Microeconomic Analysis and Modern Business Practices Report

This report addresses the challenges faced by Familymart Groceries due to fluctuations in daily sales, focusing on the sales manager's lack of understanding of microeconomic concepts. It elaborates on the law of demand and supply, including movements along and shifts in the respective curves, and identifies factors influencing demand and supply. The analysis uses graphs to illustrate these concepts. Furthermore, the report compares and contrasts emerging and 20th-century economic theories, such as Adam Smith's economic theory, relating them to modern business practices to provide a comprehensive understanding and potential solutions for Familymart's sales variations. This document is available on Desklib, a platform offering a range of study tools and resources for students.

CW1-
Microeconomics and
behavioral economics

Contents
INTRODUCTION.................................................................................................................................3
Task 1....................................................................................................................................................3
Elaborate the law of demand, movement along the same demand curve and changes in demand
curve along with the factors that have impact on it with the help of suitable diagram.......................3
Discuss the law of supply, movement along the same supply curve and changes in supply curve
with the aid of diagram......................................................................................................................7
Task 2..................................................................................................................................................10
Select two emerging theories or models of 21st century contemporary economics and two 20th
century models. Compare and contrast and relate both to modern business practices.....................10
CONCLUSION...................................................................................................................................13
References...........................................................................................................................................14

INTRODUCTION
The upcoming report highlights the solutions for the problem that is faced by
Familymart Groceries in the fluctuation in its daily sales. The newly recruited sales manager
is unable to understand the logic behind the variation and is unaware about the
microeconomic concepts. The following report consists of the notions on the demand and
supply along with the analyzation with the help of useful graphs. Moreover, it also contains
those elements that influence the demand and supply for the product. Furthermore, the report
comprises of the theories which represents the connection between them in the modern
business practices.
Task 1
Elaborate the law of demand, movement along the same demand curve and changes in
demand curve along with the factors that have impact on it with the help of suitable diagram.
The law of demand is the most important topic in the economics. This shows the
inverse relation between the quantity demand and price of a commodity. It states that keeping
other factors aside, if the price of a product increases, then the quantity purchased will be
decreased or vice- versa (Bon., 2018)
The law of demand will assist the Jack Dobb, the new sales manager of Familymart that the
things are priced the manner they are. This law works by two factors the one is demand
schedule and the other is demand curve. The demand schedule helps in the evaluation of apt
quantity that a consumer will purchase at the provided price and the demand curve allocates
those figures on charts.

Graph 1: Law Of demand
As per the above representation there are can be that Y axis shows the price and X axis shows
the quantity demanded. When the price for the product is 2 the purchased quantity was 10.
But when there is a hike in price then the quantity demanded also starts diminishing.
 Movement along the demand curve and shift of the demand curve:
Familymart will have to face the demand curve for the goods that it is supplying. There are
lot of components the influence the law of demand and these changes can be driven by
analyzing the variations in the demand curve. These factors can further be classified in two
categories i.e., the change in and demand and the change in quantity demanded (Sadeghi and
et.al., 2020)
Keeping other factors unchanged, when there is a change in the specific commodity, due to
the change in price, then the movement in the quantity demanded with the same curve
happens. In this the other factors like change in the consumer income, preference, taste etc.
remains constant that means they do not change. In this case, the changes that occurs in the
price affects the quantity of demand for a commodity and this leads to the movement in
demand curve. The motion takes place in two ways that is upward and downwards.
Graph 2: Movement in demand curve.

