Input Costs, Market Competition, and Production Decisions: UK Analysis

This report examines the impact of input costs and market competition on production decisions, particularly within the UK economy between 2010 and 2019, using Aston Martin as a case study. It explores how input prices and production costs influence supply decisions, highlighting the inverse relationship between cost and production. The analysis also delves into the effects of perfect competition on the supply of goods and services, noting the challenges and disadvantages of such a market structure where numerous sellers offer similar products and buyers possess comprehensive market knowledge. The report further considers the economic concepts of scarcity, supply and demand, costs and benefits, and incentives, illustrating how these factors affected businesses in the UK, especially during the COVID-19 pandemic. The report concludes by emphasizing the importance of cost management and strategic planning for companies to maintain profitability and competitiveness in dynamic market conditions.

Harvard

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK-1............................................................................................................................................3
Input and cost impact the production decisions...........................................................................3
Economic concepts......................................................................................................................5
TASK-2............................................................................................................................................6
Perfect competition or a highly competitive market impact supply of goods and services........6
CONCLUSION................................................................................................................................8
REFERNCES...................................................................................................................................9

INTRODUCTION
Economic decision includes different factors such as, production, distribution, exchange,
consumption, saving and investment of economic resources (Chien, Dou and Fu, 2018). Aston
Martin is a public limited company which was founded in the year 1913 by Lionel Martin and
Robert Bamford. They are providing good quality products to customers and earn more profit.
The report examines, when and why do inputs and cost impact production decision related to
supply of goods and services. Economic concepts are used from within the UK economy
between 2010 and 2019. Further, impact of perfect competition or a highly competitive market
impact supply of goods and services.
TASK-1
Input and cost impact the production decisions
In an organisation there are many factors which affect performance of company and it is
the responsibility of managers to handle all the activities. In company, there should be proper
production of goods so that need of customers can be satisfied and profit can be earned by
company. Input and cost impact the production decision related to supply of goods and services.
These are the two elements which affect production decision for how much goods and services
should be supply. Input is affecting production decision as increase in price of input leads to
decrease in supply because when price of input goes up then cost of making good is also
increases (Mathiyazhagan, Sengupta and Poovazhagan ,2018). This affect supply of goods and
services because when price of input is increased then companies are not making products and
supply of good and services is decreased. When there is decrease in price of inputs then it lead to
increase in supply.
It is the responsibility of manager to make proper plans so that goods and services can be
provided to people on time and more revenue can be generated. There are different factors which
affect supply of goods and services like, price, number of suppliers, state of technology,
government subsidies, weather conditions, availability of workers. These affect supply of good
and services because if prices of input is increased then there is decrease in supply and when
prices are decreased then it leads to increase in supply. Aston Martin is one of the well-known
company which provides good quality products and services to customers. They are making
product as per need of customer and input affect production decision of managers. When prices

of input is low then company is making more products and supply of goods and services
increases. This is because company want to earn more profit and provide good quality products.
When cost of production increases then quantity supplied is decreased. Higher cost of production
means producers are have to make less products so that they can sell product at a given price.
When price of input is increased then there is fall in supply of goods because now the product
has become more expensive to produce (Hendalianpour and et.al., 2019).
Cost is also affecting production decision related to supply of goods and services. Usually,
lower cost of production means high profit for company. It is calculated by subtracting all the
expense from income earned and remaining is profit which is earned by company. For an
organisation it is important to reduce production cost so that more revenue can be generated.
Cost of production is increasing due to high variable cost and it decreases profit of company.
Cost plays a crucial role in decision making because it helps in determining profitability of
operations and helps in deciding prices.
Managers of Aston Martin company are determining cost of production when making
plans so that product can be made at low price. This helps in increasing profit of company and
helps in making better plans for future growth of company. When variable cost is high then it
leads to decrease in profit. Managers try to reduce cost of production so that more profit can be
earned and it helps in creating good image in market. Managers are analysing market situation
and make plans accordingly so that need of customers can be satisfied. It is essential to decrease
cost of production to increase profit. High variable cost has negative impact on an organisation
because due to this profit is decreased and overall performance is affected.
Cost is important because it helps in taking correct decision and better plans are made for
achieving goals and objectives. It is essential for a company to earn profit and satisfy need of
customer by providing them good quality product. Cost is affecting production decision related
to supply of goods and services. Managers are making plan after determining need of customer
and making good quality product so that their needs can be satisfied. It is important to reduce
cost of production and increase profit of organisation. Due to covid-19 supply of goods and
services is affected. During pandemic company is getting raw material at high price and due to
this there was decrease in supply. Company is making few products because cost of production is
more and company was not earning more profit. It is essential to determine cost before making
any product so that goals and objectives can be accomplished. The main aim of identifying cost

