BM533 Contemporary Economic Analysis: Demand and Supply Analysis

This report provides a contemporary economic analysis focusing on Familymart Groceries, addressing the sales manager's lack of understanding of microeconomics, specifically demand and supply. Task 1 explains the law of demand, movements along the demand curve, and factors influencing changes in the demand curve, including consumer preferences, income, and related product prices. It also covers the law of supply, movements along the supply curve, and factors influencing supply, such as production costs, technology, and government policies. Diagrams illustrate these concepts. Task 2 compares and contrasts traditional economic theories, such as Adam Smith's and Keynesian economics, with modern theories like Nudge theory, assessing their relevance to modern business practices and their applicability to Familymart Groceries' strategies.

BM533 Contemporary
Economic Analysis

Table of Contents
INTRODUCTION ..........................................................................................................................3
Task 1...............................................................................................................................................3
1. Determination of Law of demand movement and changes in demand curve with influencing
factors..........................................................................................................................................3
2. Determination of Law of supply movement and changes in supply curve with influencing
factors..........................................................................................................................................6
TASK 2............................................................................................................................................8
Economic theories.......................................................................................................................8
CONCLUSION .............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
According to the below report, the contemporary economic analysis take place in relation
to the company Familymart Groceries. In this following report, the purpose of microeconomics
factors are explained to the sales manager of the Familymart Groceries for increasing the
business (Anthony., 2020). The report describe the consumer behaviour in terms of buying any
commodity. It consist two task where first task are explained about the company daily
fluctuation in sales in accordance to law of demand and law of supply with the help of some
fluctuation diagram of law of demand and supply curve and tables. In second task, the two
models of 21st and 20th century are theory are explained and also both the models are compared
and contrast in relation to modern business practices.
Task 1
1. Determination of Law of demand movement and changes in demand curve with influencing
factors.
It is the concept which determine the consumer tendency to buy a product along with
their power to pay the amount.
Law of demand: It is the term of economic which states that price and demand are
directly proportionate to each other, if price of any commodity decreases then demand
automatically increase similarly if price of any commodity increases demand of that commodity
decreases. Movement on demand curve are also a same factor which increases or deceases the
totality of demand accordance to its price changes. In this situation the position of the demand
curve which goes upward or downward along with same curve (Dakka and Wade., 2019). In
context to the company Familymart Groceries, it determine that the company sales is
continuously fluctuating in day to day cycle which effect the company consistency and also its
profitability. This condition arise due to lack knowledge of microeconomics on sales manager of
Familymart groceries which effect the commodity demand curve movement. It impacted due to
the influencing factors of changes in demand curve.

Influencing factor which effect the change in demand curve are as follows:
 Needs and preference of the customer: It is an major factor which sells the product in
terms of customer needs and preference. If the company Familymart sells the commodity
which is very attractive and demanding in the consumer market then its quantity of
demand and demand curve position increases that means demand curve lie at higher
place.
 People earnings: It is also a influencing factor for change in demand. This is because the
people set their budget according to the earnings in terms of buying any commodity
people only think or demand the product that cost are under their budget line. If the
earning of the people is more, the greater will be their demand. In relation to the
Familymart groceries this gives the good or positive effect in demand curve. This
resulted, the shift of demand curve in upward direction.
 Fluctuation in related product price: This Factor of demand curve shows shifting in curve
if the price of the goods increase or decrease because in relation to this the price of other
substitute also increase or decrease in vice – versa. The company Familymart groceries
also effect from this substitute fluctuation.
 Other expenditure: It is also a measure factor which effect the product demand. The
company use many types of expenditure for product advertisement for the purpose of

increasing sales. Advertisement of the product are done from many sources like
newspaper, social media, radio, etc. that helps to attract more number of customers. The
familmart groceries have to do the same consideration for more selling more products in
the marketplace.
 Price of the goods: The price of the goods are the most important thing to remained. The
population always want a product which price is lower and its quality is goods. The
consumer are also influence or attracted towards the product which are in discount or
high in quantity (Derrington., 2021).
Diagram of shifts in the demand Curve
The demand curve effected with influencing factors of change in demand. These factors
are price of the goods, needs and preference of the consumer, earning of people, fluctuation in
related products and Adventism expenses. It take place if the demand of the product is increase
or decrease without any change in price. This is known as shifts in the demand curve. Shifting
take place in both upward and downward direction according to the demand of the commodity. If
the quantity of the product increases, the demand curve shifts to the right side or if quantity
decreases demand curve shifts on left direction.

