Management Economics Report: UK Inflation and Yummy Bites Group

This report delves into the realm of management economics, exploring the multifaceted issue of inflation within the UK context and its implications for businesses, specifically focusing on the Yummy Bites Group. The report begins with an introduction to management economics and proceeds to define and explain inflation, examining its causes, implications, and diverse effects on the economy. The analysis extends to the actions taken by the Bank of England, including interest rate adjustments, and evaluates the role of the government and the tools it employs to manage inflation. A critical aspect of the report involves assessing the effects of increased interest rates on the Yummy Bites Group, considering factors such as borrowing costs, deposit yields, and the impact on stocks and bonds. The report concludes with a summary of the key findings and provides recommendations for the Yummy Bites Group to navigate the challenges posed by inflation and rising interest rates, including the importance of establishing a positive work environment, providing excellent customer service, and exploring new strategic opportunities. The report is a comprehensive overview of the economic landscape and how it impacts businesses and consumers.

MANAGEMENT
ECONOMICS

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK...............................................................................................................................................3
Explanation of inflation, it causes, implications and effects..................................................3
Appraise the possible effects taken by the Bank of England and including government role
and tools in inflation control ..................................................................................................6
Discuss the effects of interest rate increased to Yummy Bites Group...................................7
Conclude and produce recommendations...............................................................................8
CONCLUSION ...............................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Management economics is a assistance tool of economics which is provided the methods
and techniques to take decision for distribution of resources. It is the study of distribution,
production and consumption of goods and services. It improves the efficiency and effectiveness
of unproductive activities. It also includes the decision making process of the future regarding
risky and uncertainty (Boda, 2018). In this report discuss about the increased inflation rate of
energy soars and increased the interest rate of Bank of England which has impact of Yummy
Bites Group situated in UK. Further in this report considering the government's role and tools in
inflation control.
TASK
Explanation of inflation, it causes, implications and effects
Inflation is always harmful for an economy because it can affect the economy in different
ways. The high inflation rate affect the savers because it destroy the purchasing power of the
fund. It can provides the benefits of insurer because it reduces the outstanding interest due to
adjusted inflation rate. In simply words inflation means rising the prices of goods and services.
The inflation can affect product or services which includes necessary items such as housing,
medical care, food and cosmetic items. It saves the money in present rather than in future. For an
example if investors earn money 5% from shares and bonds, but the inflation rate is 2% , the
investors actually earned income only 2%in real time. There are many factors which can affect
the inflation and prices in an economy. The production costs and demand for product and
services increased due to inflation results. There are three important concepts which are explain
the inflation (Damania, 2020).
 Money given to citizen for printing.
 Reduces the value of legal tender currency.
 To purchasing brand from secondary market and loaning new fund through the banking
system.

Inflation can be caused by some factors. The inflation in 2022 are more complex because during
coronavirus period the demand has suddenly increased and labour shortages. The causes of
inflation are as given below-
1. Demand pull inflation- These factor occurs only when demand increases of goods and
services and economy does not fulfil the user requirement. Increased government
expenditure is good essential for the economy. This situation occurs when customer
demand increases and seller does not supply the product then they rise the product price.
This situation is also known as price inflation (Du and et.al, 2018).
2. Cost push inflation- The prices of the product increases when increased the cost of
wages and materials. The supply of the product decreases when the costs of production
goes up. If the company production cost increases, the executive manager pass the
surplus cost onto customers due to rasings the price of the products. If company can not
change the price of the product while cost of production increase, the profit of the
company will down.
3. Increased money supply- In this term the total amount of money in circulation includes
some factor such as cash, bank and coins. The rate of production increased more than
money supply this cause occurs due to inflation. The Federal reserve is increased money
supply this process is known as open market operation (Hartmann and et.al, 2021).
4. Devaluation- It is downward adjustment in country exchange rate. It decreases the
country's export cost and increases the cost of imports. It is very difficult factor of
economy.
5. Rising wages- It determines how much amount is paid to the workers. Wages are the
cost of production. The increasing price should allow customers to combat inflation.
In this report contains the details of Yummy Bites Group situated in UK and operates the
business of restaurant serves low and medium class population. In UK inflation hits 9% as cost
and energy soars and interest rates also increased of Bank of England which has directly impact
on the Yummy Bites Group. Andrew Bailey is the governor of Bank of England. It says the
policy maker should prepared to move borrowing cost higher in bigger steps to control inflation.
According to Andrew Bailey the inflation rate to the highest since 2009. The committee of
monetary policy is expected to hike rates again, and investors are pricing in the likelihood of a