In this figure, it is interpreted that OP is the price and OM is the demand on that price. There
is a increase and decrease which is explained as below:
1. When the price went high from OP to OP”, then the quantity decreased to OL. This
shows the UPWARD movement in the demand curve.
2. Secondly when price have turn down the demand has increased and it reflects the
DOWNWARD movement (Henchion and Zimmermann., 2021)
Thus, it is analyzed that the other factors remaining constant, the demand curve will either
move up or down.
 The shift of the demand curve
It happens when the demanded quantity changes at each possible price due to the changes in
the other factors, it can be one or more than that. So, in this scenario for every possible
change in price the demand abides the different curves. There is a left or right shift in the
demand curve.
Table 1

Graph 3: Represents two demand curves with different incomes.
The above table and graph represent the change in quantity demanded due to the change in
income and the shift that takes places due to such factors.
Graph: 4: Rightward shift Graph: 5 Leftward shifts
From the above table it can be clearly seen that if the income of a consumer changes, then the
there is a shift in demand curve is caused by the change in price. As per the graph the there is
a rightward shift that signifies the purchasing power of the households have been increased
due to the rise in income. In the 5th graph there is a leftward shift which indicates that when
the income of a household declines then the consumers are buying less quantity of the
commodity. This expresses the decrease in the desire of the households to purchase the good
(Sa’ad and Idakwoji., 2021).

 The factors that influence the demand for a product are as follows:
1. Consumer income: The income has direct impact on the quantity purchased by the
customer. If the consumer has more money, then they tend to buy high – quality
products or the opposite.
2. Availability of substitute goods: There is a tough level competition in the market if
the consumer is getting the same product in the less price, then would go for that.
Discuss the law of supply, movement along the same supply curve and changes in supply
curve with the aid of diagram
Supply is that quantity of the product that a manufacturer is willing to provide at the
given price and at the given point of time.
Law of supply is the significant fundamental standard of the economic theory. This law states
that other factors keeping constant, an increase in the price results to an increase in the supply
of quantity for a product. It reflects the direct relationship between the price and quantity of a
commodity (Ma and et.al.,2021). In short it can be said that the response of quantity changes
according to the variations in prices. If the price of a commodity goes up then the producers
will make an attempt to earn more profit by bringing an increase in the number of items for
sale.
Price (in $) Quantity supplied
10 1000
20 2000
30 3000
Table: 2

Graph: 6 Law of supply.
The above table and graph show the relationship between the quantity and price when the
price is $10 the quantity sold is 1000 and goes on increasing with the rise in price. Thus, it
has positive relation.
 Movement along a supply curve / change in quantity supply.
When the supply for a good change because of the change in price of the good but other
factors or elements do not change then it is called as the movement along a supply curve. It is
also explained as the state of increase or decrease in the supplied quantity due to the rise and
fall of a product’s price. This motion assumes that the other components like inputs,
technology, the government policy etc. are stationary.
The change that occurs is of two kinds: Expansion and contraction in supply.
1. Expansion in the supply of the commodity: when the price of a commodity increases
then the quantity of sales also increases but in this other element does not change then
the expansion takes place. It shows a climb in the quantity that is supplied in a market.
2. Contraction: In this the when the price of a commodity falls then the quantity
demanded also decreases. Here also other factors remain same. When this happens
then the contraction in supply tends to happen. This shows that there is a decline in
the quantity supplied (Balke., Zeng, and Zhang., 2021)
Price ($) Supply (in Kg)
20 200
35 300
10 100
Table: 3
From the above scenario, it is seen when the price was 20 then quantity sold were 200 Kg, it
increased to 300Kg when the price went to 35 $ which shows the expansion. In the last row
the price decreased to 10 and quantity sold also declined to 100 which represents the case of
contraction in supply.