2. Determination of Law of supply movement and changes in supply curve with influencing
factors.
Supply means quantity of product and services that provide by the manufacturer at a
given price or a particular period of time. This help the company in maximizing its profit.
Law of Supply: It is the law of macroeconomics which states that if supply of the
product increases then price automatically increases that means price and supply have a direct
relationship between each other. In simple words, Law of supply depend on two factors: price
rises and supply rises. Law of supply play a role of vice – versa in relation to price and supply. It
helps to provide more profit to the producer from this producer offer more product to sale in the
market at higher prices (Eickhof., 2019). The Familymart groceries also have to consider this law
for analysing and decision making about selling commodities. If its rise the price of products
then its tend to rise the whole supply of goods in the economy market. It also give the idea to fix
the price of a particular commodity which have higher demand in the market because if the
demand of the product increases supply increases respectively that changes in the volume of the
goods supplied represented as the movement in supply curve. These changes are important for
rasing the supply in the market place so that they can make more profitability and revenue.
Changes in supply curve with influencing factors are as follows:
 Change in the goods price: It is the factor which help to determine the commodity
supply and price. Generally, the price of the goods and supply are related to one another
directly. This help to analyse how much the company earns profit because if the price of

the commodity is higher that means it is more chance to earn profit. It give the power to
the company to sale more goods in the market. The familymart groceries must try to
focus on the production volume so that the company sale more in the market place.
 Price of other Product: This factor says that the firm should have always try to deal in a
two or more alternative product because it finish the company dependence on one
product. If the increase in the price of the commodity make the company more profitable
in comparison to the given product (Erokhin., 2018). The familymart Groceries need to
be aim the other prices of other product that help the company to expand the business and
making profits.
 Prices of raw material: Price of raw material describe the effect of raw material in profit
making. The company needs more raw material for producing the finished goods. Raw
material effect the company profitability if the price of raw material which are using in
production of the goods increases. It seems that if this situation happens in the market,
the company sell less product. The familymart Groceries also suffer from this factor at
the time of production.
 Innovation and Technology: It is important to innovate the product as per changes in
the market condition and company needs. If the company use more technology to
innovate the goods then it directly increase the commodity supply and price that helps the
company in business expansion. Familymart Groceries have to be attempt some
innovation and technology in their sales or production such as using advance packaging
method.
 Government Programme: The government always set their policy in relation to every
market activity. Due to this government policies such as taxes increases the cost of
production of the company and thus reduces the supply. In result, it decrease the profit
margin of the company. Sometimes, government policies are also helpful when it provide
tax concession and subsides when it take place the supply quantity increases and make
more profit top the company (Greenbaum, Thakor and Boot., 2019).
 Target of the company: The supply of the products generally increase at higher prices.
These higher supply help to fulfil the target of the company and profit maximization.
Some company sell their product in lower prices that couldn't increase the company

profit. These are the firms are not focus on profit, it only want to increase the firm
goodwill and its expansion in the economic market.
Change in Supply Curve:
This take place if any variation take place in the cost of production, technology and
innovation, price of Raw material, prices of other product and government policies.
TASK 2
Economic theories
The principles and ideologies which support and manage the dynamic environment
circumstances to maintain stability in economic growth. The theories facilitate interest rates,
government intervention with respect to their rules and regulations and other aspects of an
economy. The managers of firm Familymart Groceries has applied traditional and modern
economic theories in relation with modern practices which are mentioned below :
Traditional Economics Theories
Adam Smith Economic Theory – This theory is introduced by Adam Smith under the
notion that markets be likely to work best when there is no government intervention. Smith