half point move. It is prepared to risk growth. The inflation rate of UK is 9.1% but it will
increased up to 11% in the end of the year (Jeuland, 2020).
Inflation is not a new term. It is the studied of past years, with its effects briefly researched. The
central bank maintains the rate at around 2 %. The economic activity can destroy due to inflation.
The effects of inflation depends on the inflation rate. There are both positive and negative effects
of inflation they are discuss below-
Negative effect of inflation:
1. Fund loses its value- when the prices of the products has increased then money loses its
value. For example if keeps the $1 under pillow then will not able to purchase anything
due to inflation. The inflation is to try the best method which gives the best returns on
their capital.
2. Inequality- If the prices of necessities products such as food and house goes up then poor
people have no choice to buy it but to pay. The most important factor of inflation is asset
prices tend to increase. Due to inequality the richer people buy the more assets, shares
and other assets.
3. Increased cost of living- When prices of product goes up then customers pay more money
to buy the necessities products. Low skilled labours also affected the high level of
competition in the economy (Le and et.al, 2018).
Positive effect of inflation:
1. Increased investment- The consumers purchases more product in current rather than wait
until next year, increases the inflation rate. The normal people invest money in new cars,
phones and other consumer goods. The customers try to find the best method to return on
investment.
2. Higher Asset Prices- The asset prices goes up more than inflation. To invest in long term
asset gives better returns of individual.
3. Reduces debt level- Those organisation have high level of debt, it is benefit for high level
of inflation. For example the lender pays the interest rate of 2% on their loan. If the
income and inflation rates increases at a same rate, it means the optimum rate by which
they are repaying declines.

Appraise the possible effects taken by the Bank of England and including government role and
tools in inflation control
The interest rate of the Bank of England increased after fifth meeting, it was the highest
record in 13 years. The government has started a new package of emergency support for
household after the warned Bank of England. The bank increased the interest rates up to 1% after
the Russian's war in Ukraine. The home energy bills has increased above 10%, it is the highest
record of year 1982. The financial crisis was raised in year 2008, it brings the borrowing costs,
but the bank policy says there are many rules and regulation which is necessities after the
economic storms clouds. The governor of Andrew bailey said there was a better way the central
bank had to navigate between the recession and double risk of inflation which is faced by the
British economy. Most of the people live in UK, particularly those are lower incomes, no savings
who are beat solid by goes up the value of necessities products such as food and energy. There
are two reasons to keep the job in UK. The first factor is export product prices are very high and
in excess increases the cost of energy. There are also some reason to increasing the price of
developments at home. Theses include: There are number of job vacancies which is filled by
people it means labours offers high wages to attract job applicants and the another factor is the
products are changing according to requirement of customers. So that the interest rates raised
many times over the past months. Changing of the interest rate directly affects the economy but
sometimes the interest rate helps to bring the inflation down. The increasing and decreasing
interest rates affects the other interest rate of UK. The borrowing becomes more costly and
encourages saving when higher interest rates (Maevskaya, 2020). The steps adopt to maintain the
inflation it is known as monetary policy.
The government increases the income tax and vat to control inflation. This improves the
economy condition and improves the budget situation. There are three methods which are
adopted by the government to control inflation they are as follow:
1. The Monetary policy- It is important tool to control the inflation. This policy are adopted
by the government to control the circulation of money in the environment. It includes
coins, bank deposits and paper money which is own by individual and business. To use of
interest rate can control the money circulation in the economy. When the inflation
increased in the economy the money produced by financial institutions need to be
restricted (Sion, 2018). The federal reserve selling securities to the public for controlling

the supply of money. To increasing the reserve the federal reserve bank require to deposit
the money. The low reserve requirement means the bank gives the money to increasing
the money supply.
2. Fiscal policy- It is used by government to adjust the expenditure and tax rates. To use
both policy government can control the interest rate. The main purpose of the fiscal
policy is to increase the demand of goods and services. This policies focuses if there is
not sufficient business activities in an economy then it raise the money. Governments
take the money by issuing debt and bonds, if there are not sufficient enough tax receipt.
The fiscal policy focuses on the communities, industries and investments (Vuong and
et.al, 2021).
3. The exchange rate- It is the value of country currency. Some of the exchange rates are
free floating and depends on the rise or fall on supply and demand in the market. Some
exchange rate are not free floating and are pegged to the value of other currencies and
may have restrictions.
Discuss the effects of interest rate increased to Yummy Bites Group
There are some factors which are increased the interest rates of Yummy Bites Group they
are given below-
 Borrowing becomes more expensive: This policy is applies only when lending the money
to overnight between banks out of their securities amount held at the Fed. The interest
rate of Yummy Bites Group has increased due to slew of variable rate loans and credit
cards. The group announced the prime interest rate would increased from 3.50% to
3.75%.
 Deposits Yield- Higher borrowing cost applies on Yummy bites group which is taken
loan from savers in the form of deposits. The deposit rate are increased due to create
competition between banks and customers so that interest rate goes up and FMCG
industry borrow loan at higher rate.
 Trouble for stocks and bonds- There are inverse relationship between price and bond
yields. The yields are interrelated with the federal funds rate (Yiu and et.al, 2018).
 The dollar strengthens- The higher interest rates attract more investing in Treasuries, and
other safe, dollar denominated assets more attractive, capital floods out of other
countries, risky emerging markets.

Conclude and produce recommendations
Yummy Bites Group should make a friendly work environment. They should provided
better services to their customers and paid higher wages to their employees. The company should
established new strategy so can reduced of interest rate and company can invest in better
opportunities.
CONCLUSION
In this report discuss about management economics, it is the backbone of the business. It helps to
take decision and allocation of resources in better way. Further in this report the Governor
Andrew Bailey says the inflection has affected due to pandemic and the war in Ukraine. The
inflation is directly affected to consumer equilibrium. Inflation affects the consumers because if
the price is increased then consumers do not purchase the product. In this report also discuss
about the tools and techniques which are adopted by the government to control the interest rate.

REFERENCES
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industry–A safety practitioner's perspective. Journal of safety research. 64. pp.1-9.