Graph :7 Movement along supply curve.
 The shift in supply curve:
1. In this the amount of quantity supplies not just the reason being is price, but it
happens due to the other factors as well. The shift signifies that there is the smaller or
larger quantity supplied at the similar price. An increase or decrease may be of two
types:
2. Outward shift: It means to the scenario where the supplier priors to sell the big
quantity of a product at the same price because of the convenient changes in the
elements other than the commodities price. The increase can occur due to the decline
in cost associated with production, upgradation in the production techniques etc. It is
also called the rightward shift in the supply curve.
3. Inward shift: In this the producers sells the less of the quantity at the same price level.
The decrease occurs due to the opposing variations in the components. This decrease
can be the result of an increase in the price of inputs like raw material, increase in the
taxation etc. It is also known as leftward shift in supply curve.
This theory can easily be understood with the help of a diagram:

Graph: 8 Shift in supply curve.
It represents the leftward and rightward shift in the supply curve due to the change in factors
other than price.
 The factors that influence the shift in supply curve are as given below:
Causes Increase in supply Decrease in supply
Price of related goods Decrease Increase in the price of other
goods.
Taxation amounts Decline in the taxation and
turn up in the production
subsidies
It happens due to the
increase in the taxa amount.
Technology Efficient use of technology Inefficient and inappropriate
use of technology.
Task 2
Select two emerging theories or models of 21st century contemporary economics and two 20th
century models. Compare and contrast and relate both to modern business practices
Economic theory: These theories are the set of standards and ideas that defines how
functioning of different economies. There are various theories that economic theory holds.
The newly appointed sales manager of Familymart has performed task with the help of the
economic theories. The models are stated as below:
Adam Smith Economic theory: It states that the manpower and labor have the capability to
create power and if the people have self – motivation then they can make the best and
optimum utilization of the available and scarce resources. Adam Smith believes that the
market operates and function well when the government is not involved in it or it has no
interference (Andor and Fels., 2018). In his theory, Adam Smith says that the how an
ordinary people can make good and effective use of the state’s assets and he said that it could
lead to the distress of the economy growth because of government interference. When the
government authorities were not in the favor to encourage the international trade practices
and was against it, then the Smith Laissez Faire came up with the approach and he also
criticizes on the same. In his theory he specified that state’s good can be done by allowing
people to decide how the capital, labor, land and machine shall be used, supposing it is the

case they use it in an ethical manner. This concept made aware that to enable people for
doing what they like is really important than some other systems.
Keynesian Economic theory:
It is the standard that examines the fiscal system of the macroeconomy and also discusses on
affects that is caused in production, employment and inflation due to the all in all
expenditures in the financial system. The principle was developed in the 30s when the British
economist named John Maynard Keynes tried to understand the Great Depression. This talks
about the changes in the economy that takes place because of the changes in the financial
methods. It elaborates that if the all in all demand in the financial system turns down then it
will result in the loss of job opportunities and production and lead to the dropped expenses
and payments. This idea can be applicable in case of the Familymart groceries that if the state
authorities expand the delivery of money, it will result in the demand for the commodities
and services. In case of the company Familymart groceries there can be an exception to the
law of demand which is defined as the demand for the goods and services will increase with
the rise in price (Costa., Carvalho. and Moreira., 2019)
Modern Theories
Nudge principle: This standard explains the effect on the customer behavior that happens due
to the modest recommendations and magnificent innovations. This helps in improving the
thinking and decisions of the people, to manage every kind of change and assess the existing
impacts (Read., 2019). If this theory is applied in the company Familymart Groceries then it
will help in improving the performances and effective utilization of assets.
Behavioral Theory: This theory was stated by Richard Thaler. It is the great blend of
economics and psychology. It allows to get knowledge on how and why the people act the
way they do in the real world. The use of the notion in the business enables the firm to take
quick decisions. It is based on the actual observations of human behavior, which has
evaluated that the people do not always make rational and optimal decisions instead of having
the information and tools. For the Familymart Groceries, the applicability of conventional
theories is grounded on the concept that the people make alternative choices to maximize the
welfare in terms of money. So, monetary theories are imposed after taking into account the
distinct factors like spending, taxation policies and borrowings. All this can be changed
wholly and will no more be functionally inhibited through the Federal Government sales. But

the concept born by Adam Smith demonstrates that enabling human to act according to their
hobbies is a great way to make independent system. (Sidorova., Osipov and Zeldner., 2018)