mentioned in his theory about how the nation's resources would naturally best use by sensible
people and contemplated government intervention as potentially destructive to economic growth.
When government discouraged international trade, Smith's laissez-faire approach to economic
policy came into existence. The monopoly power of same group as well as policies related to
direct commerce which are intervened by government was criticised by Smith. In this theory, he
specified that the generation of the benefits for the nation is by allowing individuals to decide
how to use their money, labour, land and equipments an how they saw the process of fit. This
theory suggested that to get result in a self-organising system, it is better to allow people to
pursue their self interest (Greenbaum, Thakor and Boot., 2019).
Keynesian Economic Theory – This is a macroeconomic economy theory elaborates
about the total spending in the economy and its effect on output, employment and inflation. The
theory was came into existence during 1930s by British economist John Maynard Keynes in an
attempt to understand the Great Depression. Keynesian theory is observed as 'demand side'
theory that emphasises on changes in the economy in the short period. It suggests that if total
demand in the economy fell, the resulting weakness in jobs and production would bring out a
decline in prices and wages. The application of this theory in firm Familymart Groceries is
applied when the government of any nation increases the supply of funds then it will result in an
increase in demand of goods and services. This theory of Keynesian can be taken into
consideration by Familymart Groceries as an exception to demand law rule which tells that if the
prices of the goods and services rises then eventually, there will be decrease in demand of them
or vice-versa. In relation to the firm Familymart Groceries, the theory is beneficial for increasing
the employment opportunities, decrease in inflation rates which leads to price reduction, decrease
in interest rates as well (Gričar and Bojnec., 2019).
Modern Theories
Nudge theory : Nudge theory suggests the influence of small suggestions and positive
augmentation on consumer behaviour. Supporter of nudge theory argues that the placing of
nudges is very important aspect for an organisation as if nudges are well placed then, they may
reduce market failure, save the government money and help in increasing the efficiency of
resources use. With the application of nudge theory in Familymart Groceries, the firm
encourages desirable actions as well as improvises efficiency in regard to uses of resources.

Behavioural theory – Behavioural theory is developed by Richard Thaler which has a good
composition of psychology and economic environment. In company Familmart Groceries,
application of the theory in business practices consists usage of shortcuts or rules of thumb for
devising fast decisions. In modern world, businesses initiate for understanding that consumers
are irrational and embed the theory for decision-making policies of firm which makes
shareholders worthwhile when done effectively (Le Gallou., 2018).
Comparison and contrast -
In the Familymart Groceries company, the application of traditional theories are done
with the assumption that sensible people devise rational choices with a aim of maximising
economic welfare. Consequently, modern economic theories are applied while considering the
factors such as spending, taxation policies as well as borrowings from fiat currency which are
fully control and not operationally constrained through revenues of federal government. While in
Keynesian theory, of government of any nation increases the supply of funds then it will result in
an increase in demand of goods and services. However , the Adam smith theory application on
Familymart suggests that to get result in a self-organising system, it is better to allow people to
pursue their self interest.
By applying the traditional and modern theories on the Familymart Groceries, it can be
concluded that there is one thing in common in all these theories as they are somehow helpful in
different terms according to the status and circumstances of the firm and enabling managers and
analysts for understanding macroeconomics issues in the economy (Ma., 2018).
CONCLUSION
From the above mentioned report, it can be presumed that demand and supply go hand in
hand in terms of economics. With the help of demand and supply law, it is easy to understand the
flow of offerings available in the market place. There are many factors which causes an effect on
the entire demand of goods and services in the market are price of goods, buyer's income,
choices and preferences of buyer, fluctuations in demand with response to dynamic environment.
There is an existence of opposite relation between price and demand of a commodity.
Furthermore, supply is having the direct relation to the prices and the quantity supplied as

increase in the price result in decrease in supply because people will demand less and not able to
pay the increased price with respect to their disposal income. In the report, different theories are
discussed with reference to 20th and 21st century such as Nudge theory, Behavioural theory,
Adam Smith Economic theory and Keynesian theory and their application on given firm
Familymart Groceries, as how they can effectively use these theories and their implications also
mentioned there.

REFERENCES
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