of production is to make improvements in efficiency. This helps in taking good decision which is
beneficial for growth of company.
Economic concepts
Economy of UK increases during 2010 and 2019 because competition is increasing and in
UK jobs are replaced. There was increased in the service sector due to introduction of public
services. When competition was increased then companies start making new and innovative
products so that needs of customers can be satisfied and more profit can be earned. There was
change in the economy of UK and companies start producing good quality products. During
covid-19 there was shortage of raw material and proper delivery of goods and services was not
done.
According to economic concept there is inverse relationship between cost and production.
When cost is increasing then production is decreased and when cost is reduced then production is
increased. It is the responsibility of manager to make plans after deciding all the factors which
can affect performance of organisation and goals & objectives can be achieved. Production is
increased if marginal cost is less than marginal revenue. Production is decreased when marginal
cost is more than marginal revenue. As per the economic concept, when cost of production is
lower than it increases profit. Income should be more than expenses and it helps in generating
more profit and satisfy need of customers (Kangru and et.al., 2018,). It is not necessary that low
production cost guarantee high profit. Cost of production is increased because of high variable
cost. It helps in decision making and better plans can be made which is beneficial for growth of
company.
During pandemic it was difficult for companies to make products as there was shortage of
raw material and suppliers are not supplying material on time. It is difficult for managers to
make products because cost of production was high and due to this price of product is high. This
is affecting performance of company because they are not able to earn profit. It is important to
provide good quality product to customers and focus on satisfying their needs. In UK, business
suffer loss due to covid-19 as they were not able to sell products and cost of production was
high. There are four economic concepts like, scarcity, supply and demand, cost and benefits and
incentives. These affect performance of an organisation as in UK, during 2010 and 2019 there
was shortage of resources and less demand. After sometime due to increasing competition,
people start demanding new and innovative product (Hanawalt, 2020). This increase demand and

supply of goods and services. When cost of production is increased then supply is decreased,
cost is reduced then supply increases. There is inverse relationship between cost and production.
Managers are making plans after determining all the factors so that they can perform better than
others.
TASK-2
Perfect competition or a highly competitive market impact supply of goods and services
Perfect competition refers to when all organisation are selling identical products. In perfect
competition companies are free to enter and exit in market without any barrier. In perfectly
competitive market buyers are having perfect knowledge and it is difficult for companies to
determine prices. Perfect competition is the market where there are many companies selling
same product or service. In this market buyers are having full information and producers are not
able to determine prices. There are some characteristics of perfect competition like, in this there
are large number of buyers and sellers, homogeneity of the product, free entry and exit of
companies. There is no restriction on entry and exit of companies and buyers have perfect
knowledge of market. There is absence of price control in this market and perfect mobility of
factors of production and goods (FajrinManik and Wahyudi, 2020). In perfect competition there
are many sellers who are selling similar type of product and there is equal market share. Buyers
have perfect knowledge about market and it is difficult to determine prices.
Perfect competition market has impact on supply of goods and services of Aston Martin
company because there are many organisation selling similar type of product. This affect ales of
a company as competition increases and it is difficult for an organisation to attract customers.
Managers are responsible for identifying issues and strategies applied by competitors so that
better plans can be made and it helps in achieving goals and objectives. In perfectly competitive
market there are large number of buyers and sellers selling same product and buyers are having
perfect knowledge and information. Managers of Aston Martin are determining choice of
customer and making unique products so that they can gain competitive advantage and more
profit can be generated. It is important to provide good quality products to customers so that their
needs can be satisfied (Zhu and et.al., 2019). Perfect competition is affecting supply of goods
and services because there are many sellers and buyers but customers are having knowledge and
if any one company is selling product at high price then people move to other company. There
are many options available and producers cannot determine price.

