benefits to the suppliers than other goods.
The conditions of change in supply curve are mentioned below:
 Change in the costs of production: lower cost of production leads to more supply at each
price. For example, in retail sector if cost of x goods is lower than y than it will be
increase in supply of x goods. Higher cost of production leads to rise in raw material
price than industry will minimise that product supply.
 Change in technology: production technology can change the supply curve with rapid
change in increase in supply at a lower price to consumers. In retail sector if a new
product will come with latest technology and easy to use in customers than it will rise in
that product demand because now a days everyone wants comfort and it will decrease
subsidiary goods supply (Factors of supply, 2020).
 Government taxes in UK: government taxes and subsidiaries directly affects the supply in
UK. Indirect tax cause an increase in products cost that leads to inward supply curve.
Subsidiaries brings out fall in supply cost that leads to right shift in supply curve.
 Change in price of substitute goods: Change in price of subsidiaries can affects the goods
or services supply in positive and negative manner. If tea price will high than it leads to
rise in demand of coffee. In opposition, if coffee price rises than it will be increase in
tea's supply.
 The number of producers in the market and their objectives: The number of suppliers in
the market will directly affects the market supply. Even when a new goods comes into the
market it leads to downward pressure on price.
 Change in climate special for agriculture products: some commodities that are grow by
agriculture or affects from climate conditions such as coffee, wheat and fruits etc. that
directly affects the market supply. Favourable weather will produce large number of
products or unfavourable weather leads to lower harvest that effects supply of goods or
services. Because some of them commodities are used in production of other goods, a
change in supply of those goods will effects the supply of related goods.
6

The data for COVID -19, As per this data when price of goods or services deceases
supply of that goods also decreases and when price of goods increases supply of that goods
increase that shows positive relation between price and quantity.
TASK 2
1. Analysis and evaluation of the major governmental and economic policies of the UK that can
be used to influence the retail spending by the consumers in the UK
Government and economic policies are the main factors that can influence the consumer
spending but it has to be applied in a careful and precise manner as it can help the companies to
grow and prosper and at the same time it has the potential to damage the reputation and market
value of the firm if it is not used correctly. In COVID 19 the demand for goods & services are
effects for customers. In COVID 19 govt. Has comes for various schemes for customers. There
are various aspects that can influence the consumer spending and all of these are explained in
detail below-
 Poverty programmes- Poverty is a condition or a state of an individual or a society in
which a person is not able to meet the basic requirements that are essential elements in
living. As in it a person is not financially strong enough to fulfil the essential
requirements of human beings. Poverty stricken society or a nation doe not possess basic
necessities of living like proper housing facilities, safe and drinkable water, nutritious
food and medical aid in case of illness. There are various different programs that the UK
government and its non profit organisations (NGO's) run so that the country can be free
from the poverty and many poverty eradication programs are also run by the government
7

of the UK. These all aspects has proved very beneficial as the country has significantly
decreased the poverty rate in the country and thus it stands as an example for other
countries in this regard. As many efforts are made in poverty eradication programs and
thus it has influenced the retail spending by the consumers in the UK ans also it has
resulted in improved standard of living of the citizens of the nation and thus improving
overall GDP of the country. As due to the pandemic many individuals lost their jobs, the
government of the UK helped all of its citizens in meeting the basic requirements of all
the people (Poverty program, 2020).
 Government transfers- Government transfers is an essential element for a country as in
this the government transfers the wealth of the country in a proportionate manner so that
difference between the poor and rich can be reduced. This is a one way transfer as the
government does not receive any goods or services while transferring the payments to its
citizens. These transfers can also be given to an organisation if government thinks that
the company is doing exceptionally well in all aspects like environment, society, etc. It
can act as an important tool in reducing the gap between different societies and thus it can
be very beneficial for the nation when taken as a whole. The government of the UK uses
this aspect very carefully and precisely and thus it has proved very beneficial too for the
country as it resulted in increased profits and growth for the nation. This acts as a
mediator between government and its citizens or between the government and various
organisations and bridges the gap between all of them. These all aspects has impacted
and influenced the spending of the customers in the retail sector as it has tends to increase
the purchasing power of an individual and thus benefiting the society as a whole
(Government transfers, 2020).
 Retail subsidies- Subsidies are the relief or a benefit given to an organisation, an
individual, or an institution so as to appreciate the work done by them or to improve the
position in the industry or it can be to increase the sales and profitability level. There are
various ways of subsidies but majorly it can be of two types that is either in terms of cash
or tax reduction. Government of the UK implemented many subsidy programs that are
very helpful for the retail sector as many tax reliefs and cash grants are given to the firms
including sick industries and thus it has also proved very useful in increasing the sales
and thus resulting in improved profitability and growth. It has also acted as a very critical
8