There are some disadvantages of perfect competition market i.e., they allocate resources in
most efficient way, normal profit cover opportunity cost and all the perfect knowledge and
information is available. Negative impact of perfect competition is they can achieve maximum
consumer surplus and economic welfare. Perfect competition affects supply of goods and
services because in this market no one has the ability to decide price. When there is rise in prices
then supply of product decreases and when prices decrease then there is increase in supply of
goods and services. When there are many buyers it is essential to make new and innovative
products so that good quality products can be provided to customer and it helps in earning more
profit. Perfectly competition has impact on supply of goods and services because price of
product increases people are buying more product and when there is rise in price supply of goods
and services decreases. It is essential to make good quality product and services to attract more
customers and more profit can be generated (Azevedo and Gottlieb, 2017). In UK, there are
many companies who are making similar product as Aston Martin company and it is difficult for
managers to provide good quality products and earn more profit. Perfect competition has impact
on supply of goods and services as there are many buyers and sellers in this market and buyers
are having perfect knowledge about market.
During pandemic supply of goods and services decreases because people were not buying
goods and there was no supply of raw material. This affects economic growth as organisations
are not earning profit. After pandemic competition increases because all companies want to earn
profit and they want to gain competitive advantage in market. It is important to identify choice of
customer and make products accordingly so that revenue can be generated and need of people
can be satisfied (Orgaz Gil, Bello Morales and Reneses Guillén, 2018).
Highly competitive market means where producers are competing with each other and selling
good quality products to customers so that their needs can be satisfied. It is essential to focus on
satisfying need of people because it helps in generating more profit and builds good image in
market. A highly competitive market is the market where large number of producers are
competing with each other and providing good quality products and services to customers so that
their need can be satisfied and organisation can earn profit. There are some advantages of highly
competitive market like, it is beneficial for consumers as prices are kept low and quality of goods
is high so that more people can be attracted. In UK, earlier there was less competition and
companies were not providing good quality products. During 2010 and 2019, competition

increases and companies start making new and innovative product which satisfy need of
customer. To gain competitive advantage it is essential to provide products and services as per
the choice of customer. When competition increases in UK then it helps in increasing economy
and more people get employment. When there are many sellers, all want to increase their sales
and want to earn more profit. To attract more people companies will provide good quality
products and prices will be less as compare to other companies. It is important for an
organisation to gain competitive advantage and provide good quality products (Manna, 2017).
When there are many sellers, consumers are having different choices and they can select product
as per their choice. Managers of Aston Martin company are identifying choice of people and try
to make products according to their choice. They are setting price after analysing market
situation and make new products so that people can be attracted. When there are many sellers
than more people will get job and this increases economic rate.
In highly competitive market there are large number of buyer and seller. They are
providing good quality products to satisfy need of customers and more revenue can be generated.
People are having choice to select best product. Managers of Aston Martin company are setting
price after analysing market situation so that more profit can be earned and helps in creating
positive image in market (Podobas, 2018). Highly competitive market impact supply of goods
and services as when prices are high less supply of goods and when prices are high more goods
and services are supplied. Producers cannot charge more prices because there are many
companies and people can buy product from other company. So, highly competitive market has
impact on supply of goods and services. Production decision depends on choice of customer and
what type of product they want.
CONCLUSION
From the above discussion it can be concluded that, production decision depends upon choice of
customer. Input and cost has impact on production decision related to supply of goods and
services and economic concepts has been discussed. Further, perfect competition or a highly
competitive market has been described and its impact on supply of goods and services.

REFERNCES
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