aspect as it helped the firms to employ additional staff rather than firing the existing
workforce and thus it also resulted in increased income of the individuals including
society. It has also influenced the customers of the retail sector to purchase a good
amount of products and services because of increased purchasing power of the people in
the society (Retail subsidies, 2020).
 Stimulus packages- Stimulus packages is the package that is given by the government so
as to improve the economy and thus resulting in overall growth and development of the
citizens, society, as well as the nation. Government of the UK has given various different
kinds of stimulus packages and announced many of them in the recent past so as to
improve the economy and to cope up with the adverse situations that are prevailing in the
market. It has also proved beneficial for all the sectors but retail industry was the one that
was benefited the most as it is an essential part of the economy of the country. It has also
increased the purchasing power of the customers and simultaneously improving the
standard of living and thus resulting in increased spending of the people on the retail
sector. As the coronavirus pandemic affected each and every part of the world the
government of the UK have started furlough scheme for the individuals that require work
due to losses in job and thus government has done an excellent job in this aspect by
providing essential help to the people in distress (Stimulus packages, 2020).
 Industry-specified measures- There are various measures that a nation takes while
keeping a specific industry in mind so that main focus can be dedicated towards the
betterment of that industry so that it can add to the value of the nation in the long run.
Government of the UK implement various measures keeping in mind a specific industry
but main focus was on the retail industries as they are the core sector of the country.
There are various types of measures that the country implied on this sector and thus
resulting in increased value of that firm in the competitive environment. These all aspects
further resulted in increased customer sales as it influenced the buyer to spend a large
amount of their income on it as it is essential part of living and thus standard of living had
also improved by these all measures that the government of the UK has taken (Industry-
specified measures, 2020).
9

CONCLUSION
From the above report it has been concluded that Economics for business looks at major
factors of economics that applying to the real world of business. It refers to study of some
components of a market that is demand and supply. Demand refers to buyers wants in order to
buy goods or services at a given price in a given period. Supply considers power of suppliers to
sell products or services at the given price within a time period. Change in demand and change in
supply can be happen by some factors that are change in production cost, tax rates, consumers
preferences, subsidiaries and complementary goods, change in technology and income level.
Government and economic policies are the main factors that can influence the consumer
spendings. There are various aspects that can influence the consumer spendings such as
Industry-specified, measures Stimulus, packages Retail subsidies, Government transfers and
Poverty programmes.
10

REFERENCES
Books and journals
Online
Poverty program. 2020. [Online]. Available through:
<https://www.investopedia.com/terms/p/poverty.asp>
Government transfers. 2020. [Online] Available through
<https://www.investopedia.com/terms/t/transferpayment.asp>
Retail subsidies. 2020. [Online] Available through
<https://www.investopedia.com/terms/s/subsidy.asp>
Stimulus packages. 2020. [Online] Available through
<https://www.investopedia.com/terms/s/stimulus-package.asp>
Industry-specified measures. 2020. [Online] Available through
<https://www.investopedia.com/terms/s/sector-analysis.asp>
changes in demand. 2020 [Online] Available through: <
https://www.bloomberg.com/markets/economics>
Changes in supply. 2020. [Online] Available through
<https://www.financialexpress.com/opinion/digitising-the-supply-chain/2122031/>
Factors of demand. 2020. [ Online] Available through
<https://www.investopedia.com/terms/d/demand.asp>
Factors of supply. 2020. [Online] Available through
<https://www.bloomberg.com/professional/blog/excess-demand-vs-supply-commodity-
sectors-prevail/>
Analysis of demand. 2020. [Online] Available through
<https://www.investopedia.com/terms/l/law-of-supply-demand.asp>
Krugman, P. and Wells, R., 2017. Volkswirtschaftslehre. Schäffer-Poeschel.
11